Analysts are cautiously optimistic about Verifone Inc.'s ability to meet its goal of $1.2 billion in revenue by 2000.

The Redwood City, Calif., company, best known as the leading maker of point of sale terminals used in card-based transactions, reported 1996 revenues of $472 million.

Verifone executives are betting the rising popularity of electronic commerce will boost the company's business. In an effort to take maximum advantage of this payments revolution, Verifone is diversifying into software businesses.

The move, while not a surprise, is a significant change of direction. About 95% of the company's annual revenues now are derived from hardware sales.

But analysts said Verifone appears to be positioning itself well for the change.

The company has staffed up in preparation for its push into electronic commerce, creating new jobs and filling old ones with new people. (See article on page 16.)

It also has struck alliances recently with providers of electronic commerce software.

A large part of Verifone's growth predictions rests on "the assumption that the electronic commerce part of the business is going to kick in rather meaningfully," said Peter Barry, analyst at Deutsche Morgan Grenfell, New York.

The company "seems to be well staffed to accomplish its objectives, and now it's really a matter of execution," he said.

In order to meet its revenue goal for 2000, Verifone would have to boost annual revenue growth from the low 20% range it reported last year to the high 20s, but analysts believe this is attainable.

Mr. Barry projected $580 million of revenue for Verifone this year and $740 million in 1998.

Verifone's growth forecasts are not based on "outlandish margin assumptions," Mr. Barry said. "I am not too far out on the limb in terms of earnings."

The next few years will be important in the development of the electronic commerce market, and Verifone looks ready to play "an interesting part in that," said Craig Johnson, analyst at Piper Jaffray Inc., Minneapolis.

Some were less optimistic. An analyst speaking on condition of anonymity called Verifone's revenue goals "lofty."

He said only a small fraction of Verifone's current revenues are related to electronic commerce and the Internet so that to be banking on significant new revenue from those areas is premature.

But others said Verifone's recent activity in electronic commerce software bodes well for its ability to book new revenues.

Its launching last year of VPos and VGate software served as prime examples of how Verifone's experience in the point of sale terminal business could be applied to emerging payment systems.

The software packages are designed to make it possible for banks and merchants to provide credit card payment services via the Internet. Already, the company is looking to bolster these offerings with third-party software.

Last week, Verifone announced agreements with Digex Inc. and Commercewave Inc. to develop Internet commerce software for merchants.

Digex is a Washington, D.C.-based Internet services and software provider focused on business customers. With Verifone's help, it will develop products using VPos and Microsoft Corp.'s Merchant Server software.

Commercewave, a San Diego-based provider of software and network services, will develop merchant products that use VPos and Netscape Communications Corp.'s software.

"The largest barrier to mass adoption of Internet commerce is the lack of a simple, safe system for setting up shop on the Internet," said George Hoyem, vice president and general manager of Verifone's recently formed Internet commerce division. "If merchants and financial institutions establish the Internet as a compelling shopping arena, consumers will follow."

In a separate announcement, Verifone agreed with Transaction Network Services Inc. to provide secure transaction processing services at the point of sale over wide-area networks.

The services, which will be targeted to large retail chains, will let stores process credit transactions during business hours without interruptions for software and information updates.

In the wake of these announcements, Verifone's stock rose $1.25 last week, trading at $36.75 a share late Friday. The stock took a $14 dive in early October but since Jan. 1 has shown gradual improvement.

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