Earnings at Transaction Systems Architects Inc. for its third fiscal quarter indicate that the payments processor may be starting a gradual recovery.

Revenue for the quarter that ended June 30 edged up 5% from the previous quarter, to $78.9 million. Net income, however, fell 37.7%, to $1 million. Earnings per share rose 80%, to nine cents.

In the same quarter last year, the company reported revenue of $89.1 million and net income of $11.8 million, or 27 cents per share.

Dwight Hanson, the company's chief financial officer, said he recognizes that earnings are not as strong as they were a year ago, but he is seeing "a gradual return to the momentum of customers buying our products and services."

The Omaha company, which has 1,900 financial institution customers, suffered from a Y2K hangover. Although it reaped rewards as banks upgraded their software in preparation for 2000, sales slowed after the date change occurred. With banks going back to business as usual, Transaction Systems Architects' revenues are picking up, Mr. Hanson said. "We are not getting back to the levels we were pre-Y2K overnight, but we are seeing volumes gradually rise."

The company signed 11 new customers last quarter, which Mr. Hanson described as "higher than normal." Its total revenue included $46.5 million of software license fees, $14.3 million of which recur monthly. It also earned $11.2 million of guaranteed term license fees and $21 million of upfront license fees.

Transaction Systems Architects' investments in smart card and wireless technology also began to pay off last quarter, Mr. Hanson said. The company signed nine smart card-related deals over the quarter, including one with Bank of America of Charlotte, N.C.

Gary R. Craft, an electronic commerce analyst with Deutsche Banc Alex. Brown Inc., said the firm's customer growth is a particularly good sign of recovery. "We are seeing signs of life in the core business and do believe that there is a structural turnaround [coming] for the company," he said.

The company's decision in May to return chairman William E. Fisher to the chief executive officer post probably helped its position on Wall Street, Mr. Craft said. Mr. Fisher had been with the company for 13 years when stepped down as CEO in November to concentrate on the company's strategic direction.

"It's confidence inspiring," Mr. Craft said. "It's a good signal that the CEO who had wanted to spend more time fishing has come back to the company he believes in."

Transaction Systems Architects plans to focus on its core business of payment processing and will spin off its Insession Technologies unit, which provides middleware.

The company also is developing a strategy to enter the electronic bill payment and presentment market, Mr. Fisher said.

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