Hypercom Corp. has begun shipping its new-generation point of sale system, which offers faster transaction times and lets merchants advertise products while customers wait for authorization.
The ICE 5000 line of terminals and the accompanying Ascendent software hit the market two weeks ago. Hypercom says it hopes they will serve as fresh ammunition in the market-share battle against its larger competitor, Verifone, a subsidiary of Hewlett-Packard Co.
Hypercom already has a backlog of $35 million in signed contracts and purchase orders, said George Wallner, chairman of the Phoenix-based company. He expressed surprise at the response.
The independent sales organizations, or ISOs, that market Hypercom's wares to merchant clients are clamoring for the system, Hypercom executives said.
"We believe the industry is going through a complete change" in which credit and debit "are just the anchor for new applications," Mr. Wallner said.
The new terminal package has faster modems and larger touch screens than previous models, and integrates signature capture and printing.
Mr. Wallner compared the differences between the ICE 5000 system and previous generations to the improvements personal computer users got in the switch from the old DOS operating platform to Microsoft Windows.
Retailers want software that can handle more than basic transaction processing, he said. Hypercom can deliver functions that include advertising, loyalty programs, restaurant menus, and mini-statements from banks.
One goal is to give ISOs and processors a way to enhance services and retain customers without raising prices significantly, if at all.
The idea is to "add value to an otherwise commodity item," Mr. Wallner said. "The more services somebody delivers to a merchant, the more hooks they have to keep the merchant."
To do that, "you need a highly active interface and you need to store a large amount of information," Mr. Wallner said.
In addition to displaying advertisements on-screen, the new system can print promotions and logos on the receipt. Its screen-capture function attaches an electronic signature to each receipt, which helps merchants handle chargebacks more easily.
Terminals cost an average of $350 to $400 each, and an accompanying package of Ascendent software typically runs $6,000 to $7,000 but can cost less in small configurations.
"Both of those products will be very successful," said Patrick Burton, a computer services analyst for Lehman Brothers.
He recommends Hypercom's stock with a target price of $16, well above the current $9.50 range. He attributes his bullishness to the company's strong push in Europe, significant ownership by management, and market- share gains against Verifone.
Mr. Wallner said it is too early to see whether there has been any effect on market share from the ICE (Interactive Customer Equipment) 5000.
Hypercom also has been plowing income into research and development. Those expenses were $8.2 million in the 1998 fourth quarter, up 28% from a year earlier, according to a filing with the Securities and Exchange Commission.
"What they did was design a suite of products that they knew would meet or exceed demand in the marketplace," said Paul Martaus, president of Martaus & Associates, Clearwater, Fla. "They merely put their head down and executed on their vision."
