Any time a large corporation endures a major jolt, speculation about the company's future runs rampant.
The latest jolt came for VeriFone Systems Inc. on March 11, when CEO Doug Bergeron resigned amid falling share prices, lawsuits and business dealings that violated international sanctions on Iran.
The stock price recovered slightly upon Bergeron's resignation, signaling investor interest, and competitor Pax Technology was quick to draw attention to recent speculation that VeriFone would be for sale.
Industry analysts line up on both sides of that speculation, but there is no denying that anything that happens to VeriFone short- or long-term will have a ripple effect on the payments industry.
Pax Technology's POS Industry News e-newsletter on March 12 carried the subject title of "VeriFone for sale?" and provided details of the company's troubles and Bergeron's departure.
The newsletter referenced coverage last month of a research note from SunTrust Robinson Humphrey analyst Andrew Jeffrey that VeriFone would likely be sold.
"Management credibility has been lost," Jeffrey wrote. "Market share losses are deeper and more persistent than we had previously believed."
Deutsche Bank analyst Bryan Keane wasn't as convinced about a pending sale last month and reiterated that stance in a research note March 1.
"Given the expensive valuation of the business in our view and the significant drop of the share price over the past year, we see a strategic take out of the company as unlikely," Keane wrote.
In its research note this week, global investment firm Jefferies stated, "We believe shares will react positively to the CEO change, as investors may perceive Mr. Bergeron's departure as a signal that the board is demonstrating an increased sense of urgency with regard to enhancing shareholder value."
Jefferies speculates that VeriFone could undergo "an accelerated turnaround plan, or possibly evaluating strategic alternatives such as a company sale."
"We continue to believe strategic buyers may be attracted to [VeriFone's] global market share, sticky client relationships, POS domain expertise, and low valuation," Jefferies states.
However, Jefferies views a sale as an unlikely near-term option because the company's balance sheet flexibility is limited, even though a sizable share buyback would likely boost sentiment for a sale.
Even if a buyer doesn't pounce on VeriFone right away, the timing is right for interested buyers to make themselves known, says Gil Luria, analyst with Los Angeles-based Wedbush Securities.
"I think the company would be for sale at this time because they need to make some profound changes, and the stock is depressed," Luria says.
VeriFone spokesman Pete Bartolik declined to provide comment on speculation regarding VeriFone's future or its competitor's newsletter. VeriFone has stated its views in recent announcements and SEC filings, he says.
Just a week before his resignation, Bergeron addressed the company's shortcomings in an earnings call, saying VeriFone would swiftly implement changes to regain investor confidence.
In the same manner in which industrial companies made pitches for Diebold and Ingenico in the past when those companies struggled, a company looking to expand into the payment terminal vertical may come knocking on VeriFone's door, Luria says.
A private-equity firm could also come forward, Luria adds. "Private investors could come in and fix the issues facing VeriFone and then put the company back up for public sale," Luria says.
Several larger private-equity firms have become involved in the payments industry in the past, he says. "VeriFone and Ingenico combined own 70% of the market share and continue to grow, so that's attractive to a buyer," Luria adds.
Paris-based Ingenico SA declined to comment about VeriFone's current status.
For its part, China-based Pax Technology began to compete against the two industry giants two years ago, says Pax sales director Mark O'Flynn. Demand for an alternative POS supplier increased after so many providers, such as Hypercom, Lipman, MoneyLine and others disappeared through acquisitions and consolidations, says O'Flynn, who operates out of Pax's London office.
VeriFone acquired Hypercom's international properties in August 2011, but sold the U.S. properties to private-equity firm Gores Group LLC as part of a settlement with the U.S. Justice Department.
The Pax Technology newsletter was simply "quoting what analysts recently said [about VeriFone]" rather than taking a position, O'Flynn says.
O'Flynn declined to share his thoughts on VeriFone's future, saying only that talk about a possible sale has long filtered through the payments industry grapevine.
But he did share thoughts on a general view of the terminal makers he competes against.
Potential customers often "came around" to consider Pax's terminal offerings after overcoming the notion that Pax is a Chinese company because it manufactures equipment in that country, O'Flynn says.
"Despite the fact that VeriFone and Ingenico all manufacture [some products] in China, they market themselves as American and French companies, respectively," O'Flynn says. "As our customers come around to realize this, they begin to put PAX on par with our competitors."