Global Payments Inc. announced a major delay in upgrading U.S. merchants to a new authorization system.
The payments processor also reported weaker-than-expected quarterly earnings Monday, leading investors to drive down its share price by Tuesday.
Global Payments said it was putting off migrating its largest retail customers and independent sales organizations to G2, its new front-end authorization platform that aims to reduce operating costs and help the company beef up reporting capabilities for merchants.
The Atlanta company reported net income dropped 15% from a year earlier, to $49.4 million for the first quarter of fiscal 2011, which ended Aug. 31.
The "results again demonstrate that Global Payments should not be a public company and that its value would likely increase significantly in the hands of private equity or a significantly larger international payments company," Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey, wrote in a research note Tuesday.
Global Payments' shares dropped by about 9%, to $38.46, by midday Tuesday.
The company already has upgraded most of its Asian customers and many U.S. merchants to G2, but initial U.S. testing has shown the "risk of a less-than-seamless migration for certain merchant and terminal types," Paul Garcia, Global Payments' chairman and chief executive, said on a conference call with analysts Monday, according to a transcript.
"With the goal of ensuring that our merchant base has a perfect migration experience, we have expanded our testing window and have elected to migrate our largest customers and ISOs after peak retail season," Garcia said.
The U.S. migration, which was planned to finish in the most recent quarter, will not be completed until fiscal 2012, he said.
While executives said they plan to make up the $2 million of savings it expected from the U.S. migration, "domestic migration delays will likely disappoint investors as Canadian and U.K. conversions [and savings] will be pushed out as well," Tien-Tsin Huang, an analyst with JPMorgan Securities Inc., wrote in a research note Tuesday.
Despite the expected delays, the company reiterated previous guidance for the fiscal year, with expected revenue of $1.74 billion to $1.77 billion, up 6% to 8% over fiscal 2010.
For the most recent quarter, revenue grew 7% from a year earlier, to $440.1 million.
Investor restlessness will likely grow until the company makes an acquisition or other strategic investments in the business, Jeffrey said in his note.
"Global is the last major independent international processor, possessing a fixable U.S. acquiring business, a strong if depleted Canadian platform, an at-least average U.K. business and an Asia-Pacific operation, which is clearly the crown jewel," he said.