Verifone CEO Paul Galant is not happy with his company's performance in Asia, and plans a number of changes including personnel and the separation of China as its own region.
"In the second quarter, our main challenges were in Asia where our results were disappointing. I'm actually quite upset about it," said Galant during the point of sale company's quarterly earnings call on June 4. "The combination of not yet having delivered a full portfolio of products as well as some inconsistent sales management really hurt us in the quarter."
For the quarter ending April 30, Verifone reported net revenues of $490 million, compared to $466 million a year ago, a 5% increase and ahead of guidance of about $489 million. In the Asia Pacific region, the company reported net revenues of $49.6 million, down from $67.6 million the prior year, or a 33% decrease. By comparison, North American revenue increased to $193 million from $125 million, a 20% increase.
"Our China clients need us to consistently deliver quality products that match our brand promise of cutting edge security, innovation, nimbleness and functionality. But at a more competitive price point," Galant said. "We haven't done this to our satisfaction or the satisfaction of our clients."
There are some bright spots in Asia such as India, Australia and New Zealand, Galant said, but sales, execution and order delays in places like Indonesia hurt Verifone's business. "And in China, we have yet to turn the corner and have not gained traction as quickly as we need," Galant said.
Verifone understands the root causes of its issues in China and "are actively fixing them," Galant said. "And we're accelerating the exaction of those fixes."
That includes establishing Verifone China as a separate region. Verifone has also recruited executive talent from a Chinese terminal manufacturer and has partnered with a local provider of technology, design and development. Verifone did not identify the talent addition or local partner.
"These changes, along with additional planned leadership upgrades, will fix our issue and deliver positive impact on our business in Asia," Galant said. "We won't get there overnight. In fact it will take many quarters. But we're on the right track and continue to be fully committed for the long term."
Payment companies in the U.S. are placing more focus on China. Technology providers such as Monitise are pursuing opportunities in China, and Starbucks has introduced gift cards in the country. Additionally, Apple CEO Tim Cook has discussed partnering with Chinese e-commerce giant Alibaba.
China is also loosening restrictions on outside card networks, and both Visa and MasterCard are planning to expand into the country, though there are lingering hurdles that could delay that effort.
Verifone had better news on the mobility front. Galant noted the company in the first quarter released a new mobile terminal called E3 55 that's designed to integrate with most consumer smartphones and tablets. Verifone signed its first client for that terminal in the second quarter, a large U.S. wireless carrier. "And our mobile business in the medium to large retail segment is growing at a rapid pace," Galant said, adding Verifone tripled its mobile orders versus what it booked in all of last year. Verifone also reported 80% of the terminals it sold in the quarter were Near Field Communication (NFC) enabled.
"More and more, leading retailers and specialty brands are establishing mobile point of sale to engage consumers, upsell merchandise and connect to their online inventory throughout the store," Galant said.