|To: AugustWest who wrote (113)||3/8/1999 8:06:00 AM|
Barron's On FDC|
From: Henry Niman Date: 3/6/99 Time: 5:30:35 AM Remote Name:
March 8, 1999
Piece of the 'Net
First Data wants a cut of all e-commerce
By BARRY HENDERSON
First Data Corp. chief executive Ric Duques has a modest goal: Every time you pay for something without cash, he wants First Data to get paid. And as more and more transactions move through the Internet, he wants a little piece of each one as they fly through cyberspace. That's not just for the stuff that's getting sold via the 'Net these days; he's got his eye on all those paper bills that you now receive by snail mail. If First Data can get a foothold in the nascent business of "electronic bill presentment," the stock market may concentrate more on its future growth potential than its past missteps.
First Data already processes nearly one of every three credit-card transactions, or four billion transactions totaling $300 billion in 1998. The company also is a major processor of checks and owns Western Union, which has become the 800-pound gorilla of the money-transfer business.
But the company also has stumbled in the past couple of years, with a rocky merger with First Financial Management in 1995 and a few disappointments in its core card-processing businesses. As a result, the stock trades at 38, or 22 times estimated 1999 earnings. That's a significant discount to the average price-earnings multiple of 33 on the S&P 500, and a sharp contrast to the 30% premium First Data stock once commanded.
Electronic bill presentment is the first prong in Duques' plan to cash in on the 'Net and to restore the company's growth. Here's the no-nonsense pitch he gives to phone companies and anybody else that stuffs your mailbox with bills each month: Sending bills the old-fashioned way costs about $1-$1.50 apiece. Duques thinks he can do it for about 30 cents with an online bill-payment system. His product is called TransPoint, which allows customers to read their statements online, hit a button, and debit the correct amount directly from their bank accounts.
It doesn't take a supercomputer to figure out why Duques is so excited. According to Dove Associates, there are 14 billion bills mailed out every year. If electronic bill presenters charge 30 cents apiece for their service, that works out to $4.2 billion. If First Data could capture 10% of this market in five years, that works out to be an additional $420 million. Of course, this assumes that everyone that gets bills will pay them on the 'Net, which is unrealistic. Even so, what if one-half of all bill payers want to do business on the 'Net? Half of $420 million would still be a hefty fillip to revenues of $5.1 billion last year.
To get there from here, Duques enlisted a partner: Microsoft. Steve Ballmer, Bill Gates' right-hand man, was enthusiastic, he says. According to Duques, Microsoft's interest was piqued because it saw electronic bill presentment as the first "real application" for the 'Net that had mass appeal. Duques claims Microsoft is pulling out all the stops to make it a success. "They told me they put the 'A' Team on it," he says proudly. The service is being beta-tested through May, and a summer rollout is scheduled.
Once Microsoft was on board, Duques also got Citibank to take a minority interest (between 10% and 20%) in TransPoint. Notwithstanding Gates' characterization of banks a couple of years ago as technological dinosaurs, Duques says that for customers to embrace electronic billing, banks need to be involved. "You have to have an intermediary in there that the customer trusts," he says. Duques says he's also asked Gates to back off on the anti-bank rhetoric. "I got him to promise me not to make any more dinosaur comments," he laughs.
For this to work, Duques says two things have to happen right off the bat. First, he's got to sign up enough billers to give him an edge with consumers. "If I tell you that I've got a service where you can pay eight out of your 10 bills online, you'd probably say, 'Okay, I'll give it a try.' " If it's only one bill out of 10, most people would pass. First Data has at least 30 billers signed up, and 26 of those will participate in the pilot program.
The other absolute necessity: Flawless customer service. If customers have no problems with the service, or problems are taken care of immediately, the word-of-mouth from early adopters will be positive.
First Data hopes to be first to market with the new system, although Duques admits that the competition won't be far behind. CheckFree figures to be the biggest competitor, and by some accounts, it already has more billers than Transpoint. There's also been some speculation from industry types that CheckFree has been in talks with a portal company like Yahoo.
Nonetheless, Duques believes there are some fairly significant barriers to entry in this business, notably the required investment, which could keep all but the best-funded companies out. Indeed, First Data anticipates a $50-$100 million investment in the system. There's also what Duques calls the "hassle factor" of setting up this business.
The second prong of his Internet strategy involves getting retail merchants wired to the World Wide Web. The bigger a merchant's presence on the 'Net, the more transactions there are to process, usually via credit cards. "Everything, 100% of the stuff that people buy over the Internet, has to be processed electronically," he says. The implications of that elude most people, including Wall Streeters. "It's kind of like what happened to Federal Express," he says. "All of a sudden, people figured out that everything that was getting bought on the 'Net had to get delivered somehow, and that Federal Express is going to get a big chunk of that business," he says. Duques thinks First Data should get similar recognition once investors see the revenue potential of its 'Net-related business.
