At Hypercom, "focus" is not the ordinary business cliche. It is a code word.

When senior managers of the Phoenix-based transaction terminal manufacturer say they are focused, their subtext is, "We are not Verifone."

With that, their competitor would surely agree. Verifone Inc. is the dominant provider of the ubiquitous, low-cost devices that authorize card transactions at points of sale. Though Hypercom can give Verifone a run for its POS, even outselling Verifone in some foreign markets, Hypercom won't soon eliminate the worldwide market-share gap that The Nilson Report calculates is 47% to 11%.

But while Verifone has moved on to other things - it has ambitions of playing a central role in Internet commerce - Hypercom invokes that "f" word. It places faith in focus to yield a competitive advantage as Verifone diversifies.

"For 10 or more years this was a steady-state industry, but no more," George Wallner, president of Hypercom Corp., said of the core point of sale business. "This is not the time to be going off into cyberspace."

With that unmistakable dig, Mr. Wallner is off on his vision of how POS technology has to change dramatically for increased transactional demands, how "everything will be obsolete in the next three years," how the advent of "multifunction cards will change the way cardholders interact at the point of sale."

Internet commerce may be a valid long-term opportunity, he said, "but it's wrong to focus on that at a time when the point of sale needs a complete retooling."

He sees Hypercom making headway: Though it has roughly 10% of POS installations worldwide, it is getting 18% of the new ones, thereby cutting into Verifone's lead.

"My focus is to see that we grow profitably every month," said Albert Irato, who Mr. Wallner brought in as president four years ago from American Express Co. "We are not driven by market share."

"I'm focusing on next year's results," said Mr. Wallner, underlining the difference between tactics and strategy.

Mr. Wallner, 46, who founded Hypercom in Australia in the late 1970s with his brother Paul, is his industry's "other visionary," often overshadowed by Verifone chief executive officer Hatim Tyabji.

Both rarely speak publicly or to the press. They share a mutual, gentlemanly respect; Mr. Tyabji does not tolerate poor-mouthing of competitors.

If Mr. Wallner and his No. 2 executive display more of a gloves-off pugnacity, it is good-natured and even a bit smug. They like not having their rival's scope - Verifone has almost twice Hypercom's $240 million of revenues, four times the employee base of 600, plus the new emphasis on the Internet - nor do they have to be accountable to public shareholders, as Verifone is.

"We stay focused and we want to see returns before doing something," said Mr. Irato, president of Hypercom Inc., the North American unit of Hypercom Corp. Reporting to George Wallner, Mr. Irato is also CEO of the holding company that also consists of an international arm, a manufacturing subsidiary, and Hypercom Network Systems.

The last, a telecommunications unit run by Paul Wallner, provides another contrast with Verifone. It does not own a similar company with expertise in enterprise networks, typically for bank branch systems. Hypercom's leaders view networking alongside manufacturing and software as a core competency; Mr. Irato said the network company could do $50 million of sales next year.

In recent interviews, Mr. Irato and George Wallner indicated that strategic planning and change management have become constant preoccupations. Hypercom's announcement this month of its Network Terminal family is an indication of how they are preparing for a new generation of POS automation.

Mr. Wallner largely endorses Visa International's scenario for "relationship cards," made smart with computer chips. One card could embody credit and debit, cash-like stored value, a buyer-loyalty program, even drivers-license-type identification.

"The business case is almost OK for this today, and that says a lot," Mr. Wallner said. If it flies, POS transactions could become very different, involving many parties to a transaction, requiring more elaborate graphical displays at the retail site.

But don't peg him a smart-card firebrand. While Hypercom has been involved in many chip card experiments and has a complete product line, it has kept a skeptical distance from the more vocal enthusiasts, Verifone among them.

Last year Hypercom hired Howard Mandelbaum, a veteran of the electronic banking wars with several New York banks, to manage smart cards. It is a modest undertaking; Mr. Mandelbaum has one employee writing software for the MasterCard-Visa test in New York next year.

Something of a chip card maverick, Hypercom has criticized EMV - the Eurocard-MasterCard-Visa standards project - as out of touch with practical transaction needs. It also spoke out about some terminals' tendency to tear chips from their plastic beds, a problem others have minimized.

Mr. Wallner suggested the industry could have gone about smart cards differently, perhaps approaching semiconductor manufacturers for help in designing a specialized, lower-cost chip.

Siding with those who have said the current U.S. card authorization system will not easily be displaced with chip technology, he said reduction of credit card fraud would cover only 50 cents of the cost of a $4 smart card. Revenues from loyalty programs, income from stored value, and other opportunities would go much farther.

His bottom line: The business justifications for anything but the relationship card have been "dreadful to useless;" the industry has "hushed up" the negative results of pilot tests rather than spreading the knowledge from them; and moving from pilot to rollout stages "requires convincing the CFOs (chief financial officers), and that's tough."

"I have a much clearer picture of this industry and the implications of the chip than I had a year ago, and a lot of that is because of the learning from pilots," Mr. Wallner said. "The last word on the chip has not been spoken yet."

Meanwhile, Mr. Wallner is playing architect for new ways of delivering financial and transaction services. Typical is the Network Terminal, an embodiment of the client/server model, which moves "intelligence" away from the retail counter and onto remote server computers that can be more easily maintained and upgraded.

"The cost of memory in a terminal is approximately $150 per megabyte," Mr. Wallner said. "The cost of server memory is 45 cents per megabyte. It's easy to see how much more cost-effective client/server is."

The server, standing between the POS and the traditional host computer, comprises an "adaptation layer" that easily accommodates new functions and uses telecommunications more efficiently. If programming for the year 2000 were a problem - it never was for Hypercom - it could be solved on the servers.

The POS industry in general is moving in the more flexible, multifunction direction, said Ed Hester, author of a recent report on electronic commerce trends for Freedonia Group in Cleveland. Smart cards would follow logically.

"People will want to easily retrofit new payment devices into the terminals," he said. "Hypercom and Verifone are developing products this way almost exclusively."

Multifunctionality will bring about "a fairly complex transaction environment," Mr. Wallner said. "Through what exists today, consumers would not be able to access all the features easily and quickly, and retailers wouldn't let consumers use their terminals an extra 30 to 60 seconds to do bank business.

"We will need highly interactive, screen-based products," he continued. "That means graphics, and you can't put enough memory in terminals for graphics. You can load screen images from the server, like on the Internet, and it becomes feasible to deliver 50 to 100 times the information we do today. The technology is very much on our side in this."

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