The Microsoft-First Data announcement could easily scare some Checkfree holders out of their stock, even though news of this new venture first hit the Street two weeks ago. In fact, I would not be at all surprised if it sparked some of the selling we saw today in Checkfree. It has been an overhanging negative that is better off out in the light of day where it can be dealt with, rather than be whispered about behind the scenes. The public announcement of this venture I believe was delayed because of the objections of some major banks who are First Data customers. Banks are very wary and fearful of Microsoft getting into their business, as they should be.
My assessment of the meaning of this:
1. Checkfree now has something like 75% of the industry. It's market share will most probably decline as the industry grows.
2. Today's announcement will, if anything, force Integrion (IBM and 16 member banks) to quicker action. This might mean buying out Visa Interactive with its 80 or 90 mostly smaller banks as is currently rumored and more importantly work out some kind of deal with Checkfree for all of the Integrion banks- not just the 11 or 12 banks that Checkfree already has three to five year contracts with. This would be very bullish for Checkfree and most probably would have a favorable impact on Checkfree stock over both the short and longer term. That is because it not only brings in substantial additional business to Checkfree, but also ties IBM-Integrion in with Checkfree as partners and not competitors. Such an arrangement would seem to make eminent sense for IBM-Integrion because they need to get into the business sooner, rather than later, and if what we are all led to believe is true, IBM-Integrion has nowhere else to go at the present time but to Checkfree, for it's back end bill payment processing.
3. Checkfree still has a commanding lead, is well ahead of the pack, and with each passing month is building invaluable hard to dislodge links with a growing number of merchants, banks, and consumers. 4. Battles are won by those who stay by their posts and fight, not by those who throw away their guns and run. Checkfree is engaged in a competitive battle for big stakes with some very powerful players and, as shareholders, we are in that battle too. I can't say I like the idea of having many of the modern day portfolio managers in the next foxhole alongside me when some of the guns go off.
5. Come August 7th, or there abouts, we should get a clearer update from management on what progress has been made since the end of the March quarter. |
