American Express Co., which spent 1998 through 2000 bulking up its network of automated teller machines, said Wednesday that it had sold 1,704 of its 7,300 to Cardtronics, the third-biggest independent ATM owner.
The sale, which followed one of 600 machines last year, looks like retrenchment. In early 2000 the company made a bold statement by buying 4,562 ATMs from Electronic Data Systems Corp., expanding its fleet to nearly 8,700. Only Bank of America Corp. owned more.
But American Express said Wednesday that it intends to stay in the ATM business. It would not discuss the decisions behind the latest sale.
"We took a hard look at our portfolio in general," said a spokeswoman, Christine Elliott. These ATMs "didn't meet the criteria that we had set." She would not say what those criteria were or whether the machines just were not making enough money.
William H. Glenn, Amex's president of establishment services in North America, said in a press release: "With this sale, we are rationalizing our ATM portfolio and capitalizing on marketplace opportunities."
Matthew Park, an analyst for A.G. Edwards & Sons, depicted the latest move as "selective pruning."
"I don't think American Express is signaling one way or another a change of strategic direction," he said.
One thing that remains intact is Amex's to service 7-Eleven Inc.'s its Web-enabled ATMs, known as Vcoms. Under the Cardtronics deal, Amex also transferred the placement contracts with merchants.
According to ATM & Debit News, the 600 machines Amex sold last year were bought by various other independent sales organizations.
The acquisition brought the number of ATMs managed by Cardtronics, the Houston independent sales organization headed by former First Union Corp. executive Jack Antonini, to 12,500.
That is the third-largest merchant ATM network in the country, behind eFunds Corp.'s and E-Trade Group Inc.'s. But Cardtronics owns half of those machines - more, it said, than those two companies.
"I believe we have the largest owned ATM network in the country that is not owned by a financial institution," said Brian Archer, a Cardtronics executive vice president, in an interview Wednesday.
Banks have been pulling back from the off-premises ATM market as the proliferation of machines has trimmed their profits. Cardtronics offers branding deals that let banks put their names on the machines without having to bother with maintenance and other ownership issues.
Cardtronics will be "positioned very well to bring them back into the retail market without having the capital expense," Mr. Archer said.
The ATMs that Cardtronics bought from American Express are spread out nationally, many of them in large chain stores, the companies said. Neither would disclose the price.
"There was about two years ago the expectation that ATMs were going to allow nonbanks to communicate with their customers," said David Robertson, the publisher of The Nilson Report. "The technology would improve to the degree that they would be interactive in a way they're not typically used."
Now "it's becoming clear there are very few terminals that will allow for interactivity, so there's been an adjustment on the thinking of American Express."
The ATM business is "becoming a niche kind of thing, where a company has to micromanage the business in order to make money at it," Mr. Robertson said. "The profits are not what a company like American Express needs to generate from its core business."
