Noting a series of “self-inflicted” issues that have hampered the company's performance, VeriFone CEO Doug Bergeron promised a series of overhauls at the payments technology provider, including a renewed focus on research and development and better management of the resources dedicated to creating country-specific configurations of its products.
“In retrospect, we had a breakdown in the process that estimates these aggregate requirements, and the field communication and prioritization of their needs,” Bergeron said during the company’s fiscal first quarter 2013 earnings call with analysts March 5.
San Jose, Calif.-based VeriFone posted $11.8 million in net income off revenue of $428.8 million for the quarter that ended on Jan. 31, compared to a net loss of $3.1 million off revenue of $419.5 million in FY1Q12. The company had previously announced preliminary 1Q13 financial results that sent its stock plunging.
Along with the operational change, Bergeron warned of other actions, including a possible shakeup of senior management, “to ensure that we have the best executive team and the resources to execute our strategic plan.”
To streamline the R&D resources dedicated to country-specific customizations, field-based engineering staff now report to a centralized executive vice president of worldwide operations, which Bergeron said would provide better process control and improve efficiencies in what he called a “technology arms race” in the payments industry.
“The complexity around the point of sale, in EMV [chip-card accepting] countries in particular, is increasing dramatically,” Bergeron said. “The market is certainly not dumbing down to dongles. It's demanding ever-higher levels of sophisticated and secure technology that’s localized, customized and certified.”
Along with the internal delays and sales execution missteps, Bergeron said weak economic conditions in Europe, delayed customer spending and a canceled contract to install its hardware in Washington D.C. taxis were among the forces affecting the company.
The five-year taxi contract worth up to $45 million was included in VeriFone’s 1Q13 and full-year forecasts, before legal challenges to Washington D.C.’s request-for-proposal process resulted in an appeals board ordering the termination of the VeriFone contract. Bergeron said VeriFone is “pursuing all of our legal remedies” under the terms of its contact with the city.
Meanwhile, VeriFone acknowledged that its chief competitor, Ingenico, has made gains on its market share in various markets, as the Paris-based rival continues to expand its global reach.
“We've had many cycles or many phases in the 12 years I've been here that we've pulled ahead of Ingenico with a product or a product family, or they've pulled ahead of us,” Bergeron said, adding later, “We will reclaim all of the ability to gain that market share back through technology excellence over the next six to nine months.”