Hewlett-Packard paves way for Internet commerce with acquisition of VeriFone

Weekly Corporate Growth Report, May 5, 1997

The Deal: In its biggest acquisition yet, Hewlett-Packard has agreed to buy VeriFone in a stock-swap valued at $1.18 billion. The deal calls for one share of H-P to be issued for every share of Verifone. H-P plans to integrate VeriFone's technology into its powerful computers, or servers, which are then sold to businesses. On the news, VeriFone shares skyrocketed 57%, from $17.125 to $47.25.

Discussion: VeriFone's claim to fame is the the grey swipe box beside cash registers that is used to make credit card transactions. VeriFone estimates that of the $800 billion electronic transactions made in the US last year, over $520 billion were handled by VeriFone systems. Recently, however, the company has committed itself to developing software for secure Internet commerce- the use of the Internet by indisviduals and companies to buy goods and services.

Shopping via the Internet is still in its infancy. However, it is expected to reach $95 billion in the US by 2000. VeriFone is working on ways to make sure that transactions and credit numbers are kept private as they travel across the Web. The market is relatively new and there is little so far in the way of competition.

VeriFone is also developing devices that will allow consumers to transfer cash digitally from bank accounts into hand-held cards or chips located in their PC's, thus allowing them to make payments over the Net While VeriFone plans to make a future out of electronic commerce, it currently gets 95% of its revenue from selling credit-card machines to stores