E-commerce duo may be unstoppable

A new study says Hewlett-Packard's acquisition of VeriFone has created a major player in Internet commerce.

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Hewlett-Packard's (HWP) acquisition of VeriFone this year has created a major player in Internet commerce, a new report concludes.

In "Hewlett-Packard's Electronic Commerce Strategy: Tilting the Playing Field," Killen & Associates said the acquisition will stimulate competition to supply the complex technology needed for merchants and financial institutions to adopt the Secure Electronic Transactions protocol for secure payment card purchases over the Net. Visa and MasterCard developed the SET specification.

In one of the first forecasts of SET market size, Killen, a telecommunications, financial services, and technology consulting firm, estimates the market for SET hardware, software, systems integration, and supporting services will top $2 billion in the year 2000. The lion's share will be in SET software sales, $1.2 billion in 2000, up from $75 million this year. Computer hardware shipments for SET, projected at just $10 million in 1997, will grow to $600 million in 2000, Killen said.

Among HP competitors, only IBM (IBM) is positioned as well as HP-VeriFone to provide a one-stop solution, said Bob Goodwin, senior vice president at Killen.

In June, HP closed its $1.29 billion acquisition of VeriFone in a stock swap announced April 23. With 1996 revenues of $472 million, VeriFone was already a giant among early players on the Internet, although by far the biggest part of its revenue comes from hardware and services in the physical world, not the Net.

VeriFone acquired its Internet expertise in August 1995 when it bought a consulting firm called Enterprise Integration Technologies.

The Killen firm predicts SET technology vendors will scramble to rework their strategies. Those vendors include: Digital Equipment, EDS, IBM, Intuit, Microsoft, Motorola, NCR, Netscape, and Sun Microsystems.

Indeed shortly after the acquisition, Microsoft, HP, and VeriFone announced they would jointly offer turnkey SET systems for banks and merchants, although that deal had been under discussion prior to the VeriFone-HP merger. The offering will include HP's hardware, VeriFone's Internet payments software, and Microsoft's Web storefront software.

The combined HP and VeriFone also offer new options for SET-hungry financial players, according to Killen.