The text of American Banker
Checkfree Holdings Corp. unveiled a plan to reach out to the more than 100 million consumers who go to Internet portal sites.
The announcement, made last week, was timed to increase interest in the company's coming stock offering.
The Norcross, Ga.-based processor said it will seek to form
relationships with Internet portal companies -- which Checkfree
executives said serve more than 100 million people -- to boost
consumer awareness of its billing services.
"We're going to make sure that we turn as many of those
consumers into Checkfree subscribers as we can," Peter J.
Kight, the chairman and chief executive officer, said last week in a conference call.
This strategy is only now possible, because Checkfree has
settled a dispute with Intuit Inc. Intuit had sued in March after an announcement that Checkfree would present bills through a
major Internet portal, identified in the Intuit suit as Yahoo Inc.
The dispute centered around whether Intuit had exclusive rights
to certain Internet distribution channels for bills processed by
Checkfree.
Checkfree currently sends electronic bills through the Web sites
of two major banking companies -- Bank One Corp. and First
Union Corp. -- as well as more than a dozen smaller ones and
credit unions; Intuit's Quicken personal financial management
Web site, and several on-line brokerages.
Checkfree executives did not say which Internet portals they are
seeking as additional distribution points for electronic bills. But Mr. Kight did say that "all of the other major portals began
inquiring about working with us" after the announcement that
sparked the Intuit suit.
"Serious" discussions are under way with Internet portals and
with "financial institutions committed to the Internet," he said.
Gary Craft, who heads research at the on-line investment bank
E-Offering, said partnerships with nonfinancial Internet portals
could help Checkfree take away some business from banks.
"They're attempting to become a single-point gateway to
consumer providers of electronic bill presentment," he said. "The
risk is in harming their relationships with banks."
Checkfree executives also said they plan to increase the number
of consumers subscribing to its electronic bill payment and
presentment services from 2.8 million to five million by June
2000. To meet that goal, the executives said, they have
earmarked $50 million for growth initiatives, including offering free introductory trials of electronic bill presentment and payment to consumers, increasing the roster of major billers to 100, and bolstering processing and customer service capabilities.
Avivah Litan, research director at GartnerGroup of Stamford,
Conn., said the incentive program is a major change in policy for
Checkfree.
"Banks have often complained that they couldn't get widespread
consumer adoption of Internet bill payment as long as Checkfree
was charging them some $5 a month per customer," she said.
To serve the expected flood of new customers, the company
plans to build another data center in Dublin, Ohio, and a
customer care and payment facility in Phoenix.
Checkfree also said it would invest in developing new electronic
commerce services, including one that would send electronic
payments between consumers, and one that would support
payment and presentment between small businesses.
The processor expects to sell 3.8 million shares in its secondary
offering. The stock closed Friday at $39.0625, up $1.8125 for the
week.
Allen Shulman, the chief financial officer, said proceeds from the secondary offering would not be used to fund the company's
growth strategy. The new capital would replenish the company's
treasury, depleted by the repurchase of $32 million of its own
stock last fall.
Merrill Lynch & Co., Deutsche Bank's Alex. Brown, Hambrecht &
Quist, and U.S. Bancorp Piper Jaffray will underwrite Checkfree's
upcoming stock offering, according to filings with the Securities
and Exchange Commission.
These initiatives and the upcoming secondary stock offering
indicate Checkfree is putting off near-term profitability to grab as many customers as possible in the still-nascent electronic billing market, industry observers said.
"They are banking their financial future on Internet portals," Ms. Litan said. |
