VeriFone To Cut Its Headcount by 500 as Recovery Plan Takes Shape

Point-of-sale terminal maker and payment-services provider VeriFone Systems Inc. says it will cut its worldwide workforce by 500 full-time-equivalent employees, or about 9%, by year’s end as it continues to streamline operations in a fast-changing payments market.

While it will be paying $30 million in severance, the San Jose, Calif.-based firm expects to save $35 million annually from the cuts, chief financial officer Marc Rothman told analysts Thursday during VeriFone’s earnings call for its second quarter of fiscal 2014 ended April 30. Chief executive Paul Galant said the savings will be invested back into the company and on new products.

VeriFone had 5,800 employees at the start of 2014. “This decision was difficult but necessary,” said Galant, who came on board last September to right a VeriFone ship listing from a series of operational miscues.

VeriFone posted $466.4 million in revenues in the second quarter, up 9% from $426.3 million a year earlier, but recorded a net loss $23.9 million, an improvement from the $58.4 million loss in fiscal 2013’s second quarter.

Galant’s recovery plan includes reducing VeriFone’s lengthly list of stock-keeping units (SKUs), its various products and accessories, from 1,000 to fewer than 500 by year’s end. Another key element is centralizing its scattered research-and-development efforts involving 1,800 employees in 75 locations. VeriFone already has identified 10 sites from which R&D will be moved.

The R&D consolidation is related to a reduction in the number of core platforms supporting VeriFone terminals from 13 down to one. “We know this is far from ideal and likely unsustainable,” Galant said of the current platform plethora. In all, VeriFone plans to reduce its facility count from 129 to 119, consolidate 20% of its data centers, and eliminate 19 of its 132 legal entities.

VeriFone’s belt-tightening comes as it faces intense competition from chief rival Ingenico S.A. and other POS hardware and software providers as the U.S. prepares for the coming of Europay-MasterCard-Visa (EMV) chip cards, and other countries modernize their payment systems.

While VeriFone has acknowledged it has lost market share in some places, it also said it’s winning new clients and getting more business from existing ones. In the U.S., 15 large retailers upgraded to VeriFone’s EMV-compliant MX 900 product during the past quarter. Another six, including Nike, Godiva Chocolatier, Abercrombie & Fitch and PetSmart, signed on to use VeriFone mobile products that integrate with Apple Inc. devices, Galant said.

North America produced $125.3 million in revenues in the second quarter, up 3% from last year, and accounted for 27% of VeriFone’s total revenue. Europe-Middle East-Africa is VeriFone’s biggest region, which with $190.2 million in revenues accounted for 41% of the total.

VeriFone’s fast-growing payments-as-a-service, security and other software-based services generated $175.7 million in revenues, up 17% from last year and 38% of the quarter’s total. Hardware-based Systems Solutions revenue grew 5% to $290.7 million.

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