VeriFone Says Security Driving Technology Sales

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Byline: Sean Sposito

VeriFone Systems Inc. said merchants' security concerns are driving development and sales of new payment hardware.

Gas station owners, taxicab company owners and retailers have expressed interest in using encryption to protect payments, VeriFone said. To that end, First Data Corp. has said it would offer the San Jose, Calif., terminal maker's VeriShield Protect service to customers unless they opt out. VeriFone also said it plans to follow a similar approach in Europe once its deal to buy Hypercom Corp. closes. VeriFone said in November that it agreed to purchase the terminal maker in a stock deal to improve its business overseas.

"These guys are growing very fast right now," said Wedbush Securities analyst Gil B. Luria. "They have a lot of things going well ... end-to-end encryption software to retailers, new petroleum products to gas stations and taxi products and services - those three things are helping them grow above and beyond."

VeriFone's profit rose 202%, to $32 million, in its first quarter, which ended Jan. 31, from a year earlier. Net revenue rose 27%, to $284 million.

VeriFone estimated that about a quarter of its petroleum customers have signed up for a new software maintenance program. It said it will deploy about 25,000 secure pump devices this year, about three times more than were sold last year.

VeriFone's gas-pump line has the potential to generate $200 million to $300 million in revenue over the next several years, said Tien-tsin Huang, a JPMorgan Chase & Co. analyst who covers the payments networks.

Sales of VeriFone's payment acceptance hardware for taxis are also growing. So far, VeriFone has installed about 1,000 card readers in London taxis in anticipation of the Olympics there next summer.

"London has twice the number of taxis than NYC, and average fares are slightly higher," Huang wrote in a research note to investors Wednesday. That "bodes well for VeriFone's opportunity to earn higher yields."

Douglas G. Bergeron, VeriFone's chief executive, said the company's pending acquisition of Hypercom will bolster its presence in Europe.

"Once we get the Hypercom deal into the fold, we are going to start moving in a much more aggressive manner," he said on a conference call with analysts Tuesday. "The transformational initiatives that we've been so successful incubating over the last two years in the U. …