In a further sign that the off-premises market for automated teller machines may be drying up, a large company that buys ATMs from manufacturers and sells them to retailers has run into problems repaying its suppliers, the major manufacturers NCR Corp. and Tidel Technologies Inc.

The reseller, Credit Card Center of Philadelphia, owes $42 million to NCR and $26.7 million to Tidel, and attributes its liquidity problems to its rapid growth coupled with economic problems within its merchant base. Founded in 1996 as a two-person operation, Credit Card Center now has 700 employees and earned revenues of $140 million last year. The company vows to repay the money it owes to NCR, Tidel, and others, but does not give a time frame.

Credit Card Center said its ambitious buying program left it with more ATMs than it could resell, and demand dried up as the economy began to sour. The repercussions may be particularly jolting for its suppliers: Credit Card Center's debt to NCR represents 5% of the manufacturer's sales revenue, and 70% of Tidel's.

NCR, the Dayton, Ohio, manufacturer that competes with Diebold Inc. for the business of major U.S. banks, called an investors' conference on March 6 to explain that it will take a $42 million charge to cover the unpaid debts. Tidel said it had already been relying less on Credit Card Center, and will seek to compensate through arrangements with other independent sales organizations.

Now that the market for ATMs on bank premises is largely saturated, manufacturers like NCR and Diebold have been catering more to the off-premises market. NCR said it uses independent sales organizations like Credit Card Center to avoid conflicts of interest with its main customers - banks. "We wouldn't want to do anything that would imply that we are competing with our customers," said Gregg Swearingen, NCR vice president of investor relations.

Diebold, NCR's main competitor in the bank market, no longer uses ISOs to sell its ATMs. In 1998 the company did business with 92 ISOs, but by 1999 it had "disengaged all our reseller relationships," said John Titko, Diebold's national sales manager. "The potential credit concerns with dealing with ISOs were a factor in our decision to terminate the use of ISOs."

"Experience has taught us that the only effective way to build an economically viable retail placement program, with lasting power, is to structure all placements directly with the retailer," Mr. Titko said. "The involvement of third parties in the transaction has only led to unnecessary complications."

Last October, NCR signed a three-and-a-half-year deal making it Credit Card Center's "preferred ATM provider," or primary supplier. As part of the deal, NCR lent the reseller $16 million to help upgrade its infrastructure. Credit Card Center's additional debt to NCR includes money owed for ATMs the reseller purchased, as well as accrued interest and legal fees.

Under the agreement, Credit Card Center was to buy and deploy 50,000 NCR machines at a relatively cheap price, $5,000 apiece. Since Credit Card Center primarily sells to retail stores - gas stations, convenience stores, and supermarkets - most of the ATMs it agreed to buy were basic cash dispensers. NCR says that Credit Card Center has yet to pay for the 5,000 machines it has purchased so far.

Meanwhile, Tidel, of Houston, has lost what had been its biggest customer, and may have a much more difficult time than NCR recovering from the lost revenue. Leonard Carr, senior vice president of Tidel, said that his company knew it was going to have to look elsewhere for business after Credit Card Center gave preferred status to NCR. Tidel, however, did not anticipate that Credit Card Center might default on the money it already owed.

"Basically, we were willing to offer them extended payment terms and financed long-term notes in an effort to be competitive with NCR," Mr. Carr said. Until now, Credit Card Center has been "a terrific customer," he said. "The first time we encountered problems was this calendar year."

David Bearman, NCR's chief financial officer, tried to assure investors during the conference call that the situation was "a single-customer issue" and that "our expectations remain in line with our previous guidance." That guidance includes sales growth of 5% for 2001. NCR currently works with 20 other independent sales organizations in the off-premises market.

Mr. Bearman defended NCR's decision to work with Credit Card Center. He called it a "bold move," adding, "When you make a bold move, there are some risks." He said Credit Card Center had been keeping up with its payments to NCR until late February, when the situation "unraveled rapidly."

In a press release, Credit Card Center president Andrew Kallok said the contract with NCR, combined with prior commitments to other manufacturers, "inflated our inventories to an eight- to nine-month level. At the same time, wholesale money to the small-ticket leasing arena was reduced significantly, forcing several companies out of business, and inflating our receivables."

The press release also said Credit Card Center has begun cost-cutting measures and that it "is committed to honor its obligations to those with whom it does business, its customers, and its employees." The company did not return calls.

ATM manufacturers rely on ISOs like Credit Card Center to act as their sales forces, deploying their products in locations away from banks. Ernest Burdette, president of Triton Systems, a manufacturer in Long Beach, Miss., says his company sells exclusively through ISOs. "We fundamentally believe that's a sound way to do business," he said.

Tom Harper, president of NetWorld Alliance in Louisville, Ky., which owns and operates the Web site ATMMarketplace.com, called Credit Card Center's problems "an isolated incident, but it will have a ripple effect" on the rest of the industry by making merchants wary of ISOs.

Joseph Vu, president of Universal ATM Network, an ATM manufacturer and ISO out of Sacramento, Calif., said Credit Card Center's strategy was to get merchants to lease its ATMs by guaranteeing them that Credit Card Center would pay the balance of the lease as an interest loan if the machine did not pay for itself during the month. "It actually could have worked if they allocated enough money for the companies that failed," he said.

Tim Wallace, owner of Daily Market, a convenience store in Lewes, Del., leased an ATM from Credit Card Center about two years ago, he said. At first, he said, the company promised to pay him $500 to sign a lease, plus $200 a month in advertising revenue. So he leased a Tidel ATM for $12,500 over five years.

Mr. Wallace said that each month, Credit Card Center is supposed to send him a check for his cut of the machine's advertising and transaction revenue. But the last check he received was in November, and it bounced, he said.

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