VeriFone Systems Inc. is making more investments to expand beyond payment terminals.
To this end, the San Jose, Calif., vendor is sharpening its focus on mobile payments, digital wallet services and fraud prevention.
"We feel that we're at an inflection point of turning this business into something much greater than it ever was," said Douglas G. Bergeron, VeriFone's chief executive, on a conference call to discuss its fiscal second-quarter earnings.
"We've got a lot of irons in the fire here," he said. "We're going to continue to distance ourselves from would-be competitors in many of these markets by continuing to invest strongly in [research and development] and sales and marketing."
VeriFone said its encryption services business is one of its fastest-growing. It signed up 10 national retailers in the quarter that ended April 30, giving that line about 40 customers total. VeriFone did not name those clients.
VeriFone is also boasting of its involvement with Google Inc.'s mobile wallet, which the search giant announced last week. VeriFone predicted its revenue could increase by up to $150 million a year in the U.S. by generating momentum for mobile payments.
"When it goes mainstream over a period of three to four years, you would have approximately 15% or 20% of our U.S. customer base either upgrade to [near-field communication] capability or accelerate the upgrade cycle for" NFC, a technology many mobile payment systems rely upon, Bergeron said.
Still, the company has been stymied in its quest to grow by acquisition. Last month, the Justice Department filed a lawsuit to block VeriFone's proposed $485 million acquisition of its Scottsdale, Ariz., rival Hypercom Corp., citing antitrust issues.
In April, Hypercom said it would sell its U.S. terminal business to the French terminal maker Ingenico SA for $54 million. The Justice Department insists that this would not resolve the antitrust concerns because it would not create a new competitor in the terminal market.
"They'll find a buyer," said Gil B. Luria, an analyst at Wedbush. "Because it's always a matter of price. It's not whether you can sell something — it's how much you can sell it for."
VeriFone's profits rose 24.6%, to $25.2 million, in its second quarter from the same period a year earlier. Its net revenue rose 21.5%, to $292.4 million.
