Hypercom Corp. made its case Nov. 2 that it can succeed as an independent company.
The Scottsdale, Ariz.-based payment-terminal maker reported record revenue in its third quarter, driven by strong growth abroad. However, the company still faces an unsolicited bid from its rival VeriFone Systems Inc. (see story)
“Quite frankly, we are in the best position that we have ever been in,” Philippe Tartavull, Hypercom’s chief executive and president, said in a telephone interview. “We have very strong market demand in almost every geography we have.”
Hypercom’s success comes down its marketing ability against its competition in Europe, Ingenico SA, analysts say. The France-based company tried to purchase Hypercom in 2008 at $6.25 per share but later withdrew its bid after Hypercom purchased Thales’ e-Transactions unit (see story). http://www.paymentssource.com/news/terminal-industry-consolidates-around-three-top-616041-1.html
One reason for Hypercom’s strong third quarter was its ability to catch up with orders it fell behind on previously, observers say. Hypercom says upticks in its Asian business also helped.
“You also have to remember that some of these regions are vastly under-penetrated,” says Michael Saloio, an equity research analyst at Sidoti & Co. LLC. “There is still enough business for everyone.”
According to Tartavull, 10 “Tier 1” retailers nationwide are testing Hypercom’s new “multilane” point-of-sale terminal, which he said will ship in the first half of 2011.
The multilane product is one of Hypercom’s strongest bets for business in the U.S., Tartavull said.
But that does not put the drama of VeriFone September bid too far in the rear view mirror, analysts say.
Although Hypercom dropped litigation it said prevented the companies from talking publicly about the potential purchase, Hypercom still refused to talk about the possible acquisition this week.
“We will not be making any comments on VeriFone’s unsolicited proposal to buy Hypercom,” Tartavull said during an earnings conference call with analysts.
Hypercom’s silence may be a result of pressure from its lawyers, says Gil B. Luria, a vice president of research at Wedbush Securities.
“The lawyers were driving the show,” he says. Hypercom is “very reluctant to get themselves into trouble.”
Assuming a sale to VeriFone might still happen, “you don’t want to [tick] off your new bosses too much, even though you know you are going to get fired on the next day.”
Still, Hypercom’s strong performance could discourage the purchase, Luria says.
The Scottsdale, Ariz.-based payment-terminal maker on Nov. 2 reported net revenue of $125.1 million for the three months ended Sept. 30, up 23.6% from $101.2 million during the same period last year. Net income was $4.5 million, up considerably from $1.2 million a year earlier.
“Global demand for our products and services has never been stronger,” Tartavull noted in a news release. “We are capturing significant market share in the Asia-Pacific region and in Europe.”
By midday Nov. 3, shares of Hypercom’s stock rose 10.39%, to at $6.48.
That puts Hypercom’s stock price above VeriFone’s earlier $280 million offer of $5.25 a share.
Doug Bergeron, VeriFone’s chief executive, says other events may have negated the earlier bid.
VeriFone recently announced its plans to buy the terminal business of the France-based card marker Gemalto NV. The acquisition closes the European gap that VeriFone planned to address in a potential Hypercom deal, Bergeron says.
“I haven’t given a tremendous amount of thought or focus over [it],” Bergeron says of Hypercom, adding, though, that “at the right price we might be interested.”
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