Banks' deliberate pace in moving toward the Internet has not helped some of the software companies that expected to be enjoying boom times by now.
Though leading home-banking vendors showed some positive trends in the third quarter, either boosting revenues or narrowing losses, their stock prices are still languishing.
It is apparent that the market does not have a lot of confidence in the profit outlook for on-line banking.
Home banking is a "tough space," said Stephen Franco, an analyst at Piper Jaffray Inc., Minneapolis. With financial institutions facing year- 2000 and merger-and-acquisition issues, "on-line banking keeps getting pushed farther down the priority list."
But Mr. Franco pointed to reasons to expect activity to pick up-and software company executives reinforced that optimism.
"Banks will have to respond" to the inroads on-line brokerages have made in providing a wider array of financial services, Mr. Franco said. "Brokerages have been a lot more aggressive in utilizing the on-line channel, so the bar will be raised pretty significantly in the next year."
He also suggested that consumers are ready to buy in, once banks seriously push the proposition.
"The amazing thing is that every time someone makes a half-hearted effort at marketing home banking services, they have gotten a tremendous response."
To varying degrees, the stocks of three major providers of Internet banking software are showing signs of recovery from their 52-week lows.
Intelidata Technologies Corp., Herndon, Va., last Tuesday reported revenue of $2.7 million for the third quarter, 3% less than a year earlier. But its net loss of $761,000 compared favorably with $3 million of red ink in the 1997 period. Alfred S. Dominick Jr., president and chief executive officer, said the improvement is a reflection of banks' getting serious about home banking.
"There is a sense of urgency," he said, "caused by the threat to the payments system."
Intelidata, which reached a two-year high of $9.875 on Nov. 8, 1996, closed Friday at a penny-stock price of 87.5 cents. TK.
Security First Technologies Corp., which sells home banking software and outsourcing, reported third-quarter revenue of $6.5 million, up 127%. The net loss of $5 million was $300,000 better than a year ago.
Above the bottom line could be seen some healthy signs. Revenue grew 44% from this year's second quarter. The number of bank customers using Security First's software increased 47% from the second quarter, to 387,000.
"This industry is still in its infancy," said Robert F. Stockwell, chief financial officer of Atlanta-based Security First.
Charles Wittmann, analyst at Wheat First Union, called Security First's quarterly results favorable and maintained his "buy" rating. "I think we are getting a glimmer of hope that people are accepting Internet banking," he said.
Security First closed Friday at $17.75 TK, up/down TK for the week. The company went public on May 23, 1996, hitting its all-time high of $45 on that first day.
Edify Corp., a Santa Clara, Calif.-based developer of home banking and call-center software, revised its third-quarter earnings-initially reported Oct. 21-to include a charge of $5 million resulting from settlement of a patent infringement case with Lucent Technologies Inc.
Edify's revised loss was $4.975 million on revenue of $18.7 million. Before the charge, it had posted net income of $25,000, compared to net income of $1.09 million a year ago.
The stock closed at $6.50 Friday, up $1.375 for the week. Edify went public on May 2, 1996, at $15, and shot up to its all-time high of $53.75 on May 21, 1996.
Edify's shares fell 39% on April 6, to $11.25, when it reported disappointing first-quarter earnings and revealed problems in converting to Microsoft's Windows NT operating system from IBM's OS/2. But a company official was as sanguine as his counterparts at Intelidata and Security First.
"We made considerable progress in the second quarter," said William A. Soward, Edify's director of financial services. "I think you will see us getting back to profitability, as we said we would," said William A. Soward, Edify's director of financial services.