VeriFone is blunt about the issues plaguing the terminal maker and is working to restore its customers' confidence as it seeks a permanent chief executive.
Longtime CEO Doug Bergeron left the company in March, following a number of issues that impaired the company's performance. Chairman Richard McGinn has been interim CEO ever since, and has been meeting with clients to determine where VeriFone went wrong.
"It has been an eye-opening process," McGinn said on a June 5 conference call to discuss the San Jose, Calif.-based company's earnings. "They have been brutally honest about our lack of partnership."
VeriFone was not sufficiently investing in research and development, and 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 for which it heavily competed, McGinn said, though he did not name these customers. These wins 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 VeriFone's fiscal second quarter, which ended April 30, its net revenue dropped 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."
This financial fallout of this issue, which led VeriFone to terminate this distribution relationship, "has hit our current-period performance quite hard we are feeling the short-term consequences but we've done the right thing for the long-term," he said.
VeriFone's 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.
"We're not waiting for a decision," McGinn said. "We are moving ahead to rebuild this business."
Bergeron's departure came shortly after the company's first-quarter earnings call, where Bergeron said there would be a senior-management shakeup "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 the role of chief operating officer. Yanay was previously VeriFone's executive vice president of operations. VeriFone also appointed three other executives to be regional presidents. All of these 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, allows the terminal maker to play a role in the growing digital offers field while taking advantage of its technology for swiped card payments.