Hewlett-Packard Co. and Verifone Inc. did not have to complete their merger to show what they are capable of.
The California-based companies, which have emphasized that they had a close working relationship even before they announced the $1.2 billion deal April 23, joined forces at PC Expo in New York last week on the frontier where smart cards meet personal computers.
Hewlett-Packard unveiled a computer keyboard with a chip card reader, a first by a PC manufacturer. Implicit and embedded in that introduction was Verismart, the technology that Verifone developed to enable remote banking and electronic commerce with smart cards.
The companies are planning to announce the consummation of their merger any day. By the time the HP smart card keyboard emerges from prototype stage to market availability in September or October, Verifone expects to have settled into its status as a division of the computer giant while maintaining its independent identity and character.
Hewlett-Packard and Verifone began finding common ground in computer- server and payment technologies at least a year before their merger announcement, and the smart card keyboard became a logical point of convergence.
With Microsoft Corp. and smart card makers Bull, Schlumberger, and Siemens, HP was a charter member of the PC/SC WorkGroup that has been promoting a common standard for smart card readers on PCs. Much of the card technology community has jumped on this bandwagon, envisioning smart cards as both payment devices and security tokens for on-line commerce, and therefore requiring "portability" from one device to another.
Meanwhile, going the Verismart route, Verifone came up with the Personal ATM, a hand-size card-reading device with ultimate portability-it could connect to a server through any phone line and might typically be used to credit or debit cash value on a chip.
"Verismart is server technology with different applications that can drive smart card appliances," said John Menzell, director of business development in Verifone's consumer systems division. "Personal ATM was one we developed ourselves. Now HP has the smart card keyboard. We are driving one of the applications of the smart card keyboard."
At least two years ago, Hewlett-Packard began to consider smart cards a critical element for secure electronic commerce, said Eric Cador, general manager of the company's small-business computing operation in Grenoble, France.
"It may have helped that the organization was located in France," the first country to make a national commitment to chip cards, Mr. Cador said. "But it was clear there was no smart card standardization," a void the PC/SC group set out to fill.
Several companies offer adapters to make smart cards computer-readable, and the cards are being incorporated in the network computer designs of Oracle Corp., Sun Microsystems, and others. But "we are the first" among PC companies to create a chip-reading keyboard, Mr. Cador said. It will be available on the Vectra 500 series small-business PCs and V-line commercial PCs.
Jupiter Communications digital commerce analyst Scott Smith said the PC- SC interface has "tremendous potential" in electronic commerce.
"We expect smart card transactions to become a major on-line payment method by as early as next year and estimate they will account for more than a quarter of on-line transactions by 2000," he said. "The introduction of secure smart card solutions for PCs could help turn this potential into a reality."
Aside from the standard smart card connection and Verifone applications, Mr. Cador said HP introduced another key element for secure PC-based commerce: a patented personal identification number system that resists hacking.
The cardholder's PIN stays encrypted and is validated in the keyboard, rather than in the computer itself. As conventionally entered in computer hard drives or memory, PINs are vulnerable to theft that, if widespread, could doom electronic commerce, HP officials said.