Another part of First Data's e-commerce strategy was to take a stake in a company called iMALL, which designs and hosts Websites for retail merchants. Duques and iMALL are using a number of tactics to get the merchants hip to e-commerce. They've developed four Websites designed to funnel more transactions their way. First, there's VirtualApp.com2, directed to businesses that already have their own Web strategy down cold and are simply looking for credit-card processing. The second is MerchantStuff.com3, which says it supplies "all the stuff you need to start selling on the Web for one low monthly price," from creating and hosting a Website for a retailer to luring traffic with links from other iMALL sites.
There also are two shopping sites, stuffmall.com4 and stuff.com5, which get you information about a product and a link to a retailer where you buy something that requires a credit-card transaction. Merchants that are on the First Data bandwagon include FAO Schwartz, Toys 'R' Us, SkyMall, OfficeMax and bedandbath.com6. If all goes according to plan, these sites should create new sources of recurring revenues for First Data.
Things are moving ahead quickly. At the beginning of last year, First Data had 4,437 merchants signed up to use its Internet services; by yearend that number grew to 21,578. Duques believes this is just the beginning. "We've got two million merchants that use our card processing services, and I think you can get 10% of any group to try something at least once," he says. Duques gets a bit cagey about specific revenue projections, however. "We don't expect to see anything, really, from this business in 1999. In 2000, we'll see something happening in the numbers and then in 2001, it's going to be significant," he says.
So far Wall Street hasn't given Duques much credit for his Internet strategy, in part because he hasn't said much about it until now. The Street also hasn't been enthralled with the mature credit-card processing business. And it didn't help that the company over-promised last year and fell short of earnings expectations.
First Data managed only meager revenue and profit growth last year, with the top line gaining less than 2%, to $5.2 billion. Net inched up to $697 million, or $1.56 per share, from $691 million or $1.51 in 1997.
Duques notes that revenues dropped off because he sold several underperforming "non-core" businesses that he got as a result of the 1995 merger with First Financial Management. In 1998, he sold off VIPS Healthcare Information Solutions and First Image Management. This followed the 1997 sale of a credit agency called Nationwide Credit. As a result of the sales, the company had to take a $232 million writedown, which is excluded from the $1.56-per-share earnings number.
"When we did the merger in 1995, we said we love Western Union and TeleCheck. At the time we hoped the other stuff would turn around, but if it didn't we were going to sell it," he says. "The way it ended up, we bought a cow for a quart of milk and then we had to shoot the cow," he says. Nonetheless, the divestitures have cleaned up the company's focus and he's ready to move forward.
Duques still faces challenges in his core credit-card business owing to consolidation in banking. Some of First Data's largest alliance partners have been merged or bought out, including NationsBank, a major account.
While the consolidation trend in banking looked like it meant the loss of even more customers, First Data allayed some of those fears last month. Not only did it manage to hold on to Bank One's business even after the Chicago-based bank merged with First Chicago NBD, it also picked up a new credit-card processing contract from First Chicago at the same time. "The announcement erases that fear while adding the cards to the conversion pipeline," wrote James Marks, a research analyst who covers the company for Deutsche Bank. First Data said 46 million Bank One card accounts will be processed in 1999, with another 22.5 million from First Chicago.
Despite this near-term win, bank consolidation could still threaten some of First Data's credit-card business. Although Duques says he's committed to maintaining his existing relationships with banks, he's thinking about new kinds of alliances. That's because banks are a great way to gain an entree with retailers. "When a merchant comes in to set up a bank account, the bank can refer them to you for their credit-card authorization needs," says Duques. But banks aren't the only ones that have an in with merchants. Payroll-processing companies come to mind. Duques won't name names, but people familiar with his plans think he's likely to approach Automatic Data Procrssing, Paychex and others that have longstanding relationships with merchants that First Data could piggyback.
At a certain level, Duques will never be able to completely disengage himself from the banking industry. After all, banks are still the ones that issue the most cards, so they're the ones that still control who gets the processing business. For banks to outsource that function to First Data, it has to process credit-card transactions more cheaply than the banks can do it themselves.
That's where Charlie Fote, president and now chief operating officer, comes in. Widely viewed as First Data's best operating executive, with the best feel for the ins and outs of the processing business, he's now focused on controlling costs. It's starting to show up in merchant processing operating margins, which came up to 29.9% last quarter.
Even if Duques' Internet plans come to naught, and Fote can't keep margins this high, Western Union is probably worth nearly as much as First Data's current stock price, according to Greg Jackson, an analyst who follows the company for Harris Associates in Chicago. The wire-transfer business doesn't sound very sexy, and in the U.S., it's not, growing only in the "mid-single digits," Jackson says.
The real gains are coming from overseas, where the business is growing at 50% or better. Part of that owes to emigres of the former Soviet bloc countries who send money back to the old country. For instance, the influx of Russian Jews to Israel brought about a doubling in Western Union's business there last year.
That kind of growth potential has spurred a major expansion program. Western Union currently has about 55,000 agent locations, half of which are outside the U.S. Duques has a target of 150,000 over the next few years, with most of the expansion outside this country.
This is not a capital-intensive business. A new location needs only a local agent and a computer system. Of course, the challenge is to navigate local banking rules and customs, and finding trustworthy agents. But this expansion should give the business 20%-plus earnings growth for years to come.
