VeriFone Systems Inc. said it has bought a small Boston payments technology company in an effort to attract more merchant users to its mobile payment system.
Analysts also said the deal announced Wednesday for Way Systems Inc. eliminates a potential competitor.
The San Jose terminal maker paid $6 million for Way Systems, with an additional $3 million possible if the company hits certain performance targets.
Way has several patents, notably one related to connecting magnetic stripe readers to mobile phones, VeriFone said.
Paul Rasori, VeriFone's senior vice president of marketing, said it could eventually look to license that intellectual property.
More than 25,000 merchants use Way's mobile point of sale devices, VeriFone said. About 100 independent sales organizations resell Way's devices and payments services.
The merchant and ISO combination made the company attractive, Rasori said. A VeriFone spokesman said the terms of the ISO contracts for the Way services will not change.
Way approached VeriFone, looking to sell, about four months ago, Rasori said.
"They had been in business for a couple of years and developed a pretty decent distribution channel," he said. "And, to be honest, they were running up against the fact that you do need scale to compete."
VeriFone sells its own mobile payments device, the PayWare Mobile Reader, which made its debut in Apple Inc.'s retail stores in February.
Analysts said that some of Way's patents could bolster PayWare.
"It just kinda broadens the reach a little bit, from very Apple-centric to a broader base," said Robert Dodd, a managing director at Morgan Keegan, a Memphis unit of Regions Financial Corp.
Way's patents are built more around Blackberry devices, rather than Apple's popular iPhone, Dodd said.
The deal "illustrates that mobile terminals are an existing market that's well established," said Aaron McPherson, a research manager who covers payments at IDC Financial Insights. "There is just a thriving business in mobile terminals."
Still, the purchase does not amount to much.
"It's not a significant investment, and it's very much a small, tuck-in kind of a thing," Dodd said. "I don't think it's indicative of a change of plan or anything like that."
Way was founded in 2002 with seed capital from Bill Melton, the founder of VeriFone. Melton has not held a post at VeriFone for several years.
Rasori said Melton was not part of the decision to buy Way.
Some Way employees have been offered jobs with VeriFone, but some were laid off, according to Pete Bartolik, a VeriFone spokesman.
The purchase will not make a material impact on VeriFone's financial results.
Last week, the San Jose vendor reported record earnings.
Its profit for the quarter that ended July 31 rose 12% from the year earlier, to about $18.5 million, on revenue that grew 24% from a year earlier, to $261 million.
During the conference call with analysts, VeriFone Chief Executive Doug G. Bergeron alluded to a large pending contract for PayWare Mobile — analysts suggested that a retailer such as Avon, with a lot of out-of-office salespeople, could potentially be named in coming months.
At midday Wednesday, VeriFone's shares were trading at $25.72, up 6.37% from Tuesday's closing price.
