VeriFone’s New Strategy Begins To Take Root

VeriFone Systems Inc. experienced mixed fiscal first quarter results, as net revenues were up 2 percent, but the company experienced a $16.2 million loss as it worked on a number of initiatives to improve the company’s operational efficiency.

Revenues for the quarter totaled $436.1 million, up from $428.7 million for the same three-month period ended Jan. 31 last year. The $16.2 million loss for the quarter compared with net revenue of $11.8 million a year earlier.

Regionally, North American revenues totaled $122.1 million, down 1.9 percent from $124.5 million a year ago. Outside the U.S., revenues totaled $314 million, up 2.4 percent from $306.7 million. VeriFone has an installed base of more than 20 million terminals in some 150 countries.

Operational update

During a conference call with analysts, Paul Galant, VeriFone’s new CEO who took over for his predecessor Douglas Bergeron last year, went over the company’s progress in working to streamline the company’s operations under his vision to “become our clients’ most trusted, most secure and innovative partner by delivering terminals, payment as a service and commerce enablement solutions.”

Thus far, he said, VeriFone has exceeded its guidance in terms of revenue, earnings per share and free cash flow.

“We’ve also been working hard to transform VeriFone into the company that we all wanted to be – a VeriFone that is client first, operationally excellent, strategically focused and properly organized with a single distinct culture,” Galant said. “Once accomplished, we’re confident that we can create a competitive advantage and deliver a long-term sustainable value.”

Top initiatives

Since the last quarterly call with analysts, VeriFone has moved to fix how it is managed by executing its three top VeriFone initiatives, which include redefining its global product-management processes and portfolio, reengineering its R&D function, and improving its cost structure.

In terms of product management, Gallant noted that VeriFone has redefined its processes for evaluating new and existing products to ensure they fit with its strategy and meets clients’ ongoing needs. Each of its more than 1,000 SKUs has been initially vetted, and management has identified at least 25% for rationalization and replacement. This process will reduce complexity across the company, from development to procurement to sales and marketing and to customer support, he said.

Also, as VeriFone does its R&D organization, it will free up resources to focus on new commercial innovation, Gallant noted.

Optimization efforts

VeriFone also is addressing the overlap in its operating model through its third initiative, which is cost optimization. “Our global team has identified more than 50 cost-savings projects,” Gallant said. “These projects address everything from the prices we pay to procure goods and services, to improvements we can make in our internal processes that will contribute to efficiency and to our bottom line. Each project has an owner accountable for executing and delivering the expected benefits.”

These top three VeriFone initiatives are being managed globally by a newly established transformation office, which includes a global team of business leaders and employees working to gather and analyze data who make recommendations and drive in market execution with clients. Ed Wiggers, who recently joined VeriFone as head of global transformations, is leading that team.