The online payment processor CyberSource Corp. is hoping that an acquisition and a marketing and distribution deal, both announced last week, will help it expand its role in the e-commerce market.
The Mountain View, Calif., company, which specializes in card-not-present transactions, said Tuesday that it had acquired BidPay.com Inc., an online auction payment system provider, from First Data Corp. for $1.8 million in cash.
Bruce Frymire, a spokesman for CyberSource, said that First Data shut down BidPay in December, but his company plans to revive it.
On Friday the Houston software vendor Paymetric Inc. said it had agreed to provide its corporate customers with transaction data from CyberSource. The companies will also integrate and market accounts receivable products.
The BidPay purchase could put CyberSource in competition with one of its partners, eBay Inc.’s PayPal Inc. of San Jose. CyberSource has offered PayPal as an online payment choice to its U.S. merchants since October 2003. The companies extended that arrangement to CyberSource merchants in Britain in August.
PayPal dominates the online auction payment market. However, Mr. Frymire cited a report by Forrester Research Inc. of Cambridge, Mass., that estimates U.S. consumers would spend nearly $34 on online auctions this year.
“It seems that market would accommodate several players,” Mr. Frymire said.
Scott P. Sutherland, an analyst at Wedbush Morgan Securities Inc. of Los Angeles, said CyberSource likely will not drop PayPal, because of its market dominance, in favor of BidPay.
“PayPal is a payment method that CyberSource has to accept. By necessity they have to work together, but they’re going to be competitive, too,” he said.
Sucharita Mulpuru, a senior analyst at Forrester, said that BidPay probably would not pose much of a threat to PayPal in the online auction market, but CyberSource could offer its merchants BidPay’s services.
“PayPal has been trying for quite some time to penetrate the retail market online,” Ms. Mulpuru said. “CyberSource has the ties to retailers that eBay does not have and that PayPal does not have.”
Online merchants that wanted to offer auctions on their own Web site “could potentially be an upsell opportunity for CyberSource,” she said.
In September, CyberSource announced that it intended to acquire the troubled Atlanta transaction processor CardSystems Solutions Inc., but it walked away from those plans a month later, because the two companies could not agree on terms.
CardSystems was at the heart of a massive security breach last summer that exposed as many as 40 million card account numbers. The San Francisco biometric payment technology vendor Solidus Networks Inc. bought CardSystems in December.
Mr. Sutherland said that BidPay, like CardSystems, was a “distressed asset,” and that the discipline it showed in walking away from the CardSystems talks was characteristic of CyberSource. “They are a very methodical management team, very diligent about their acquisitions.”
As an Internet payment system, BidPay was a better business fit for CyberSource than CardSystems, with its large brick-and-mortar retailer processing business, would have been, he said.
“For a minute sum of money, it allows them to get into another part of the e-commerce business — auctions,” said Mr. Sutherland.
Kathleen Nugent, Paymetric’s vice president of business development, said it already offers corporate customers a way to integrate CyberSource’s processing system, as well as those of other processors, into their computer systems. However, the deal announced Friday goes further by linking CyberSource’s system with the customers’ accounts receivable systems.
Robert J. Dodd, an analyst at Regions Financial Corp.’s Morgan Keegan & Co. Inc., said CyberSource needs to diversify to maintain its growth. Its first-quarter earnings guidance seems to show some seasonality, “which would be the first time that has happened.”
CyberSource has shown consistent revenue growth, even though retailing tends to surge during the yearend shopping season and slump in the winter and spring, he said.
However, as the company has grown — it had nearly $46 million in revenue in the 12 months through September — “they can’t outgrow the normal seasonality of their business any more,” said Mr. Dodd, who rates the stock “market perform.”
Its shares have climbed steadily in the past year, from about $5 in April to the $8 range now.
