Alltel Information Services' announcement last week of an agreement to buy Southern Data Corp. of Atlanta may signal a growing commitment to the community-bank market.
Alltel, the Little Rock-based outsourcer and telecommunications provider, is expected to complete the purchase of Southern Data this year. Financial terms were not disclosed.
Southern Data, which has 60 employees, sells software that automates the opening of new accounts in the branch. Its revenue is about $15 million a year, estimated M. Arthur Gillis, president of Computer Based Solutions Inc. in Dallas. Alltel recently has sought multimillion-dollar contracts with large domestic and foreign institutions, Mr. Gillis said. It has not been as aggressive in pursuing the lower-margin community bank market, he said.
Robert J. Venable, an analyst at Robert W. Baird & Co. in Milwaukee, agreed. "Alltel is more focused on the larger banks," he said.
The company has sold its data processing services and core banking software to about 2,200 financial institutions, including BankAmerica Corp., First Union Corp., Chase Manhattan Corp., and Barclays Bank PLC.
But Alltel officials took issue with the view that their company pays more attention to large banks.
"The Southern Data customer base is really smaller institutions, where our roots were formed," said Jeff Fox, president of Alltel Information Services. "Our commitment ... is to all ends of the industry."
Southern Data's software will complement Alltel's Horizon core banking software, which is used by 150 community institutions, Mr. Fox said. Southern Data will bring 300 new customers, many of which are potential Horizon customers, he said.
Alltel Information Systems is nominally part of Alltel Corp.'s primary telecommunications business, contributing 25% in revenues but only 10% of operating income, according to Mr. Venable. It produced $1.16 billion of revenue in 1998.
Mr. Venable rates the stock a "buy," saying it has appreciated more than telecommunications stocks in general because the company is managed exceptionally well. Alltel's stock rose $2 last week, closing Friday at $71.625.
Alltel's telecommunications and banking businesses are not especially synergistic, Mr. Venable said, aside from the fact that banks happen to be large buyers of communications services.
"There is no strategic reason for having the two together," he said. "That's not to say they should sell it, but if they wanted to, we think that would be just fine."
Mr. Fox, however, said the synergies are "enormous."
Alltel's telecommunications business is the largest customer of the information services division, which supplies it with technology and runs its data centers. The parent telecommunications company also provides Mr. Fox with sufficient capital to make acquisitions and assure customers that it can invest in new technological endeavors.
Alltel "benefits from the wisdom that we have been supplying the financial industry for 30 years," Mr. Fox said. "We think we are delivering good value."
