June 5, 2014 / 9:07 PM / 4 years ago

VeriFone results beat as retailers upgrade card swipe machines

(Reuters) - VeriFone Systems Inc (PAY.N), a maker of credit card swipe machines, reported better-than-expected results for the second quarter, mainly helped by customers in Australia and retailers upgrading equipment with new security features.

VeriFone’s shares rose about 4 percent in extended trading.

“They (VeriFone) struggled there (Asia) in the past, and what happened this year was they signed up some large Australian customers and started rolling out even faster than they thought they would,” analyst Gil Luria with Wedbush Securities Inc said.

The company also forecast higher-than-expected revenue for the current quarter, benefiting from higher sales to U.S. retailers looking to upgrade point-of-sale equipment that can read cards with chips.

VeriFone forecast revenue of $455 million to $460 million in the quarter ending July 31, ahead of the average analyst estimate of $453.8 million, according to Thomson Reuters I/B/E/S.

U.S. retailers are upgrading the payment systems to make them compatible with more secure cards in the wake of several data breaches, including the one at Target Corp (TGT.N).

United States accounts for nearly half of global credit card fraud despite handling only 27 percent of all card volume, according to Barclays analyst Darrin Peller.

VeriFone’s France-based rival Ingenico (INGC.PA) forecast in February that revenue would rise at least 10 percent in 2014 as it expects its secure payment solutions systems to gain ground.

Net loss attributable to the company narrowed to $23.9 million, or 22 cents per share, in the quarter ended April 30, from $58.4 million, or 54 cents per share, a year earlier.

The company said it plans to cut about 500 jobs by end of 2014 from 5,800 at the beginning of calendar year 2014 to lower costs. “We began executing during Q2, reducing our headcount by approximately 150 people, thus far,” said Chief Executive Officer Paul Galant during a post-earnings conference call.

    “The company was very inefficient in the past. So the CEO actually thinks that by cutting costs, by making the organization more efficient, that’ll actually contribute to more revenue growth,” said Luria of Wedbush Securities.

    In addition, VeriFone said it expects to close 10 of its 129 facilities, liquidate 19 of 132 legal entities and consolidate 20 percent of its data centers, all by the end of 2014 to make itself more efficient.

    On an adjusted basis, the company reported a profit of 37 cents per share.

    Revenue rose 9 percent to $466.4 million. Revenue in the Asia Pacific region rose 36 percent to $67.6 million, and accounted for over 10 percent of total revenue.

    Analysts had expected an adjusted profit of 32 cents per share on revenue of $443.4 million.

    Shares of the company closed at $33.82 on the New York Stock Exchange on Thursday. The stock has gained about 46 percent since the Target data breach became public on Dec. 18.

    Reporting by Sampad Patnaik in Bangalore; Editing by Don Sebastian and Lisa Shumaker

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