Loan losses in the banking industry apparently are pinching off profits at Metavante Technologies Inc.
In its first quarterly report as a public company, the Milwaukee technology vendor said Thursday that it took a $129.5 million pretax charge, most of which it attributed to "updated expectations for long-term financial performance" in its check-imaging business.
As a result, Metavante posted a loss of $92.8 million, or 78 cents a share, for the fourth quarter.
A year earlier, when Metavante was part of the Milwaukee banking company Marshall & Ilsley Corp., it had earnings of $44 million.
Excluding the charge and the $25.4 million cost of its November spinoff, the company's adjusted earnings were $44.1 million.
Revenue grew 6% from a year earlier, to $408.2 million.
"Image is not a broken business. It is still strategically important to Metavante," Timothy C. Oliver, a senior executive vice president and the chief financial officer, said on a conference call with analysts.
David Koning, an analyst at Robert W. Baird & Co., attributed the charge to writedowns banks have been taking amid the continuing credit crunch.
"Some of the banks don't want to have a lot of imaging" spending, Mr. Koning said in an interview. "They're focusing on their core business and are willing to put off the license spending for a few quarters."
John Kraft, an analyst at D.A. Davidson & Co., found the charge troubling but was unsure what had prompted it.
"How did they not see that coming? That is not encouraging," Mr. Kraft said in an interview. He said it was unclear whether banks had completed their investments in imaging software or whether Metavante might be losing sales to competitors.
But investors tend to look past such noncash charges to focus on the outlook for future results, Mr. Kraft said. "The guidance was about in line to slightly better than expected."
The slowdown in imaging proved a drag on Metavante's payments unit, which supplied 60% of the company's revenue in the fourth quarter. The business had fourth-quarter operating income of $71.3 million, an increase of less than half a percentage point, as revenue grew 5% from a year earlier, to $245.8 million.
At Metavante's financial solutions unit, which includes core account processing for deposits and loans, operating income grew 24%, to $38.7 million, as revenue grew 7%, to $162.4 million.
Executives said Metavante faces little direct exposure to the problems in the mortgage industry.
Frank R. Martire, the company's president and chief executive officer, said this should give his company a competitive advantage.
"We are not burdened with integration and restructuring issues, and we do not face significant headwinds from the mortgage industry," Mr. Martire said during the conference call.
The comment was an apparent reference to its larger rivals Fiserv Inc., which bought CheckFree Corp. in December, and Fidelity National Information Services Inc., which bought eFunds Corp., in September.
Metavante said it expects organic growth of 4% to 6% in 2008 and earnings per share of $1.12 to $1.16. The company does not intend to give quarter-by-quarter guidance, Mr. Oliver said.
Mr. Kraft said it was crucial that the outlook generally met analysts' expectations. "Guidance was the big overhang, and it came in just fine," he said.
Tien-tsin Huang, an analyst at JPMorgan Securities Inc., said the results probably bode well for other core processors, including Fiserv and Fidelity, which will report fourth-quarter results next month.
Given Metavante's stable trends and healthy pipeline, Mr. Huang wrote in a note sent to clients Thursday, "we remain positive on the core processing space."
