Like many entrepreneurs, Michael Brown sees gold in the emerging markets of Eastern Europe.

And like so many successful ideas, Mr. Brown's started out simply and led him to think big.

The former chairman of the data base company Informix was struck by the fact that residents of Eastern Europe conducted most transactions in cash, yet lacked ready access to their money. Four years ago he founded Euronet Services Inc. in hopes of blanketing the region with automated teller machines.

Euronet has installed more than 750 so far, mostly in Hungary and Poland. But plans call for a total of more than 3,000 within two years-and expansion into industrialized Western Europe. "Our goal is to have the largest number of ATMs across Europe," said Mr. Brown, who divides his time between Budapest and Kansas City, Mo.

Euronet operates like the growing number of stand-alone ATM deployers in the United States. It is on a mission to lock up as many sites as possible before others get there.

Euronet's premise is that Central and Eastern Europe are poised to embrace bank cards and electronic banking in a big way. The company also wants to be ready for a potential boom in account openings by people who currently do not use banks, relying on post offices for bill-paying and related services. "We're basically banking on card growth in each of these emerging markets," said Mr. Brown, 41.

Euronet, of which Mr. Brown is chairman, president, and chief executive officer, faces obstacles, to be sure. It has yet to make money. Whether its machines are dispensing Hungarian forints, Polish zlotys, or Croatian kunas, each ATM generates a charge to the bank of $1 to $1.75 per transaction. With banks paying Euronet in dollars, the deployer reduces its foreign currency risk.

Mr. Brown said with a total of 65 million people living in Hungary, Poland, Croatia, and the Czech Republic, he calculates his company could eventually be handling 1.3 billion transactions a year from those four countries alone. Over a six-month period ending in January, its monthly transaction volume increased 79% to 846,644. Because most residents pay cash for everything from milk to utility bills, Mr. Brown sees ATMs as a perfect fit.

To get the kind of traffic he envisions, Euronet must convince banks to sign the two- to five-year contracts it is offering.

In a recent setback, OTP Bank, Hungary's largest, said it would not renew a card-acceptance contract that expires in July. The decision means OTP will not pay Euronet to have its cards accepted by Euronet machines. Though Euronet can circumvent the snag through OTP's participation with international card organizations, the move means less revenue for the company's bottom line.

Mr. Brown said there is still time to get OTP back. "We've got to earn our wings with the banks every day," he said. "We have to service them and give them good pricing."

Banker skepticism is not the only obstacle. Installing an ATM network requires capital that the company has had to dredge for. Though it went public in March 1997 to support the costs of ATMs, a processing center in Budapest, and a staff of 200, the stock has fluctuated, plunging to about $7 from its opening of $13.50.

To finance further expansion, Euronet issued $100 million of senior notes this month through Merrill Lynch Capital Markets Bank Ltd. of Frankfurt.

Observers have said Euronet's expansion plans have scared some investors. Euronet has added countries to its business plan-including Romania, France, and Germany-and is eyeing South America.

Mr. Brown said revenue increased nearly fivefold, to $5.3 million, in 1997. But the company reported a loss of $8 million, or 56 cents a share. "They are trying to bite off as much as they can possibly chew and swallow it later," said Thomas A. Marilio, senior analyst at Arnhold and S. Bleichroder Inc. of New York.

Mr. Marilio projects Euronet will first turn a profit in 1999. "It's a lot like a utility," Mr. Marilio said. "It costs a lot of money to build the utility, but once it's up, it's a cash cow."

Mr. Brown said he tells investors, who are mostly European, to think long-term. "There is just no way I can turn this boat around to give you the returns you want in two years," he said. "If you're a classic American investor, this is probably not for you."

But analysts said Mr. Brown and company are a well-run team that is indeed getting the best off-premises locations, like shopping malls and grocery stores.

"They are doing a pretty good job locking up key sites" in Hungary and Poland, said Neeraj K. Vohra of Friedman, Billings & Ramsey of Arlington, Va.

Euronet is incorporated in Delaware but has its headquarters in Budapest. It processes transactions through its Budapest site, and also routes transactions through international networks such as MasterCard International's Cirrus and Visa International's Plus.

Euronet has overcome telecommunications shortcomings in Eastern Europe by relying on satellite links between its ATMs and the processing center in Budapest. The same technology supports ATMs on cruise ships.

With the infrastructure taking shape, Mr. Brown believes he is nearing his goals. He points to the experience of Portugal, a country of 10 million where an infusion of ATMs has generated 200 million cash withdrawals a year. Hungary's population is roughly the same.

"Last year, Hungary did around 25 million transactions and Poland did probably 10 million, with a population of almost 40 million," Mr. Brown said. "At some point in time, this cash-based economy is going to move to an electronic-based economy."

Mr. Brown is not new to entrepreneurship. He founded Innovative Software, a data base company, in 1979 after graduating from the University of Missouri. Innovative was generating $30 million of annual revenue when it merged with Informix in 1988. Mr. Brown ran Informix for two years before stepping down in 1990.

Then he earned a master's degree in cellular and molecular biology, but could not hold back the "entrepreneurial juices."

In 1993, Mr. Brown and longtime business partner Daniel R. Henry, Euronet's chief operating officer, traveled to Hungary. Informix had been successful in the booming software market in Western Europe in the late 1980s, and the two were seeking a similar opportunity.

They observed that "whether you were going to buy groceries, a refrigerator to put them in, or a house, there was no other way to do it" but with cash, Mr. Brown said. Seeing only about 200 ATMs in Hungary in 1993, Mr. Brown jumped at the chance to help modernize the system.

He put down $1 million of his own money and raised $3 million more to start Euronet. "We just smelled money in the cash."

The company chose NCR Corp. and the Diebold-IBM joint venture Interbold to provide the machines and service them.

Robert Tramontano, an NCR vice president, said the region Euronet has targeted is ripe for cash machines. In 1997, he said, NCR's ATM shipments to Europe, the Middle East, and Africa increased 25%, to 16,414.

But Euronet has had to contend with the entrenched bureaucracy of a political system slowly warming to capitalism, Mr. Brown said. Each country has its own set of banking and certification regulations and sometimes contracts are not what they seem.

"A lot of times (East Europeans) don't give contracts the same credence we do-because they never had to," Mr. Brown said.

Finding talent is also a challenge. Euronet relies on indigenous people to do its selling, but many who grew up under the old regime are accustomed to "delivering a level of service substandard to anything you'd want," Mr. Brown said.

Though Euronet is limited by the rate of card growth in any given country, Mr. Brown is an eternal optimist.

"You know the infrastructure is going to be put in," he said. "At the end of the day, we want to own a big chunk of it."

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