Executives at Metavante Technologies Inc., which gained its independence from Marshall & Ilsley Corp. last week, are planning to make a few strategic shifts, including taking aim at the credit union market and putting more effort into expanding abroad.
But they are not planning a major new course for the Milwaukee technology company.
The executives outlined their strategy after ringing the opening bell at the New York Stock Exchange on Friday, when its shares began trading publicly.
Donald W. Layden Jr., Metavante's senior executive vice president of corporate development and the president of its Metavante International Group, said the stock will be a valuable resource. "We now have a public currency. We've got the debt capacity. We've got the capital. We've got a partner" in the private-equity firm Warburg Pincus LLC.
The spinoff did not put any money directly into Metavante's treasury — M&I's shareholders received one share for each three they held in the banking company, which pocketed $1.67 billion — but it did bring to the table the private-equity firm Warburg Pincus LLC, which paid $625 million for a 25% stake in Metavante.
"They didn't use up all their money when they wrote this check," Mr. Layden said.
Frank R. Martire, Metavante's president and chief executive officer, said Warburg's expertise could be as valuable as its bank account.
"They know a lot of contacts in the international marketplace," he said.
James C. Neary, a managing director at Warburg and one of its three employees to get a seat on Metavante's 11-member board, said his company would support the vendor's growth outside the United States.
"The international opportunity is relatively untapped, and we think it's substantial," Mr. Neary said.
Warburg, which has an agreement to retain its Metavante shares for at least two years, has no plans to exercise an exit strategy anytime soon after that, he said. "We're long-term investors."
Warburg typically invests with a five-year horizon, Mr. Neary said, and "if it's appropriate to own it for much longer, we will."
Mr. Layden said that some of the most appealing international markets are in Western Europe, especially the United Kingdom, along with India and other markets where the Swiss software developer Temenos Group has clients. (Metavante and Temenos formed a marketing alliance in March.)
Metavante has customers in 32 countries, largely through third-party distributors, but in the United States it has 30 locations and a large direct sales force, he said.
In addition, Metavante sees opportunities in the credit union market, where it currently offers payment services but not core processing, Mr. Layden said.
M&I has been highly critical of credit unions' tax advantage over banks, he said. "It can be a challenging market for us to sell into."
Metavante also plans to offer the Temenos core processing system to the largest U.S. banking companies and is using Temenos technology to upgrade its hosted core system, the nation's largest shared platform, processing $1 trillion of transactions each night.
Upgrading that system will let Metavante's clients shift to real-time transaction processing, rather than the batch system that it employs now, Mr. Layden said. "Continuous processing is very important to them."
Metavante already has overhauled its front-end systems for teller and branch and call centers, "so we could begin the process of reviewing the core technology," without disrupting clients' work flow, he said.
First implementation of the new core system will begin next year, starting with the customer information system, then the deposit system, and the loan system last, in a series of phases that likely to extend into 2009.
The company also intends to expand in payments, the executives said. The payment business now provides 60% of Metavante's revenue, compared with 25% when Mr. Martire joined the company in March 2003, Mr. Layden said.
Metavante has grown in payments through acquisition, including the NYCE debit network, which processes 20% of the nation's debit card transactions, and Endpoint Exchange LLC, which 4,600 institutions use to clear check images.
"The payment processing business is one of the most attractive opportunities," Mr. Layden said.
In addition, Metavante is rolling out expedited services for last-minute payments and specialized market services such as tax payments.
"We need to do more and do it faster," Mr. Martire said. "We will continue to grow that business."
Metavante's shares have been trading at close to their opening price of $25, and analysts began coverage generally with neutral recommendations.
Brett Huff, an analyst at Stephens Inc. of Little Rock, initiated coverage with an "equal weight" rating. He said in an interview Monday that the shares are probably fairly valued, because the stock traded for about a week on a "when issued" basis before the spinoff.
"The market had a chance to consider this one for a while before it started trading live," he said.
David J. Koning, an analyst at Robert W. Baird & Co., initiated coverage with a "neutral" rating and wrote in a note issued Friday that Warburg paid around $21 a share for its stake.
At the current price, investors may want to wait, Mr. Koning wrote. "We would be more aggressive around $21-22."
