To help investors recognize the full value of its stock, Transaction Systems Architects decided to spin off several Internet-related businesses.

The strategy seems to be working.

Tuesday's announcement was followed by strong approval from an equity analyst at Credit Suisse First Boston, helping to propel the electronic funds transfer software developer's stock to a 33% gain last week. It closed Friday at $39.625.

The exploitation of hidden Internet-related value in a traditional company is a trend that other bank technology vendors - and banks - are pursuing vigorously (See story on page 1).

San Diego-based HNC Software Inc., the credit card fraud-prevention specialist, tapped into the dot-com stock frenzy in November, spinning off its electronic commerce subsidiary, Retek, in an initial public offering that raised $82 million. By virtue of its association with the company and its 80% ownership stake, HNC's stock is trading at about $98 a share, up 135% since the spinoff.

In January, Deluxe Corp. of St. Paul said it would merge its eFunds electronic payments and services unit with iDLX Technology Partners to form a separate, publicly traded company called eFunds Corp. Deluxe plans to sell a minority interest in eFunds through an initial public offering in late May or early June.

Omaha-based Transaction Systems says it has not determined which of its four businesses would be spun off, though it says it hopes to complete its restructuring before its fiscal year ends Sept. 30.

Consumer banking, which includes sales of automated teller machine and point-of-sale systems, accounted for 73% of the company's $355 million in revenues in fiscal 1999. The company's other units include corporate banking, which sells automated clearing house and money transfer software; retail, which sells equipment to retailers; and systems solutions, which develops software to support corporate infrastructure.

David C. Russell, Transaction Systems' recently appointed president and chief executive officer, said some business units have been constrained by the company's focus on conservative revenue growth, recurring revenue, and expanding operating margins.

"We have other more nascent units in areas like Internet banking, e-commerce payments, and smart card systems where we have achieved notable early success, but clearly need to invest at a much higher rate to ensure we are competitive in addressing rapidly changing new market requirements," Mr. Russell said.

Mark Wolfenberger, the Credit Suisse analyst, said in a report that he believes Transaction Systems could be as successful as HNC Software in carving out its under-valued Internet banking assets. He estimates that Transaction Systems' stock is trading at a 50% discount when each segment of the business is valued individually.

Mr. Wolfenberger gave the stock a near-term target price of $60 a share and upped his stock rating to "strong buy" from "buy," based on the company's plans.

"Each unit requires a different capital structure to accelerate growth in the rapidly evolving Internet marketplace," he said.

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