Deluxe Corp., halfway through a yearlong effort to reinvent itself, delivered better-than-expected earnings in the second quarter.

Revenues of $407.8 million were down 2.8% from the same quarter a year earlier, reflecting divestitures of several noncore businesses.

However, net income of $47.4 million was up 17.3%. Deluxe earned 61 cents per share, exceeding First Call Corp.'s consensus estimate by a penny.

Tom Van Himbergen, Deluxe's chief financial officer, said that walking away from unprofitable check-related businesses boosted operating margins to 19% of revenues, from 14% in the comparable 1998 quarter.

Deluxe, the nation's largest check printer, has been investing in higher-growth businesses such as outsourcing and electronic payment services.

On April 22 it announced the formation of four subsidiaries, each with the autonomy to go after business opportunities and allocate resources as it sees fit. The realignment of the 84-year-old company should be complete by Jan. 1.

E-Funds, a provider of merchant electronic payment services that was bought by Deluxe in February, is expected to be a growth engine. Deluxe predicted that the Tustin, Calif., company will achieve revenue growth of more than 20% annually in the next two years.

A subsidiary that offers software and outsourcing services to banks, iDLX, is another promising source of revenues, said Deluxe. It started as a joint venture between Deluxe and the Indian company HCL Corp. of New Delhi.

Deluxe, which increased its stake to 100% in the first quarter, predicted that iDLX's revenues will rise to $28 million this year, from $13 million in 1998.

The other units of the St. Paul company are the core check printing business and the government services division, which supplies electronic benefits transfer services in 29 states.

Deluxe is "slowly but surely building investor confidence," said Heather Bellini, an analyst at Salomon Smith Barney.

Its stock closed Friday at $40.50, up 56.25 cents for the week.

Ms. Bellini said she will raise her target from $42 a share. Deluxe currently is trading at 15 times expected 1999 earnings, she said.

"I would say somewhere between 16 and 18 is a fair multiple for the company," Ms. Bellini said, suggesting a price target of perhaps $55 a share.

Deluxe itself believes its shares are undervalued. The company has repurchased five million shares since authorizing a 10 million-share buyback this year.

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Bank concerns about the year 2000 continue to wreak havoc on software sales for Phoenix International Systems Ltd.

The Orlando company issued a preliminary report late Thursday warning investors of an expected loss of 17 cents a share in the second quarter. Wall Street had expected net income of 2 cents a share.

Phoenix will formally report its earnings on Aug. 9.

"Our industry has experienced a temporary slowdown in business activity as banks are delaying their software purchasing decisions while they address year-2000 issues," said Bahram Yusefzadeh, chairman and chief executive officer in a written statement.

Phoenix is the only publicly traded developer of client/server core banking software. Its stock closed Friday at $5.5625, down $1.06 for the week.

The company expects to report second-quarter revenues of $6 million, which would be up 5% from the comparable 1998 quarter. Wall Street had expected $8.8 million of revenues, according to First Union Capital Markets.

Phoenix said it expects to report a second-quarter loss of $1.4 million, compared to net income of $498,000 a year earlier.

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