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This story appears in the Nov. 26, 2008, issue of ISO&Agent Weekly.
Point-of-sale terminal maker VeriFone Holdings Inc. says growth in its international sales was not enough to stave off a lowered fiscal fourth-quarter earnings outlook fueled by a decline in sales to small and medium-sized U.S. merchants, Douglas G. Bergeron, VeriFone CEO, told analysts during a conference call last week.
"Our processor and ISO channels are telling us that new merchant applications, which we're very leveraged into, have fallen in the neighborhood of 25% to 30%," Bergeron said.
Meanwhile, international sales grew in the mid-teens compared with the fourth quarter of 2007, he said.
The company expects to report its fourth quarter and 2008 results Dec. 16. VeriFone's fiscal year ends Oct. 31.
San Jose, Calif.-based VeriFone predicts its fourth-quarter revenue will total between $244 million and $246 million, down 6% to 8% respectfully from the company's Sept. 9 guidance of $260 million to $268 million. The company reported $238 million in revenue for last year's fourth quarter.
In greater detail, VeriFone appears to have some cushion in case of merchant failures, Bergeron said when asked what exposure the POS maker has in that situation. "I don't think—and I may be wrong—that we've taken one nickel of write-off on a defunct" retailer, Bergeron said.
VeriFone also said it would reduce its operating expenses. In the United States, VeriFone's financial-services revenue experienced a decrease in the mid- to high-20% range drop versus last year, Bergeron said.
Payment-terminal sales to petroleum businesses decreased in the low-30% range, he said. Only multilane sales in the U.S. experienced growth, in the low teens, Bergeron told analysts.
International Outlook
Internationally, Latin America sales had a mid-40% growth over last year, with growth in Asia in the low-teens and European-sales growth in the high single-digits, Bergeron said. He also explained that all areas of VeriFone's business, including sales, research and development, and administration, are under review.
When revenue projections are "at 5% to 10%, not 10% to 15%, for a year, you look at some of the more opportunistic spending, both in R&D and marketing," Bergeron said. "You suspend, mothball or slow down some of it."
The faltering global economy has affected VeriFone sales across the globe, Robert R. Dykes, VeriFone chief financial officer, says in a statement. Higher-than-expected foreign-exchange losses and "the volatility of exchange rates" meant product costs grew faster than VeriFone's ability to adjust to local-currency prices, the company says. "We expected a period of uncertainty to persist until financial confidence returns to the market," Dykes says in the statement.
