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Verifone struggles for leadership position

Thursday 14 December 2006

Verifone has now completed the acquisition of Lipman (cf. Smart Insights #06-26), and will benefit from economies of scale, cost reduction as well as a better market reach, as the companies have strengths in different locations. Verifone is benefiting from Lipman strong implantation in Europe and in Asia. Lipman was also ahead of Verifone in the field of wireless payment terminals.

 

One may remember that, before its acquisition by HP in 1997, Verifone was the undisputed #1 in the industry. Then the company lost ground, mainly because of management issues inside the HP group. Then, Verifone went through several changes of ownership. Since 2005, Verifone has gone public, and recovered all its strength. In the meantime, Ingenico had been through a series of acquisitions, and has slowly become leader of the payment terminal industry.

For the last few years, Ingenico used to consider its #1 position was out of reach of its competition. Ingenico acquired Moneyline as an answer to Verifone acquisition of Lipman. But with EUR 27 million sales, Moneyline is a small fish compared to Lipman and its US$ 235 million (EUR 178 million) sales in 2005. Lipman is said to have boosted Verifone sales by roughly 50%.

Both Verifone and Ingenico have a cost structure where the management and the R&D are based in Western countries, and in which R&D investment play an essential role. They are still at risk of a price war that would be initiated by a smaller player, for instance a new entrant in the market, especially from Asia.

The leadership in the payment terminal industry is going to be disputed!