HP, one of the world's largest computer makers, said the e-commerce pioneer will operate as an independent subsidiary. The new unit will use technology developed by both companies in an effort to accelerate development and deployment of online commerce and smart card applications for consumers and businesses.
|1996 revenues||$38.4 billion||$472.5 million|
|1996 earnings||$2.6 billion||$39.3 million|
|Shares outstanding||1 billion||23.9 million|
|Chairman and CEO||Lewis Platt||Hatim Tyabji|
Glenn Osaka, general manager of HP's enterprise systems business unit, will lead the new e-commerce efforts in coordination with VeriFone's president and CEO, Hatim A. Tyabji, HP said.
"Payments are everything in electronic commerce," Rich Belluzzo, HP executive vice president and head of its computer operations, said on a conference call this morning. "The most immediate benefit is that ]this deal[ will communicate a commitment on the part of Hewlett-Packard to be a player in this market.
"We did it because of what the market potential was. The timing was mostly driven by the speed at which we wanted to get things done," he added.
VeriFone, the leading vendor of card-swipe terminals on retail countertops to approve purchases, has pushed aggressively in software for online payments and last fall moved into the smart card market with terminals for both homes and retailers. Tyabji said the merger might mean the consumer smart card readers would be built into keyboards of HP personal computers, a move the computer maker had already said it will make.
"Our primary focus has been on payments," said Tyabji, who will now report to Belluzzo. "We are now in the position to bring that payment technology and chip cards into the Hewlett-Packard family."
HP executives also stressed the deal's benefit to corporate applications. "This is not purely a consumer play here, but we believe we can extend this into the business-to-business market too," Belluzzo said, whose company last month unveiled its smart card strategy for large enterprises.
The two firms said the most immediate benefit of the acquisition will be in joint bids for e-commerce contracts and opportunities in the financial services sectors, where both are active. Belluzzo said the acquisition will focus on new businesses, not cost-cutting and layoffs.
"It sounds like this is probably a unique merger in terms of how it will work out as [both companies] view it," said Tucker Anderson, an analyst at investment firm Cumberland Associates who has followed VeriFone closely. He said the deal would advance the strategy VeriFone outlined to financial analysts in February.
The new unit will continue to focus on the online financial services business as well as consumer smart card products and other e-commerce offerings, HP said. The unit will also promote the emerging SET (Secure Electronic Transaction) standard for credit card payments over the Internet.
In the acquisition, VeriFone shareholders will receive one share of HP common stock for each share of VeriFone common stock. The deal is expected to close sometime this summer, pending shareholder approval.
International Data Corporation predicts that the e-commerce market will grow to $95 billion dollars in the United States by the end of the decade as more individuals and corporations turn to the Net for shopping and procurement.
VeriFone's stock jumped 17 points when it opened today, and traded at 47-3/4 at mid-day, up 17-5/8 or 58 percent. Hewlett-Packard stock traded at 49-1/2, off 1.