Fidelity National Information Services Inc. says it expects a return to growth in 2010 as bank spending on technology improves in the second half of the year.
The Jacksonville, Fla., company, now the largest vendor to the financial industry, also is ahead of schedule on reducing expenses by $260 million as it digests its Oct. 1 purchase of the rival Metavante Technologies Inc. of Milwaukee.
Additional savings are achievable, Mike Hayford, a corporate executive vice president at FIS and its chief financial officer, told analysts Monday at an investor presentation in New York.
"We're targeting more," he said. "We plan to take as much cost out as we can."
$260 million in cost-cutting is expected to be achieved in the first two years after the deal was announced in April, Hayford said. "Beyond two years, even, we're going to look for ways to take out costs and find more synergies."
The cost cutting began even before the deal officially closed. For instance, Metavante cancelled a partnership in July with the Swiss vendor Temenos Group under which the two were to have collaborated on a core account-processing system, but executives decided instead to go with Fidelity's systems. Hayford said the savings from this were significant, but he did not specify the amount.
FIS offered a preliminary 2010 earnings forecast of $1.91 to $2.01 a share; the midpoint is a penny ahead of Wall Street's average estimate. The company said it expects to report a slight decline in revenue this year and 2% to 4% growth in 2010.
In the longer term, FIS expects its international operations to play a larger role in its overall operations. The company projected growth above 10% in foreign markets, compared to single-digit growth in its U.S. businesses.
FIS also may look for additional opportunities outside the financial industry. The company draws 17% of its revenue from a variety of retail, government, education, health care, commercial and printing and mailing clients.
David J. Koning, an analyst at the brokerage firm Robert W. Baird & Co., called the presentation encouraging in a note to clients Tuesday, given FIS' earnings growth during the recession and the 2010 revenue forecast.
As markets improve, Fidelity has a chance to exceed its own estimates, said Koning, who gives the stock an "outperform" rating. "We view the initial guidance range as adequately conservative."
