Fidelity National Information Services Inc. has
"One of our most important initiatives this year focuses on strengthening and realigning our mid-market sales and operating organizations to compete more effectively in this large, underpenetrated market," he said in an earnings call with analysts.
The Jacksonville, Fla., technology vendor's core processing systems are popular with the biggest banks, and it has a strong community bank client list, but the company has never dedicated a sales force and marketing effort to the middle tier, Mr. Kennedy said. "That market is really an underpenetrated market for us."
Nikolai Fisken, an analyst at the Little Rock investment bank Stephens Inc., said Fidelity's push into the mid-tier would put additional pressure on competitors such as Fiserv Inc., Jack Henry & Associates Inc., and the Metavante Corp. unit of Marshall & Ilsley Corp. Fidelity's stock price has begun rising after dipping shortly after its November 2006 spinoff from its majority owner, the title company Fidelity National Financial Inc. in Jacksonville, he noted.
"I think the valuation disconnect has finally started to end," Mr. Fisken said, because investors had difficulty valuing the faster-growing technology operation apart from the insurance business. "They're finally going to get a premium to the group for their stellar growth rates."
Fidelity reported after the markets closed Tuesday that its net earnings had climbed 65.1%, to $75.1 million, compared with a year earlier. Revenue grew 59.5%, to $1.1 billion. Per-share earnings of 58 cents met the average of Wall Street estimates.
These results reflected Fidelity's merger last January with the payment processor Certegy Inc. of St. Petersburg, Fla. But even on a pro forma basis to account for the deal, revenue grew 12.5%, and earnings went up 11% before interest, taxes, depreciation, and amortization, the company said.
Revenue in its mortgage processing business fell 1.6%, to $92.5 million, though the broader area of lender services, including the former Certegy's credit card operations, reported 7.9% revenue growth, to $437.1 million.
JPMorgan Chase & Co. announced in October that it would consolidate its mortgage servicing onto a single system, with software hosted by Fidelity but using Chase employees, in order to streamline a business built through acquisitions that has run on numerous servicing systems.
Jeffrey S. Carbiener, an executive vice president and Fidelity's chief financial officer, said this deal would "drive growth as we go into '08."
Mr. Fisken of Stephens noted that revenues from Fidelity's international business grew 55% in the fourth quarter, to $141 million. "Alltel always struggled internationally. Now that's not the case," he said, referring to the operation that the title company bought in 2003 to enter the banking technology business.
Fidelity said that a major international revenue contributor was the Brazil venture that it started last July, which involves both credit card and check processing. It has said it wants to use this business model, combining the legacy Certegy and Fidelity capabilities, in future international expansions.
