As a follow up to Mobile Payment – Near Field Communications analysis, this article updates the latest events for the two companies mentioned; Verifone (PAY) and NXP Semiconducdor (NXPI).

VeriFone (PAY) (via Yahoo)
VeriFone Systems, Inc. designs, markets, and services electronic payment solutions that enable secure electronic payments among consumers, merchants, and financial institutions worldwide. The company provides countertop electronic payment systems that accept magnetic, smart card, and contactless/radio frequency identification cards; and support credit, debit, check, electronic benefits transfer, and various pre-paid products, as well as offers wireless system solutions.

Reader can access the full Q3 2011 earnings transcript PAY — Q3 Transcript

On Sept 6 2011, VeriFone (PAY) announced Q3 2011 earnings (via Reuter – Q3 2011 earnings release – Sept 6 2011):
* Q3 adj EPS $0.49 vs est $0.46
* Q3 rev up 21 pct
* Sees Q4 adj EPS $0.49-$0.50 vs est $0.49
* Sees Q4 rev $395-$400 mln vs est $395.9 mln
• VeriFone, whose customers are primarily financial institutions, payment processors, petroleum companies and retailers, is seeing growing demand for these mobile payment technologies in the United Kingdom ahead of the 2012 Olympics.
• “In London we have now signed nearly 6000 taxis to five-year processing agreements. UK retailers continue to embrace contactless systems,” Chief Executive Douglas Bergeron said on a conference call with analysts.
• The company continues to work with Google Inc to roll out the Google Wallet mobile payment service, which uses wireless NFC technology on mobile handsets.
• “The next big phase of the Google rollout is currently planned for the end of the month where we go from hundreds of locations to tens of thousands of locations,” CEO Bergeron said on the call.
• Verifone is also working with ISIS — an NFC-based mobile payment joint venture between AT&T , T-Mobile and Verizon Wireless; and PayPal Inc bring mobile payments to point-of-sale terminals in 2012.
• It has also won a $6.9 million contract with the Metropolitan Transportation Authority of New York City to depoly 1000 of its TransitPAY systems on buses which allow NFC-enabled smartphone-based payments.
• If initial rollouts lead to widescale deployment across the industry, the company’s revenue would grow by $100-$150 million in the U.S. and internationally.
Guidance:
• The company expects fourth-quarter adjusted earnings of 49-50 cents per share on sales of $395-$400 million. Analysts were expecting a fourth-quarter profit of 49 cents, on revenue of $395.9 million, according to Thomson Reuters I/B/E/S.
• Growth in North America will likely remain flat in the fourth quarter and will pick up next year, VeriFone said. It expects higher growth from Europe – especially from UK, France and Germany – and from emerging markets.
• Verifone raised its full-year adjusted profit outlook to $1.88-$1.89 a share on sales of $1.289-$1.29 billion, from its prior forecast of an adjusted profit of $1.80-$1.83 a share on sales of $1.17-$1.18 billion.

Technical Analysis:
• Expect PAY to encounter the 50-SMA resistance at around $38 range. The stock displayed a “death-cross” figure back in mid-July 2011 around $43. Looking forward, Mid-October is a better month for PAY.

NXP Semiconductor (NXPI) — As profile inYahoo –
NXP Semiconductors N.V., through its subsidiary NXP B.V., provides mixed signal solutions and semiconductor components primarily in Japan, Europe, South Korea, Rest of Asia Pacific, and the Americas. It offers small signal, power, and integrated discretes; and amplifiers, bipolar transistors, data converters, diodes, rectifiers, microcontrollers, sensors, and thyristors. The company’s products are used principally in automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting, and industrial applications. It also develops audio and video multimedia software solutions for mobile phones. The company, formerly known as KASLION Acquisition B.V, was founded in 2006 and is headquartered in Eindhoven, the Netherlands.
News Updates:
• Marketwire -08/30/11 EINDHOVEN, NETHERLANDS- NXP Semiconductors N.V. (NASDAQ: NXPI – News) today announced that Turkcell (NYSE: TKC – News) (ISE: TCELL), the leading communications and technology company in Turkey, has selected the PN544 near field communication (NFC) radio chip for Turkcell’s recently launched T20 smartphone. The T20 handset, manufactured by Huawei, is one of the world’s first commercially available low-cost Android NFC-enabled smartphones.
On August 17, 2011, NXP Semiconductor (NXPI) announced increase in share buy back to 8,000,000 shares from 5,000,000 previouly.
Marketwire – 08/17/11 EINDHOVEN, NETHERLANDSNXP Semiconductors N.V. (NASDAQ: NXPI – News) announced today that its Board of Directors resolved to increase the number of shares to be repurchased under its stock repurchase plan as announced on July 29, 2011, from 5,000,000 shares to 8,000,000 shares.
On July 30, 2011, NXP Semiconductor (NXPI) announced Q2 2011 earnings (via Bloomberg – July 30 2011):
• Second quarter non-GAAP EPS of $0.51 missed the consensus estimate of $0.52 (GAAP EPS was $0.33). Revenue of $1.1 billion was flat year-over-year.
• NXP, based in Eindhoven, Netherlands, now sees NFC deliveries at the lower end or “perhaps even slightly below” an initially predicted range of 40 million to 100 million units, Chief Executive Officer Richard Clemmer said on an analyst conference call.
• The shortfall is caused by a combination of “formulation and agreement on the specific business models to support the ecosystem,” as well as business challenges some handset makers are experiencing
• “Carriers continue to try to figure out an economic proposition,” Clemmer said in a conference call today. The company still believes a substantial increase in mobile transactions will occur, albeit with a delay of one to two quarters, he said. For 2012, NXP expects a doubling of the number of units.
Guidance:
• Product revenue may fall as much as 5 percent in the third quarter versus the second quarter, the company said, and earnings per share will be in the range of 47 cents to 56 cents.
• For the third quarter, management guided non-GAAP EPS to $0.47 to $0.56, nowhere near the $0.66 consensus estimate and potentially falling short of non-GAAP EPS of $0.49 in the year-earlier quarter. In an ominous sign for the outlook beyond the third quarter, the company reduced its 2011 forecast of near-field communication chip shipments, explaining that mobile-phone operators are not expanding wireless payment systems as quickly as previously anticipated.

