SECTOR: I-NET BANKING/FINANCIAL SERVICES
"Virtual Banking" anyone ??
How about "Triffin's Bank & Trust"
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April 21, 1999
Dow Jones Newswires
Sanchez Plans E-PROFILE Spinoff, Backs
1Q EPS View Of 2c
By DINAH WISENBERG BRIN
Dow Jones Newswires
MALVERN, Pa. -- Sanchez Computer Associates Inc. (SCAI) shares have
come down after surging to a 150% one-day gain last week, but the
banking-software developer has big plans for the subsidiary that contributed
to the run-up.
Within the next 12 months, the company plans an initial public offering of
e-PROFILE.com, a new comprehensive outsourcing business that will allow
companies to open their own Internet banks with relative ease and little
upfront cash, Chairman Michael Sanchez told Dow Jones.
He said Sanchez Computer plans to announce e-PROFILE.com's
management next week, its first technology partner in the next two weeks and
top-tier customers in the next 30 to 90 days.
"I think we're on to something that's potentially large," Sanchez, 41, said at the
company's modest one-story headquarters in a sprawling corporate park
outside Philadelphia. "What we're offering doesn't exist today."
E-PROFILE.com, which the company is launching through its purchase of
ArTech Financial Services of suburban Pittsburgh, should be up and running
early next month, he said. Sanchez Computer is building a new data center
outside Pittsburgh that will allow e-PROFILE, which has some existing
customers, to support large institutions.
"We are working with some clients who have yet to disclose their plans ...
large-brand players," Sanchez said.
A board in his office displayed a list of about 10 potential technology
partners, whose products would be incorporated into e-PROFILE.com
operations.
The possible partners include Integrion Financial Network, Edify Corp.
(EDFY), CheckFree Holdings Corp. (CKFR), Compaq Computer Corp.
(CPQ), Home Financial Network Inc., International Business Machines
(IBM), a Federal Home Loan Bank, Hewlett-Packard Co. (HWP),
Pricewaterhouse Coopers and Securities First Technologies Corp. (SONE)
Sanchez Computer, which went public in January 1997, is itself a spinoff of
Safeguard Scientifics Inc. (SFE), the nearby developer of
entrepreneurial-technology companies. As of Dec. 31, Safeguard owned
nearly 27% of Sanchez shares.
First-quarter earnings results are due Thursday, and Sanchez said he is
comfortable with First Call Corp.'s consensus estimate of 2 cents a share,
down from 7 cents a year earlier. He attributed the expected decline to a
recent change in the company's pricing, which trades upfront customer
payments for bigger long-term revenue.
Sanchez also backed First Call's full-year forecast of 64 cents a share, which
would be an increase from 57 cents reported for 1998.
"We've beat expectations for the last nine quarters since we've been a public
company," he said.
Taking the same wild ride as other Internet banking shares, Sanchez stock
soared 150% to 79 7/8 from 31 7/8 on April 13, then slid about 34% by
Monday, when it closed at 52 9/16. It recently traded at 54 1/4, up 3 3/4, or
7.4%, on volume of 230,100 shares, compared with a daily average of
215,700.
Down the road, company Chairman Sanchez said, he'd like to take the
e-PROFILE.com concept to Europe. "We're dealing with banks all over
Europe that want to do this as well," he said.
Sanchez Computer, with more than 360 employees, already developed,
markets and maintains the PROFILE line of software for the financial services
industry. Its technology provides core banking functions - processing loans,
mortgages, deposits and other transactions - and supports online banking.
Sanchez calls it "the factory for the bank."
Clients include Citibank, Sumitoma Bank Ltd., subsidiaries of American
Express Co. (AXP), ING Group NV (N.ING) unit and Bankers Trust Corp.
(BK), and Federal Home Loan Banks in Pittsburgh and Boston.
Unlike Sanchez Computer, e-PROFILE.com will be an Internet content
business, providing end-to-end, turnkey services to online banking
companies. Company headquarters will be near Sanchez's, with the data
processing center in Cranberry, Pa., near Pittsburgh.
"There are a lot of non-banks starting banks," Sanchez said. About 30% of
businesses seeking national charters to launch Internet banks are non-banks,
including department stores and supermarkets, he said.
Through e-PROFILE.com, banks and non-traditional banks will be able to
obtain the services and technology they need to go online, from seeking
regulatory approval to operating accounting, loan and credit-card activities, he
said. The new venture will combine products from various companies, offering
customers a "Chinese menu" of services.
Where a would-be Internet bank might spend $100 million to launch service
itself, it can go online through e-PROFILE with relatively little initial capital
outlay, according to Sanchez. Clients will pay according to the numbers of
their own customers.
"It's a next-generation banking technology," Sanchez said. Bricks-and-mortar
banks also can use e-PROFILE.com to retrofit their overall software
infrastructure. "It's a Trojan-horse strategy for Sanchez," he said.
E-PROFILE.com is working with several new clients, but the customers
won't announce their online banking ventures until they go live, for competitive
purposes, Sanchez said.
"There's a lot more secrecy in the market than there used to be," he said.
When e-PROFILE.com goes public, Sanchez Computer will be a partner and
managing shareholder. Sanchez said he'd like to take it public "as soon as
possible, as soon as we have a critical mass of customers."
As for the volatility among Internet stocks, Sanchez said, "I think it'll be quite
a shakeout till the real players with the good business models emerge. ... This
is real. This is content over the Internet for consumers."
And unlike retailers, he said, Internet banks are moving only electrons, not
merchandise.
Sanchez and his brother, Frank, 42, the company's president, are
"second-generation bank software guys," he said. Their banker father,
Warren, developed software and founded a service bureau in the 1960s and
1970s. Until last year, he was a consultant for his sons' business.
That business remains focused on its core product, the PROFILE software
family, despite the energy now being devoted to e-PROFILE.com.
"It's an exciting part of what we're doing," Sanchez said of the new business.
"It's not everything we're doing."
-By Dinah Wisenberg Brin; 215-656-8285
Briefing Book for: CKFR | CPQ | EDFY | HWP | IBM | SCAI | SFE | SO
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