First Data Corp. unveiled a plan Thursday to consolidate its numerous U.S. data centers and application platforms in a bid to increase efficiency.
The Denver processing company also announced that it had acquired the San Francisco loyalty program provider Size Technologies Inc.
Last month First Data announced that it would consolidate its data centers abroad.
Henry C. Duques, the chairman and chief executive of the Denver transaction processing company, discussed the domestic changes Thursday during a conference call with analysts. He said that 12 data centers would be consolidated into three, and that 13 processing platforms would be combined into four.
His company also plans to reduce the number of command centers, which oversee its data centers, from seven to two.
"Our investment in technology will yield not only fewer physical locations, but a significantly more efficient processing environment for us," Mr. Duques said. "When we complete this, we will be able to understand the performance and health of our systems from virtually anywhere in the world, enabling us to truly follow the sun when it comes to ensuring the highest integrity and performance of our systems."
The consolidation plan, expected to be implemented starting this year, would take about two and a half years to complete, and cost about $100 million, he said, though many details remain to be resolved.
"We are still working through many technical details and financial details," Mr. Duques said. "We are not in a position today to accurately estimate the total cost or the total savings of this unification of our data centers. Therefore, there are no costs for this activity in the 2007 plan."
The consolidation effort will have only a minimal effect on this year's results, he said.
"An industry rule of thumb here is that to generate an annual recurring savings of $1, you need to spend about $1.50 one time. This is clearly going to be our target as we approach this project," he said.
"The number of acquisitions, while yielding I think considerable value to our shareholders, has not only grown the number of data centers, but it has also increased the number and location of application platforms we run for our clients," Mr. Duques said.
Robert J. Dodd, an analyst for Regions Financial Corp.'s Morgan Keegan & Co. Inc., said that First Data should have undertaken these consolidations earlier, and that it needs to become more efficient every year to remain competitive.
"Would First Data go out of business next year if they didn't do this? No, but they'd be under more margin pressure if they didn't do it," Mr. Dodd said. "It's essentially the standard deal in this business. Everybody's doing this all the time. First Data appeared to have been slacking somewhat in terms of keeping their efficiencies up where it should be."
Its fourth-quarter earnings from continuing operations rose 12% from a year earlier, to $240 million, or 31 cents a share. Net income dropped 34%, to $278.5 million, in part because of the spinoff of Western Union and other money transfer networks the end of the third quarter. Fourth-quarter revenue rose 14%, to $1.9 billion.
For the full year, First Data's net income dropped 12%, to $1.5 billion. Income from continuing operations rose 5%, to $848 million, or $1.09 a share. Revenue rose 8%, to $7.1 billion.
Buying Size Technologies will let First Data offer merchants and issuers a real-time loyalty program that calculates rewards transactions at the point of sale. It can also reach consumers through mobile phone messages and the Internet.
"Loyalty has become an essential component of every merchant's marketing campaign," Barry McCarthy, the president of product innovation at First Data's commercial services division, said in a press release.
