The problems at InteliData Technologies Corp. were never about the technology.
Its online bill payment software has always been well regarded, enough to attract a few marquee customers, but its failure to amass a sizable customer base kept turning off potential clients.
But it didn't turn off the banking technology vendor Corillian Corp., which said Friday that it had agreed to buy InteliData for about $20 million in cash and stock.
"Despite their financial challenges over the last couple of years, they have, by and large, kept their customers and served them well," Corillian chief executive Alex Hart said in an interview.
Mr. Hart said that in his discussions with InteliData's customers, which include Bank of America Corp., National City Corp., and Wachovia Corp., none expressed serious doubts about the technology. "Their only real concern was financial viability."
Indeed, even InteliData conceded that its future seemed grim. On Thursday, shortly after Corillian announced the deal, InteliData posted its fourth-quarter earnings. The report included the candid assessment that "because the company has recurring losses from operations and is experiencing difficulty generating cash flow, there is substantial doubt about its ability to continue as a going concern."
Mr. Hart described InteliData, of Reston, Va., as "a business that frankly was burdened with costs that are difficult to bear for a company of its size." By taking over its business costs and regulatory obligations, he said, Corillian would remove that burden and with it InteliData customers' worries about the company's financial viability.
Corillian, of Hillsboro, Ore., stands to gain from adding InteliData's customers and software, and its online bill payment business should get a lift, Mr. Hart said. He singled out InteliData's bill payment warehouse technology and Internet software for credit card issuers as applications that would complement Corillian's products.
The new customer relationships would mean new cross-selling opportunities for Corillian and address an issue Mr. Hart raised in February when discussing his company's 2004 earnings.
Corillian has set a goal of adding one large bank and three midsize ones to its customer roster each year. Last year it signed Wachovia but no midsize customers. Mr. Hart said his and InteliData's customers include eight of the top 10 U.S. banks.
Corillian would pay 4.9 million shares of its stock to InteliData shareholders plus $4.5 million in cash. Corillian's shares closed at $3.48 Thursday, before the deal was announced, but dipped to $3.28 on Friday.
InteliData's shares closed at 29 cents Thursday and climbed to 37 cents on Friday. The company had $3.2 million in cash and cash equivalents on its books as of Dec. 31. The deal is expected to close in May or early June.
Mr. Hart said the deal was priced on an assessment of the technology's value rather than the strength of InteliData's ongoing operations. InteliData's 2004 revenue - $13 million - is "very attractive" despite being 33% less than 2003's. It is attractive, he said, because it is recurring revenue that he expects to increase over time.
InteliData lost $33.2 million in 2004, including a $25 million noncash goodwill impairment charge.
InteliData CEO Al Dominick said Friday that he had met Mr. Hart more than two years ago. At the time, a merger "just didn't make economic sense or financial sense for either company at that time."
But with InteliData struggling, he said, negotiations with Mr. Hart started in earnest a month ago. This move "gives us the financial security and stability that we've struggled with over the years," Mr. Dominick said.
Analysts say that InteliData's technology and customer relationships are sound, despite its financial woes. Beth Robertson, a senior analyst at MasterCard International's TowerGroup Inc. research unit in Needham, Mass., said these two companies are "a good fit, actually."
"I feel happy for InteliData - pleased for them that they found a good home," Ms. Robertson continued. "They had some very nice and valuable assets, but they encountered a lot of business problems and they were having a lot of trouble overcoming that."
Ms. Robertson said many of InteliData's customers fit Corillian's definition of midsize - the very customer set that eluded Corillian last year.
One of the most important additions for Corillian, she said, will be InteliData's directory services management technology, which tracks constantly changing information, such as biller addresses.
This is "actually one of the more complex aspects of bill payment operation," Ms. Robertson said. Corillian "definitely can benefit from what InteliData offers in that area" and "will have a more comprehensive internal warehouse offering."
Dan Schatt, a senior analyst for the Boston market research firm Celent Communications LLC, said InteliData's ability to let banks process on-us bill payments on its own systems would appeal to cost-conscious banks that have been "paying an outside party to basically facilitate a transaction that is internal to that bank."
It is doubtful that InteliData's $13 million of revenue will fall after the sale, Mr. Schatt said. Corillian, a larger, more stable operation, will be able "to grow that revenue stream," he said.
