Verifone Inc. still faces challenges in certain aspects of its business, but the terminal manufacturer is learning with experience how to fit into the fast-changing world of omnichannel technology.
If Verifone can maintain its recent momentum as a multi-channel commerce provider, it will become a significant player in developing products that are both merchant- and bank-friendly, said Vin D'Agostino, executive vice president of Verifone Services.
Most legacy payments hardware, gateway software and other merchant and issuer technology was developed on the assumption that consumers shop in only one channel. And few, if any, made it easier for the merchant and bank to track and adapt to consumer habits and payment preferences.
"The fundamental challenge is that consumers today live in multiple channels, while retailers live in silos," D'Agostino said. "Across a number of things we are doing, we are breaking down those silos in a way that helps both the merchants and the banks."
It is important for Verifone to continue advancing its new technology as a way to overcome the challenges it has discussed in its most recent
That particular "bump" has prompted Verifone to warn that it would trim its workforce by 5% and closely examine the facets of the company that are underperforming.
Verifone is betting that the advancement of mobile commerce will present brighter opportunities.
In many ways, when Verifone looks at its upcoming dual-screen
Its partnerships with Visa and other payments service providers play a key role in the San Jose company's future, but its open network remains vital. When Verifone hired Citigroup payments executive
The company opened its network to app developers through the
But the climb to become a multi-channel player has been slow. Verifone started that journey from a low point, and that path still has some portions that cause the company to slip back a few steps during the journey.
"Verifone has the technology in place to be in a really good position when opportunities in their weaker markets open again," said Gil Luria, analyst with Los Angeles-based Wedbush Securities.
Economic slowdowns in emerging markets in Asia and South America have caused Verifone's momentum to stall. In addition, the company has lost significant revenue it used to generate in Russia, China and Brazil, Luria added.
"It really is why they struggled last quarter and had such a strong reaction," Luria said. "They are still pretty far off from being able to fix that."
But the company has come a long way since Galant took over, giving Verifone a clear vision of where it has to be, as opposed to the previous management team's penchant for "being more focused on getting a bigger slice of the pie, rather than making the pie bigger," Luria added.
In that regard, Verifone now understands the value of good relationships with customers and good partnerships with other companies in the ecosystem, Luria said. "They have much better relationships with software developers, which makes their products much more valuable to customers."
For Verifone, it was a matter of realizing it was time to present a payment terminal as something that can do more for a merchant than handle cash and cards.
"I don't even like calling it a terminal anymore," D'Agostino said. "In some places in the world, it is the only piece of technology in a store. We had to think, what could you do with it beyond payment acceptance, and that it can become part of a powerful commerce network."
While such a revelation sounds simple enough in today's market, it was not a snap-of-a-finger decision for Verifone.
"It was a big change we made here, and it was hard," D'Agostino admitted. "We were a product-led organization like a Silicon Valley business would be, then began reimagining itself as a powerful part of a network."
Through that philosophical change and even after cost trimmings to stabilize earnings, Verifone sees far more opportunities than roadblocks in the future.
"It's always a difficult decision that has to be made to decide to reduce your workforce, but we continue to evolve and transition our business," D'Agostino said. "I know our earnings news caused a shock, but this company is in a really good position, doing more business with clients than ever before."
While profit margins created a need to trim back the workforce, the company's revenue has steadily shown increases. Verifone posted net revenue of $526 million for the second fiscal quarter, a 7.4% increase over the $490 million a year ago.
"If we continue to execute upon a whole set of services and platforms that we can create upon, we will be fine," D'Agostino said.
