First Data CEO: Still Working Through Card Segment Issues
By HEATHER DRAPER Of DOW JONES NEWSWIRES
October 14, 2005 1:04 p.m.
DENVER -- First Data Corp.'s (FDC) payments and merchant services segments are performing well, but the company's results continue to be damped by its card-issuing unit, First Data's chief executive said Friday.
"Let me assure you that the performance of the card (segment) remains a top priority at First Data," CEO Charlie Fote told analysts during the company's third-quarter call.
Revenue for First Data's card-issuing segment, which includes debit, retail and bank cards and related services, was $594 million, down 4% from a year ago. The card segment's operating profit was $116 million, down 25% from a year earlier.
"Our primary objective with card is to be sure that at the end of the day, our short- and long-term decisions here maximize shareholder value for all of us," Fote said.
Before the bell Friday, First Data reported overall net income of $421.5 million, or 54 cents a share, down from $460.6 million, or 54 cents a share, a year ago. Not including items, earnings were 60 cents a share.
Revenue rose 6% to $2.67 billion from $2.53 billion a year ago.
First Data shares traded recently at $40.06, up $1.22, or 3.14%, on volume of 3.6 million shares.
Analyst John Kraft of D.A. Davidson & Co. said he thinks First Data's card-issuing segment "has nowhere to go but up."
"It's been their worst-performing segment and has been a disappointment for management and investors," Kraft said. "But I'm seeing a bottom here and some potential for upside."
The card segment has been hit with some "bad luck" lately, he said, noting that consolidation in the banking industry has been the biggest factor.
"Some of their customers have been acquired, some have taken those services in-house," Kraft said.
In the call, CEO Fote noted that First Data lost card business because of the mergers last year of Banc One Corp. and JP Morgan Chase (JPM), and Bank of America Corp. (BAC) and FleetBoston Financial.
Kraft sees Fote possibly selling off parts of the card segment that aren't profitable.
"Charlie (Fote) is on a mission to create shareholder value," he said.
Kraft was most impressed with First Data's Western Union and international results in the quarter.
"We saw growth we haven't seen with Western Union for years," he said. "U.S. to Mexico transactions were up 20% year over year."
Overall Western Union consumer transactions were up 22% from a year ago, with international transactions up 28%, the company said.
WesternUnion.com revenue was up 51% from a year earlier, Fote said on the call.
Kraft doesn't own shares of First Data. D.A. Davidson may seek investment-banking fees from the company in the future. |
