Fiserv Inc. has begun to integrate Electronic Data Systems Corp.'s electronic funds transfer network, which it bought in December, with its own.
That sounds pretty cut-and-dried, but a news release has caused some confusion.
First, the facts. The merged unit is called Fiserv EFT/CNS. Its president and chief operating officer is Tony Catalfano, who was the director of EDS' funds-transfer network, Computer Network Services of Morris Plains, N.J. Fiserv EFT/CNS' chief executive officer is Grant Christenson, who was the president of Fiserv EFT in Portland, Ore. The merged unit will operate from offices in Portland, where Mr. Christenson works, and Morris Plains, where Mr. Catalfano works.
Here is where things get a little confusing: Fiserv, of Brookfield, Wis., issued a press statement March 13 saying the integration had already taken place.
In a telephone interview, Mr. Catalfano said the aim of the release was to "announce Grant and myself to the marketplace" and to describe "how we're going to run the organization and blend the organization." (Mr. Christenson will handle the platform consolidation and Mr. Catalfano will focus on sales and marketing.)
As for the integration, Mr. Catalfano said he is not sure how long it will take, including the consolidation of the work force and the four data centers.
David M. Scharf of JMP Securities in San Francisco guessed that Fiserv had put out the release for the benefit of customers and potential ones. "They may have been getting questions from CNS clients about the integration," he said. "The potential pricing or repricing, the pace of integration, whether there will be any interruptions. So the announcement was likely to address client questions."
Charles Trafton of the Boston investment bank Adams, Harkness & Hill said the announcement was probably meant to allay investor fears that there could be a problem with the Computer Network Services acquisition in light of recent troubles at another EFT processor, Concord EFS Inc.
Mr. Catalfano said Fiserv deliberated after buying CNS over whether to integrate it with Fiserv EFT. He said it decided that since electronic funds transfer is a scale business, combining forces made the most sense - particularly for cross-selling.
The bet seems to have paid off. Mr. Catalfano said the sales team he brought with him in December has already topped Computer Network Services' 2002 sales.
"I'm happy right now," he said. "I hope it continues."
A big reason for the boost is that Fiserv and CNS sell to the same clientele - generally small and midsize financial institutions, he said. Clients of EDS, which is based in Plano, Tex., tend to be larger companies, so there were fewer opportunities to cross-sell CNS products, which are designed for smaller outfits, Mr. Catalfano said.
Now when his salespeople meet with representatives of such clients or prospects they "are already very familiar with Fiserv, and we receive a warmer reception," he said.
John Kraft, an analyst at D.A. Davidson & Co., said the platform integration is unusual for Fiserv, which tends to let the companies it buys run more or less independently.
"I wouldn't say they have problems integrating," Mr. Kraft said. There are "less integration costs if you let them run independently. On the down side, it makes it maybe harder to cross-sell an integration solution at a later date."
Mr. Trafton at Adams Harkness pointed out that what Fiserv paid for CNS - $320 million in cash - was about twice the seller's book value. Fiserv usually pays the 1 to 1.5 times book.
Mr. Catalfano said that "it looked like from both sides it was the right price," though he added that integration costs will probably offset revenues and that the division therefore will have flat earnings at first.
"That's the plan," he said. "The question is, Can we do better than that plan?"