That's what gets the Harris Associates analyst excited. Jackson thinks Western Union alone is worth 14 times EBIDTA [earnings before interest, taxes, depreciation and amortization], or $11 billion, which works out to $25 a share. (For another valuation of Western Union see table.) He reckons the rest of the company is worth at least $25 a share, which gets him to a target stock price of $50.
Of course, Duques thinks there's lots more to like at First Data than just Western Union. "At the end of the day, we want to do more business than anyone on the Internet," he says. An immodest goal, indeed.
URL for this Article: interactive.wsj.com
Hyperlinks in this Article: (1) interactive.wsj.com (2) virtualapp.com (3) merchantstuff.com (4) stuffmall.com (5) stuff.com (6) bedandbath.com
Last changed: March 07, 1999
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|To: AugustWest who wrote (114)||3/8/1999 10:20:00 AM|
>>>>First Data hopes to be first to market with the new system, although Duques admits that the competition won't be far behind. CheckFree figures to be the biggest competitor, and by some accounts, it already has more billers than Transpoint. |
Simple...hopes to be first to market...on the planet Kyrpton.
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|To: Benny Baga who wrote (117)||3/24/1999 2:12:00 AM|
First Data to Acquire Stake in Paymentech|
PAYMENTECH INC. First Data Corp. to Acquire Stake in Company
Mar. 22, 1999, First Data Corp. (NYSE:FDC - news) reported that it signed definitive agreements with BANK ONE CORP. (NYSE:ONE - news) and Paymentech Inc. (NYSE:PTI - news) to acquire PTI's public shares.
FDC will acquire the outstanding public ownership of PTI at a price of $25.50 per share. Public ownership (approximately 16 million shares) represents approximately 45% of the shares outstanding. ONE owns the remaining 55%.
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|To: AugustWest who wrote (118)||3/26/1999 8:25:00 AM|
|From: Benny Baga|
For future use.....|
The TransPoint service will be available
to consumers in Spring 1999.
Imagine receiving and paying your bills
over the Internet with a few keystrokes
or the click of a mouse. No checks to
write. No remittance coupons to fill out.
No envelopes to stuff. No stamps to
stick. No hassle to get to the post
office on time.
The TransPoint service enables anyone
to receive and pay bills through the
Internet. TransPoint links billers with
consumers and their respective
Financial institutions to make the
payment process faster, simpler,
cleaner, and more economical for everyone.
If Internet bill delivery and payment is a new
idea for you, then the Demo is the
best place to start.
If you represent a business that sends
bills to consumers, TransPoint offers a
powerful new way to build stronger
customer relations while reducing
customer service costs. Please check
out the Billers section.
If you represent a financial institution
or major Internet site, find out how
TransPoint can enhance your online
services to strengthen customer
relations in the Consumer Service
If you represent a system integrator or
professional consulting firm, find out
more about our certification program
for TransPoint Technology Associates.
This service will be available in Spring
1999. Check back in the next few
months for final dates and sign up to
receive and pay your bills from TransPoint!
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|To: Benny Baga who wrote (119)||3/30/1999 7:59:00 AM|
Consolidated Data Completes Major Acquisition of YourBank Online.com|
MOUNTLAKE TERRACE, Wash.--(BUSINESS WIRE)--March 30, 1999-- Consolidated Data (OTC BB:CSDD - news) announced today that it has finalized an agreement with DETK Corporation to purchase its proprietary software YourBank Online.com.
The ten million ($10,000,000) purchase price is to be paid in a combination of cash and stock. YourBank Online.com is a dynamic browser-based software that uses the most advanced technology to deliver user-specific financial services and products via the Internet, IntraNets or Microsoft's (Nasdaq:MSFT - news) WebTV.
YourBank Online.com was developed in cooperation with Microsoft and River City Bank (OTC BB:AMRB - news) of Sacramento, California over a one year period of time with BETA testing completed and two additional years of use by numerous financial institutions on a variety of platforms. YourBank Online.com has proven to be extremely stable. In addition, YourBank Online.com has received outstanding industry reviews and has been well received by the approximately 25,000 users.
YourBank Online.com utilizes a central ''data warehouse'' concept of providing functional interfaces to bank customers for a variety of financial management needs, i.e. bill paying, bill presentation online for application and approval, realtime stock quotes and execution, along with the more traditional transactions, such as checking and savings.
YourBank Online.com uses U.S. grade encryption of 128 bit-key (SSL) designed by Netscape Corporation (Nasdaq:NSCP - news). Detailed transaction logging provides the ultimate in audit trails. Both federal and state regulations have accepted YourBank Online.com and recognize its use.
Consolidated Data's business model is to be at the forefront of this Internet technology revolution by being a leader and provider of E-Commerce Solutions on a global basis. With less than one percent of the nation's financial institutions presently offering online services, coupled with the fact that customers are seeking Internet banking capabilities on a daily basis, Consolidated Data's acquisition of YourBank Online.com should prove to be the nucleus of their business.
Statements in this release may contain forward-looking information within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, and is subject to the safe harbor created by those sections. All statements, other than statements of historical fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of Consolidated Data (CSDD), are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Consolidated Data assumes no obligation to update information contained in this release.
S. Everett Coryell
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