Changes to its senior management team and a new direction for the company have positioned VeriFone Systems Inc. (NYSE:PAY) to regain market share and ultimately resume growth, says Steve Wilson, Founder & Chief Investment Officer of Greenwich, Connecticut-based Lapides Asset Management LLC.
“This was, just a couple of years ago, a very well loved stock that traded at a very large valuation,” Mr. Wilson notes in a recent interview with The Wall Street Transcript. “They run the payment systems that you and I deal with on a daily basis when we’re using a credit or debit card. Whether you are at the gas pump, Wal-Mart or at the supermarket, this would be the terminal that you slide the credit card through and, if need be, punch in your zip code and then sign on a screen. They are the worldwide leader with a very strong market share.”
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Despite the ubiquity of the company’s product, VeriFone began struggling several years ago, and their stock ultimately suffered as a result. “They had a CEO who had run the company for a number of years and really sort of lost his way. He was trying to keep them growing at an unsustainable rate, and started to do numerous acquisitions that were certainly viewed from the investors’ standpoint as being inappropriate, overpriced, and unnecessary,” Wilson recounts. “Two years ago the stock traded in the $50s, and the valuation of the company was around $6 billion. When we got involved the stock had already lost some 70% of its value; he was ultimately removed from the company, and that’s when we stepped in. We felt that it was a company that needed new direction. They had just brought in a new CFO, who we had met with and felt pretty strongly that he was going to be a positive force for meaningful improvement. Also, they just recently named the new CEO after a long search.”
“So, the company has begun – reiterate begun – a process of regaining lost market share and improving their product offering and returning the company to a level of reasonable growth and improving returns and cash flow generation, which will ultimately bring them a much higher valuation,” Wilson concludes.
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