Verifone Inc., the leading manufacturer of point of sale terminals, is branching out with an Internet commerce division to develop secure payment methods for computer networks.
On Monday, just six days after announcing the new division, Verifone said it had agreed to acquire Enterprise Integration Technologies, a software and consulting firm specializing in electronic commerce on the Internet, for $28 million in stock.
The moves are designed to bring Verifone's payments expertise to bear in emerging on-line networks. They underscore what the company describes as its "transaction automation" strategy.
"The perception the world has of Verifone is as a terminal company," said Roger B. Bertman, vice president and general manager of the new electronic commerce unit. "But the value of our terminals resides in the software applications and interfaces, and our ability to flexibly integrate the terminals to the nuances of the existing payment infrastructure."
Verifone's experience in electronic payments puts the company in a strong position to develop the Internet channel, said Mr. Bertman.
In addition to security features, Verifone executives pointed out, such transactions need a system for settlement, chargebacks, and disputes.
"These are precisely the things Verifone has been doing at the merchant countertop," Mr. Bertman said.
Over the past couple of years, the Redwood City, Calif., company has also been developing payment applications for standard computer platforms. Verifone's strategy is to deliver software and hardware that can combine with Internet browsers and processors to create a payments infrastructure.
Another element in the strategy will be partnerships and acquisitions that can augment the company's payment competencies.
Verifone sees Enterprise Integration Technologies as an example of how partnerships can help build business on the Internet.
"The synergy between Verifone's global experience in electronic payment systems" and Enterprise Integration Technologies's expertise in the Internet and electronic commerce "will create a powerful catalyst for market growth," said Hatim A. Tyabji, chairman, president, and chief executive officer of Verifone.
The two companies "share a vision of consumers, merchants, and businesses buying and selling from each other in a secure, open, eletronic marketplace."
Mr. Bertman said Verifone will pursue alliances with business that have similar visions. They are most likely to be providers of transaction security and Internet browser software.
The Internet commerce division will also work with the bank card associations - with which Verifone already maintains close ties - and with communications service providers that offer access to the Internet.
An example of the alliances Verifone hopes to form is a joint development arrangement announced in May with Broadvision Inc., Los Altos, Calif., which provides software for such distribution channels as interactive television, on-line computer services, and computer networks.
The companies plan to create a new "virtual terminal" system that will allow for the passage of card payments between new electronic commerce mechanisms and existing payment networks.
Meanwhile, Verifone has been pursuing other initiatives to accelerate the growth of secure payments over the Internet.
In July it became a sponsoring member of the Object Definition Alliance, a coalition of leading companies from the electronic payments, financial services, information technology, entertainment, telecommunications, and retailing fields. The coalition was organized by Oracle Corp. to create technical standards for electronic commerce over such channels as the Internet and interactive television.
Also in July, the company joined CommerceNet, a consortium of government agencies, educational institutions, technology companies, and banks that want to facilitate business-to-business commerce over the Internet.
Among CommerceNet's other sponsoring members are BankAmerica Corp., Digital Equipment Corp., Electronic Data Systems Corp., and International Business Machines Corp.
Enterprise Integration Technologies, Verifone's prospective Silicon Valley acquisition, is the founder and program manager of CommerceNet and has had a major influence on electronic commerce through its development of the Secure Hypertext Transport Protocol and as cofounder of Terisa Systems Inc. with RSA Data Security Inc.