Executives at VeriFone Systems Inc. are speaking bluntly about the issues plaguing their company as they work to restore customers confidence and recruit a CEO.
Longtime CEO Doug Bergeron left the company in March, after a number of issues impaired the companys performance. Chairman Richard McGinn has served as interim CEO since then, and hes been meeting with clients to determine where VeriFone went wrong.
It has been an eye-opening process, McGinn said on a conference call to discuss the San Jose, Calif.-based terminal makers earnings. They have been brutally honest about our lack of partnership.
VeriFone was not investing sufficiently in research and development, and it had a poor track record of completing certification of some products in a timely fashion, McGinn said.
On a positive note, I have heard many encouraging comments from customers about our people at VeriFone our people held the line when the institution fell short of expectations, he said.
VeriFone has won some significant contracts after competing heavily for them, McGinn said, though he did not name those customers. The contracts demonstrate that VeriFone is already starting to overcome its issues, he said.
The conversation is changing for the better, McGinn said. Our mission is to regain [customer] confidence by virtue of our action and it is beginning to happen.
VeriFone is increasing its investment in product development, with attention to next-generation point-of-sale hardware, wireless terminals, unattended terminals and mobile point of sale.
VeriFone plans to release an iPad application for its GlobalBay system this month, and plans an Android version later this year.
In VeriFones fiscal second quarter, which ended April 30, its net revenue declined 10% to $426 million, compared to $472 million a year earlier. It had a net loss attributable to stockholders of $58 million, compared to a profit of $3.5 million a year earlier. Its earnings were pulled down by $69 million in estimated legal settlement costs, addressing lawsuits the company has been involved in for several years.
VeriFone is also recovering from engaging in prohibited business dealings with Iran through a third-party distributor based in Dubai, United Arab Emirates, and Point, the European payment and gateway services company it acquired in 2011.
We faced an issue with our Middle East distributor selling into an embargoed country, McGinn said. This is not the kind of business we need or want at VeriFone, and it will not happen again.
The financial fallout from that Middle East issue, which led VeriFone to terminate that distribution relationship, has hit our current-period performance quite hard we are feeling the short-term consequences but weve done the right thing for the long-term, he said.
VeriFones board plans to select a permanent CEO as soon as possible, McGinn said, but it has not chosen one yet and will continue to address its issues with McGinn as interim CEO.
Were not waiting for a decision, McGinn said. We are moving ahead to rebuild this business.
Bergerons departure came shortly after the companys first-quarter earnings call, where Bergeron said he would call for a shakeup of senior management to ensure that we have the best executive team and the resources to execute our strategic plan.
Shortly after Bergeron left the company, VeriFone promoted Eliezer Yanay to chief operating officer. Yanay was previously VeriFones executive vice president of operations. VeriFone also appointed three other executives as regional presidents. All of those jobs are newly-created positions.
VeriFone still faces challenges from smaller card-reader sellers such as Square, which is pushing upmarket with new technology designed to work as a simple point-of-sale terminal. VeriFone sold the assets of Sail, its own mobile card reader, in January.
A recent VeriFone deal with CardSpring, which provides card-linked offers and services, enables the terminal maker to play a role in the growing digital offers field, while taking advantage of its technology for swiped card payments.