An upstart from Australia is trying to muscle its way into the tight- knit terminal manufacturing club.

Established in 1988, Intellect Electronics Inc. has recently beefed up its management and picked up momentum, though it remains barely a blip in a market dominated by Verifone Inc. and Hypercom Corp.

But with a specialty in smart card terminals and other devices for accepting and downloading electronic cash, and with a potentially powerful U.S. ally in NCR Corp., the company is beginning to make some waves.

Offering highly secure, modular equipment that reads both magnetic stripes on cards and the newer computer chips, Intellect is preparing to capitalize on the smart card phenomenon, particularly as it makes its way into the United States.

Millions of magnetic stripe card authorization terminals are already in the field. The units sell for roughly $200 to $300 each. Intellect hopes to vie with Verifone, Hypercom, and several smaller competitors for transitional installations as smart cards come on the scene.

Intellect is depending on Thomas Ream, who joined as U.S. president last November, to bring its dreams to reality.

Mr. Ream, who spent the previous eight years at Verifone, is well aware that his competition is tough. He said he is "not trying to grab market share" from his old employer. He plans "to work with early adopters of smart cards; people who know it's coming and are looking to implement it now."

The 43-year-old executive said his position at Verifone, vice president and general manager of the international division, was "prestigious," but Intellect gives him "a great opportunity to build an organization."

Hatim Tyabji, chairman and chief executive officer of Redwood City, Calif.-based Verifone, called Mr. Ream "a consummate professional" who made "many and varied" contributions over the years.

Mr. Ream expanded his business unit at Verifone from 15 employees to 300. He hopes similarly to turn Intellect into a potent force in the industry.

Groundwork laid by Intellect, which opened its U.S. office in San Jose, Calif., in July 1995, may make his job easier.

Through NCR Corp., Intellect recently sold more than 4,000 terminals to Chase Manhattan Corp. as part of a branch automation overhaul.

That deal clinched an agreement with NCR, signed in December, under which the former AT&T Corp. unit will sell Intellect terminals in the United States "cobranded" with the NCR logo. Intellect has agreements with NCR in 10 other countries.

Intellect terminals are sold throughout the world by International Business Machines Corp., Olivetti, Dassault of France, Digital Equipment Corp., Unisys Corp., and others.

The smart card terminals have been certified by Visa International to accept Visa Cash stored-value cards. A test of the technology in Australia featured Intellect terminals.

Certification for Mondex, the competing smart card system of which MasterCard is acquiring a majority interest, is imminent.

Last September, Intellect was contracted to provide more than 20,000 terminals to Itacomp, a Brazilian retail service provider. It also shipped 30,000 terminals for the Dutch Chipknip program in 1996.

While Intellect can brag about such successes, it has a long way to go to be considered a contender.

The company barely registered in The Nilson Report's top terminal manufacturers of 1995-the Oxnard, Calif., newsletter's most recent market share report.

Nilson ranked Verifone No. 1, with 77% of the U.S. market and, at 4.8 million terminal installations, 47% of the world market. Hypercom was a distant second, its 1.1 million terminals giving it an 11% share worldwide and 9% in the U.S.

With only 15,250 terminals estimated for Intellect, mainly in Europe and Australia, it was not among the top 15 manufacturers. However, Intellect said the numbers for 1995 were supplied by its competitors and were lowballed. The company said it has installed 250,000 units to date.

For the fiscal year ended last June 30, revenues were $30 million. Intellect projects $42.6 million for the current year-still small compared with the $230 million reported by Phoenix-based Hypercom, a privately held company, and the $473 million of publicly traded Verifone.

But Mr. Ream contends the new technology levels the playing field and said he expects partners like NCR to raise awareness of Intellect and generate sales.

"There's always room for someone to carve out a niche and be successful," said Joseph Schuler, senior vice president of French-owned Schlumberger, one of the leading smart card and terminal manufacturers, based in Moorestown, N.J. He said the partnerships are a "good ploy."

Intellect, its supporters say, is good at making terminals. With a sophisticated security architecture and components designed to be easily upgraded, Mr. Ream said, "we have a much better product line than anyone out there." Companies looking to purchase smart card terminals "really ought to be talking to us."

Thomas Sladowski, vice president of electronic commerce at Chase, said he evaluated five companies and chose Intellect, mainly because "the terminal could be retrofitted for smart card use."

The bottom of the terminals pops out, and a new piece for reading smart cards can be installed. Chase can then upgrade as necessary, saving "a considerable amount up front," said Mr. Sladowski.

Chase, a 20% shareholder in Mondex USA, will use the technology in the New York City chip card pilot it is planning for late this year with Citibank, MasterCard, and Visa.

Mr. Sladowski said other companies offered combination smart card- magnetic stripe terminals but didn't have the modular components of Intellect. With technology constantly evolving, flexibility was a key factor in Chase's decision.

Schlumberger, also vying for terminal market share in the United States, is in discussions with Intellect to market its terminals.

Phillip Kasper, assistant vice president of marketing for NCR, called Intellect "one of the key drivers" in the smart card industry. Chase's "exhaustive evaluation" is an indication that "their criteria will match that of other banks," he said. It reinforced NCR's decision to ally with Intellect for future branch automation projects.

"We have a lot of confidence in Tom Ream and his team," said Mr. Kasper. He was especially impressed by Intellect's appointment of Robin Townend as senior vice president of worldwide smart card strategy.

Mr. Townend, a 30-year banking industry veteran who came to card industry prominence while at Barclays Bank in Britain, joined Intellect in December after three years as senior vice president, chip card technology, at MasterCard.

Mr. Townend said he will use his knowledge, experience, and connections to facilitate alliance agreements worldwide and encourage direct sales.

Albert Irato, president and chief executive officer of Hypercom, said he welcomes the competition.

"The more people talking about smart cards the better," he said. Hypercom has participated in several smart card programs, including a recent promotion with MasterCard International in conjunction with the National Hockey League's All Star Game.

While any company can compete, "success is driven by who gets the most purchase orders," Mr. Irato said.

With widespread smart card acceptance still years away, especially in the United States, Mr. Irato questioned Intellect's "staying power." Does a new company have the "capital to remain in the game for that long?" he asked.

Mr. Ream said Intellect is smaller and "more nimble" than its competitors, with a lean staff of 12 and low overhead.

"Staying power?" said Mr. Townend. "If we stay on the leading edge, our products will speak for themselves."

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