Shares of Verifone (PAY) plunged 16.22 percent to $18.39 Wednesday afternoon after the company reported a nightmare earnings report.
On a GAAP basis, the company reported an EPS loss of $0.54 on revenue of $426M. The company also guided third quarter earnings down to $0.20 per share. Verifone shares are down almost 50 percent for the year and are approaching 52-week lows.
The San Jose, California company cited enormous legal expenses for the poor earnings, but its weak sales numbers indicate that it could be losing market share to Ingenicio SA (ING.PA) and several new innovators.
The card reader industry is currently undergoing an enormous technological revolution. Companies like Square, Paypal, Venmo, Google, and others are changing the way people can purchase goods and conduct business transactions. Verifone was once the only game in town, but businesses now have more options.
Starbucks, for instance, formed a partnership with Square to bring its stores into the 21st century. Customers can simply order their drink, pull out their smartphone, open the Square Wallet app, and pay for the coffee with the tap of a button. No cash, no card, and no Verifone required.
Verifone’s interim CEO Rich McGin stated, “some customers in selected markets have made choices to meet an immediate need with non-Verifone products.” McGinn was vague about who was capturing market share and why this was occurring, but he was acknowledged that Verifone’s lack of partnerships and communication with clients have become a problem.
However, McGinn was very clear about one thing: “Things have to change.”
McGinn’s acknowledgment of significant organizational problems was the silver lining in the earnings report. He seemed to touch with what the company needs to do moving forward and conveyed confidence that the company can resume organic growth within the next year.