Struggling Phoenix International, a software company that sells core banking systems to small banks and credit unions, has shifted its focus.

Foreign markets now provide about 55% of revenues - which shrank by a fifth last year. And the company is hopeful that an Australian deal will ultimately boost business on these shores as well.

"We have larger projects and more profitable services associated with international clients," said Bahram Yusefzadeh, chairman and chief executive officer of the Heathrow, Fla., company. Its largest client here, Suffolk County National Bank of Riverhead, N.Y., has $1 billion of assets; its largest international client, Co-operative Association Financiere in Venezuela, has $3.4 billion.

Phoenix offers a client/server Internet banking product that runs on Unix and Windows NT systems. Banks and credit unions can operate it in-house or outsource to Phoenix's two application service centers in New York and Orlando. (Phoenix moved into the outsourcing space last year; now five of its 100 U.S. bank customers use this option.)

Last year the seven-year-old company, which went public in 1996, failed to turn a profit, after four straight years in the black. New business has been sluggish in the United States, and Y2K issues slowed down its technology decisions. Though Phoenix added 21 clients and installed software at 37 companies, its revenues were $19.7 million, against $26 million in 1998. Its cash loss was $7.1 million, versus net income of $2.4 million in 1998.

M. Arthur Gillis, president of the consulting firm Computer Based Solutions Inc., is not high on Phoenix's prospects. One reason it has struggled is that banks buy components, not architectures, Mr. Gillis said.

"Phoenix was selling client/server architecture, and the audience wasn't listening," he said. "By my calculations … client/server represents 2% of the installed base" in the U.S. core processing market. As a result, Jack Henry "is knocking them dead."

Jack Henry & Associates and Fiserv Inc. are the major legacy system providers with which Phoenix competes. Its primary competitor in client/server technology in the United States is Open Solutions Inc. of Glastonbury, Conn.

Phoenix "hasn't seen a thread of good news in the past two years," Mr. Gillis observed. Disgruntled employees have posted unflattering opinions about it on Yahoo, and its stock price has been a severe disappointment. The stock was trading at $2.875 at midday Friday, down from $3 a week earlier.

"By now, it should have been hitting the high spots," Mr. Gillis said. "Any more bad news and that company is vapor."

But Mr. Yusefzadeh sees hope abroad and at the moment Phoenix is particularly active in the Australian credit union market. Through an agreement with an Adelaide credit union cooperative, Data Action, 15 credit unions have signed up for Phoenix's software.

"Once the first one is up, the rest will come fairly quickly," Mr. Yusefzadeh said. "We expect to have a large piece of the Australian credit union market in the next five years. They're technology-savvy and the most advanced customer-relationship-management people around the world."

Experience in Australia will help position Phoenix to spring into the U.S. and Canadian credit union markets, Mr. Yusefzadeh added.

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