Guidance Model Driving Down VeriFone's Shares

By Wolfe, Daniel | American Banker, September 11, 2008 | Go to article overview

Guidance Model Driving Down VeriFone's Shares


Wolfe, Daniel, American Banker


Byline: Daniel Wolfe

Despite strong revenue growth and a narrowing loss in its fiscal third quarter, VeriFone Holdings Inc. failed to meet its own forecast and changed the way it presented its guidance, leading to a steep drop in its share price.

The San Jose terminal company reported Tuesday that revenue for the quarter, which ended July 31, rose 12% from a year earlier, to $258.7 million, exceeding the projection of $256 million to $258 million it made last month.

Its net loss shrank 83%, to $7.2 million, but exceeded its forecast of $3.8 million to $4.5 million.

VeriFone also changed the way it offers guidance, to include depreciation charges and other expenses, which made it seem as if the company was reducing its forecast.

It said that under the new formula, it expects to earn 33 to 36 cents a share in the current quarter; last month is said it expected 36 to 39 cents.

The news drove VeriFone's shares down. They closed Wednesday at $19.07, down 3.2% from Tuesday's close. On Wednesday morning they were trading as low as $17.11.

"They changed the basis by which they reported" guidance figures, "so it looks like they missed and reduced guidance, but they didn't," Gil Luria, an analyst at Wedbush Morgan Securities, said in an interview. "They actually reported what they said they would," but "the stock went down a lot because it looked like they were reducing their guidance."

Douglas Bergeron, VeriFone's chairman and chief executive, said he expects the Payment Card Industry data security standard to help his company increase sales in the coming quarters. The standard is prompting many upgrades in payment systems.

"There is no doubt that VeriFone has benefited from the natural upgrade cycle that this has and continues to provide," he said. "We believe that a major theme of our growth through the next decade revolves around VeriFone's expertise in data security. …

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