HP purchase of VeriFone creates strong e-commerce player

Hewlett-Packard's says it plans to buy electronic payment systems maker VeriFone, creating a potentially strong player in the electronic commerce market, according to company officials and analysts.

Hewlett-Packard's says it plans to buy electronic payment systems maker VeriFone, creating a potentially strong player in the electronic commerce market, according to company officials and analysts.

While HP gains a premier provider of electronic payment systems, VeriFone stands to gain HP's established distribution network and marketing muscle, observers say.

"HP is involved in infrastructure and VeriFone is arguably the largest payment system vendor," says Clay Ryder, director at Zona Research in Redwood City, California. "This also complements HP's alliance with Microsoft," he says.

In the near future users will be able to get one integrated electronic commerce system, optimised for HP's hardware and running on Microsoft software, that will also include transaction processing and payment verification systems, Ryder says.

"Every time somebody will click the electronic payment button some money will trickle in at HP," Ryder says. "It will be interesting to see how this will change the company's business model."

HP is proposing to buy VeriFone in a one-to-one stock swap valued at roughly US$1.18 billion.

VeriFone, which had net revenues of US$472 million in fiscal 1996, will operate "fairly

independently" as a subsidiary of HP, says Richard Belluzzo, HP executive vice-president

and head of the Computer Organisation.

"We believe the strengths of HP along with VeriFone's expertise and reputation can redefine the marketplace and expand the capabilities around electronic commerce," Belluzzo says.

Together the two companies will accelerate the evolution of electronic commerce, says Hatim Tyabji, VeriFone's chairman, president and chief executive, who will continue his role as head of VeriFone, reporting to Belluzzo.

"HP has a formidable distribution infrastructure. It will allow us to penetrate the market faster and in a more cohesive fashion then we would have been able to do on our own," Tyabji says.

HP and VeriFone's top executives stress that the corporate cultures of both companies are a nice fit.

"These are two companies that are very alike," Tyabji says. "This is not a situation where you mix oil and water. We think alike, we work alike. What we have here is a unique chemistry. How the organisational chart looks on paper is irrelevant. If there isn't human chemistry and rapport between the principals it's not going to work anyway," he says.

HP's Belluzzo says the acquisition will not have a negative impact on VeriFone's established relationships with a number of other vendors.

VeriFone, founded in 1981, provides secure electronic payment solutions for financial

institutions, merchants and consumers. The company maintains more than 30 regional sales,

development, manufacturing and distribution centers throughout North and South America,

Europe, Asia, Africa, Australia and the Pacific.

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