CheckFree Holdings Corp. fulfilled expectations that its planned acquisition of BlueGill Technologies would hurt fiscal second-quarter results, but its loss was not quite as big as anticipated.
The provider of electronic billing services on Wednesday reported a quarterly net loss of $4 million, compared with break-even results the year before. The 8-cents-a-share loss beat the consensus of analysts surveyed by First Call/Thomson Financial by 3 cents a share.
Though the acquisition of BlueGill is not complete, it has already contributed to improvements in some fundamental elements of CheckFree's business. With BlueGill's software for helping companies post bills on the Internet now under its wings, CheckFree increased the number of billers that signed contracts and the number that rolled out electronic bill delivery.
Twelve billers signed up in the quarter, bringing the number of biller customers to 89. Sixty-two of these are making their bills available over the Internet, compared with 40 at the end of the previous quarter.
Pete Kight, CheckFree's chairman and chief executive officer, said that speeding the implementation of billing services was a main goal of the BlueGill deal, which is expected to close by the end of this quarter. He also indicated that BlueGill would figure strongly in CheckFree's budding international plans because BlueGill already has a global reach.
In the latest quarter CheckFree about doubled the number of Internet sites through which it distributes electronic bills and payment services, to more than 100. Bills delivered via the Internet also zoomed, to more than 38,000 in December, from 20,000 in September.
The number of subscribers using CheckFree services, however, remained flat, at 3 million. The company blamed the lack of growth on its removal of subscribers who were using software that was not year-2000 compliant. "Despite our overall subscriber count remaining the same, the quality of the subscribers is improving," said Pete Sinisgalli, CheckFree's president and chief operating officer.
CheckFree said it is intensifying efforts to promote consumer awareness of electronic billing. The introduction of its service on the Yahoo portal site this fall was "perfectly low-key," Mr. Kight said, in keeping with a plan to work out the kinks before escalating marketing.
Yahoo made CheckFree's bill payment services available through the site in September. Not until mid-December did it begin marketing bill presentment, a service that is expected to attract a wider audience. The Internet portal recently began promoting the service with banner ads, and it plans to offer links from some of its properties, including Yahoo Calendar and Yahoo Wallet.
AT&T, which mails more than 90 million statements a month, has begun making its bills available through Yahoo, "providing just a hint of how we can heighten awareness," Mr. Kight said.
Meanwhile, the planned push of America Online into electronic billing services has been delayed, though not dramatically, Mr. Sinisgalli said. Though some companies such as AOL have not rolled out electronic billing from CheckFree as quickly as expected, CheckFree said it has more distribution partners - banks and portals - than it had planned on six months ago.
The uncertainty about when CheckFree can expect its bill distributors to roll out its products may point to a vulnerability.
"CheckFree has a very compelling offer to consumers, but it is not able to control the front end," meaning the promotion of its service, said Richard Zandi, a research analyst at the Salomon Smith Barney unit of Citigroup Inc. CheckFree's distribution partners "have lots of balls in the air," he said, and implementing and marketing electronic billing may not be a top priority for them.
CheckFree changed its pricing structure this fall to encourage its biggest partners to promote its service. Subscription fees are now much lower and have been combined with transaction fees and a fixed monthly fee. The structure gives partners more reason to attract more subscribers to use the service. Banks, for example, had complained that they were paying subscriber fees on behalf of people that rarely or never paid bills electronically.
A contract CheckFree signed last quarter with Wells Fargo & Co. reflects this new pricing structure. Mr. Kight acknowledged that Wells, which founded Spectrum, the bank-owned bill presentment company, along with Chase Manhattan Bank and First Union Corp., may at times compete against CheckFree to sign up billers. "That may turn out to be competitive, or it may not," he said. "We're comfortable with the relationship."