Technical Analysis:
• NXPI moved above the 50-SMA resistance at around $19 range on higher volume. The next level of resistance is around $25 (18% higher from the current price $20.23).

Disclosure: the author owns NXP Semiconductor (NXPI).

The traditional method of payment of cash and checks are moving aside based on a recent major consumer trend — mobile payments. As smart-phones have become popular, people have become more comfortable using digital currencies and mobile payment both to shop for goods online and at traditional brick-and-mortar retail stores. Stores as varied as CVS, McDonalds and New York ‘s taxi are currently accepting mobile payments.

Smart-phone providers Apple iPhone, Google Android and others are gearing up to battle for the customer wallet. Mobile payment could be a simple process of holding a phone near a point-of-sale terminal with payment made electronically. The technology behind this process is called Near Field Communication (NFC). NFC is a short-range, wireless technology that allows secure communications between two proximate devices.

Currently payment processing companies such as Visa and MasterCard collect fees for each transaction and this is a very lucrative revenue source. Competing companies recognize this near monopoly technology and are rushing to cash in on this area.

Currently, there are two dominant smart-phone players in this area. Google ‘s Wallet and Apple’s iPhone. Google’s Wallet NFC payment program has lined up major players such as Citi Bank, First Data, MasterCard and Sprint. Google is preparing to launch this summer in San Francisco and New York City.

Apple ‘s iPhone captures major market share in smartphones and has successfully dominated high volume businesses such iTunes and Apple TV. With NFC, a fee is collected for each transaction, it is certain that Apple will want to capture this huge market.

To date, Apple had not announced an NFC capable-phone. Apple ‘s iPhone 3 and iPhone 4 currently do not have NFC-capability; Experts are certain that the iPhone 5 will be NFC capable. To enable mobile payment, a chip with NFC ‘s capability is included in a smart-phone and at point-of-sale terminal.

As an interim solution, for devices without NFC capability an SD card is an approach that implements all NFC-related functionality. With mobile devices that currently have an SD card slot, users can plug in the card to get immediate NFC capabilities.

To protect its dominance, Visa and MasterCard are using micro-card type to be NFC-enabled. Visa is using a payWave technology, NFC-enable like chip (micro-SD card) to insert into a phone. Users then download an app to make a transaction. To date, there are eleven banks that have signed up including JP Morgan, Bank of America and Well Fargo.

On August 9, 2011, Visa announced plans to accelerate chip migration and adoption of mobile payments.

Companies:•
NXPI – a Dutch company that makes chip that runs Google ‘s Wallet. The market expects 472 million smart-phones to be shipped in 2011. On Aug 2, 2011, NXPI announced a complete fingerprint-enabled payment in the US via a Motorola Android phone using technology from NXPI, AuthenTec and DeviceFidelity.

VeriFone (PAY) – makes the terminals that read credit cards; The company announced that it will enable all of its devices with NFC technology by the end of 2012.

Technology Partnership:Joint ventures with credit card companies, cellular providers and internet companies:
• Isis – joint venture with American Express (AXP), Mastercard (MA), Visa (V) and AT&T (T), T-Mobile, Verizon and Discover Card (DFS). Payment is waving their phone at the point-of-sale terminals.
• Google Wallet – partnership with Citigroup©, Mastercard (MA), First Data and Samsung.

Competing Technology:
• Ebay’s paypal and prepaid credit cards from Netspend and GreenDot.
• Social Networking ‘s Facebook – BitCoin (virtual currency) – digital currency developed by MIT.

Risks:
• Federal Regulation – Durbin Amendment stated that the Federal Reserve can have a say on interchange fees proposed by Visa and MasterCard.
• Security of financial data

HedgeFunds Holding:
• Third Points, LLC – Dan Loeb
NXPI
Nxp Semiconductors N.v.
2011-03-31 Add History
1.42% $20.93 – $31.95
($26.4) $ 17.09 -35% Add 50.78% 4,750,600

George Soros
2011-03-31 New Buy $20.93 – $31.95 $ 17.09 -35% 11100 History

In summary, mobile payment NFC technology’s penetration rate will be extremely huge over the next several years. The U.S market is currently in its infancy in adopting this technology. Japan and Korea are currently using NFC-enabled mobile payment technology. Emerging markets such as Brazil, India and China represent a huge un-tapped market. Recent research from Juniper Research indicates the mobile payments market will triple to $670 billion worldwide by 2015.

In the near term, the major markets are in correction mode. Investors with a short-term outlook would be wise to wait for the market upturn prior to making an investment. Those with a longer term horizon might want to initiate a position in this growing industry as these stocks have corrected anywhere from 20% to 40% from their 52-week highs.