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This article appears in the Januaury 29, 2009, edition of ISO&Agent Weekly.

Point-of-sale terminal maker Ingenico S.A. appears to be weathering a waning global economy after the company says it generated 2008 revenue of $948.1 million, up 28.2% from $739.8 million the previous year.

The Paris-based company said it experienced revenue growth in all of its regions except North America, where revenue fell 2.8%, to $136.7 million from $140.6 million in 2007. Ingenico did not provide its net-income results.

Ingenico's results "looked pretty solid," says Robert Dodd, managing director at Morgan Keegan & Co. Inc., a Memphis, Tenn.-based investment firm. He was not surprised at the weakness in North America.

"There is no question the market is relatively soft right now," Dodd tells ISO&Agent Weekly.

The decrease in North America revenue is more a reflection of a particularly strong 2007 fourth quarter instead of a recessionary U.S. economy, Ingenico says.

The Price Is Right?
Though Ingenico did not provide a 2009 revenue forecast, it appears the point-of-sale terminal maker is not expecting a price war with its competitors, Dodd says. Indications are "the competitors are behaving rationally" on pricing, Dodd says.

Overall, terminal makers will face weakened demand this year, but Dodd says it is unlikely the market will collapse, taking with it terminal makers' ability to generate revenue.

Though economic conditions are uncertain, Philippe Lazare, Ingenico CEO, anticipates an "organic" increase in 2009 revenue, meaning sales will grow from the company's existing products and services.

Ingenico's exposure to reduced consumer spending thus far is limited and has not delayed purchasing decisions by Ingenico's customers, Lazare says.
"Ingenico's results were comforting given the continued organic growth seen in Q4," George Sutton, senior research analyst at Craig-Hallum Capital Group LLC, a Minneapolis-based investment firm.

"We believe Hypercom saw a strong Q4 as it has been benefiting from its strengthened position outside of the United States," Sutton tells ISO&Agent Weekly.
"VeriFone has been the most aggressive of late on price, and its stock has come under some pressure due to its large debt position, resulting in recent downgrades from the credit agencies. We anticipate the United States will remain challenging for some time to come," says Sutton.

Part of the demand dilemma for POS makers is that as consumers spend less, some merchants—witness Circuit City and Linens-N-Things—are bound to close, Sutton suggests. Fewer merchants means fewer companies to buy POS devices from terminal makers.

"Outside of the United States, we expect the macro trend [of growth in] electronic payments to continue, but the economic challenges will slow down the growth rates we have seen historically," Sutton says.

Around The World
Ingenico says it sold 4 million POS terminals in 2008, up 53.8% from 2.6 million in 2007. The total does not include 700,000 terminals sold by Sagem Monetel, a competitor it bought last year. Neither Hypercom nor VeriFone release terminal-shipment data.

Ingenico's operating margin, which represents what is left after paying variable costs, such as wages, but before paying indirect bills, such as taxes, will be between 12% and 13% for 2008, Lazare said in a statement.

Southern Europe, Ingenico's largest region by revenue, generated full-year revenue of $218.7 million, up 20.9% from $180.9 million in 2007. The Eastern Europe, Middle East and Africa region nearly doubled its revenue, to $174.4 million from $88.5 million, Ingenico says.

South America also experienced double-digit revenue growth, to $169.3 million, up 22.7% from $138 million. Revenue last year from Northern Europe totaled $162.7 million, up 21.3% from $134.1 million. Revenue from the China and Asia-Pacific region reached $85.9 million, up 49.9% from $57.3 million in 2007.

Fourth-quarter revenue totaled $291.6 million, up 35.7% from $214.9 million during the same period in 2007.

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