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The world of electronic payments is constantly changing. Electronic purses are proliferating, and Internet payment is a reality. Many different methods of payment are now available and terminals must be capable of handling these different scenarios. The objective which Ingenico has set itself is to enable electronic transactions to be carried out in all these contexts, in total security, and to facilitate the use of these systems, including in the Internet environment.
France's Ingenico--Compagnie Industrielle et Financière d'Ingénierie is the world's leading manufacturer of electronic payment terminals and systems, beating out Hypercom and Verifone of the United States. Founded in 1980 by chairman and CEO Jean-Jacques Poutrel, who still owns about 14 percent of the company, Ingenico's products include debit, credit card and "smart" card point-of-sale payment terminals, smart card readers, front office servers for magnetic-strip cards and transactions, as well as software and e-commerce payment solutions. Ingenico ships more than one million terminals per year in the fast-growing electronic payment market. The company has also been quick to integrate emerging technology into its products, including communication with GSM-based mobile telephones and groundbreaking infrared-based secure payment integration with the popular Palm Pilot personal digital assistant. With its 1999 acquisition of IVI Checkmate, third-largest in the United States market and subsequently renamed Ingenico Corp., Ingenico not only boosted itself to the global market leadership, it also gave itself a prime entry in the United States--a market set to explode as it converts to the micro-chip based smart cards at the beginning of the twenty-first century. As a result of that acquisition, the company was able to win a $200 million contract from First Data Corp. in 2002 to develop its multifunction terminals for the U.S. market over the next five years. Ingenico is listed on the Euronext Paris stock exchange. Gemplus, the world's leading manufacturer of smart card, owns nearly 30 percent of Ingenico through its founder Marc Lassus; the two companies have not ruled out a possible merger in the future.
Electronic Payment Pioneer in the 1980s
France was one of the pioneers of electronic payment systems during the 1970s and 1980s and played a leading role in introducing this technology to the rest of the world. Stimulating the country's interest in secure electronic payment systems was the enormous success of the Minitel network, which placed Internet-like services in French homes in the early 1980s. France was also the birthplace of so-called smart cards, which, unlike magnetic-based credit cards, featured microchips to enable quick processing of customer purchases. The early acceptance of smart cards in France and in much of the rest of Europe encouraged the emergence of a new market devoted to the design and manufacture of payment and other financial transaction terminals.
In 1980, Jean-Jacques Poutrel and partner Michel Malhouitre established their own business, Compagnie Industrielle et Financière d'Ingénierie Ingenico, dedicated to the development and manufacturing of card-based payment terminals. Ingenico quickly rose to the top of the French market, and by 1985 the company went public, listing its stock on the Parisian bourse's Secondary Market. A year later, Ingenico switched its listing to the Paris exchange's Monthly Settlement market.
The company had grown quickly, in part because of the high margins it was able to command at a time when the electronic terminals market was just beginning to take off in Europe and elsewhere. Early on, Ingenico eyed a place in the international market, launching a subsidiary in Australia in 1988 in order to position itself for entry into the Asian Pacific markets. Ingenico opened a subsidiary in Spain at the end of the decade. The company was also quick to recognize the potential of smart cards, invented in the early 1970s, and in 1988 became an early investor in newly formed Gemplus, which was set to become the leader of the global smart card market in the 1990s.
Ingenico launched its Euromos "multiple application" terminal in 1990, hoping to establish an industry standard. Two years later the company rolled out its line of Elite terminals. By then, the company had also signed a partnership agreement with Italy's Olivetti, and had acquired a contract, with French petroleum company Total, to place terminals in its network of service stations. The early part of the decade held its share of difficulties for the company, however. As its core French and European markets suffered through an extended economic crisis, Ingenico too saw its immediate prospects dwindle, to the point where stock market analysts had come to consider the company somewhat of a has-been that had run out of breath.
Ingenico set out to prove those analysts wrong. The company quickly recognized that its future lay in its expansion on the international market. In 1992, international sales accounted for just 16 percent of the company's total revenues of nearly FFr185 million. Just one year later, however, the company had boosted its foreign sales to 34 percent of sales, and included fast-growing China among its new markets. By 1994, international sales accounted for more than half of Ingenico's revenues. Yet the company continued to suffer the extended crisis in its core French and European markets.
In 1994, Ingenico began plans to move into the lucrative North American market--the United States alone represented some 40 percent of the worldwide market for payment terminals. Instead of attacking the United States directly, and thereby finding itself in head-to-head competition with market giants Verifone and Hypercom, Ingenico chose to move into neighbors Mexico and Canada. In that year, the company placed its first terminals in Mexico, with two contracts for a total of 12,000 machines. At the same time, the company decided to sell of its 13.5 percent holding in Gemplus, generating some FFr75 million.
Global Leader in the 21st Century
The year 1995 proved to be a turning point for Ingenico. Growing acceptance of the smart-card technology, and the development of the so-called "electronic purse," led to a major increase in demand for Ingenico's multiple application-capable terminals and systems. A big boost for the company, and the industry in general, was the adoption of smart card technology by the world's largest credit card companies, including Visa, MasterCard, and Europay. If the United States remained resistant to the new technology, the rest of the world had quickly recognized the value of the microchip-based smart cards. Ingenico Pacific, the company's Australia-based subsidiary, grew especially strongly as the fast-growing Asian markets readily adopted the new technology. The Chinese market, still in the beginnings of its conversion to capitalism, turned directly to the use of smart cards.
In 1995, the company's revenues were once again on the rise, reaching FFr 190 million, and by 1996 the company's sales had swelled to FFr 280 million. In that year, the company took a major step into the U.S. market when its created a joint-venture with Canada's International Verifact Inc. (IVI), in an agreement which gave Ingenico a 16 percent share of IVI. The joint-venture provided for mutual distribution agreements of the company's complementary products, giving Ingenico's product an entry into both the U.S. and Canadian markets, but also strengthened the company's entry into the South American market.
Meanwhile, Ingenico began a series of external growth operations--indeed, acquisitions were to account for a strong share of the company's rise in the late 1990s. In 1996, the company acquired Innovatron Data Systems in France, and then moved across the border, purchasing EPOS, based in Germany. That year, also, Ingenico debuted its latest product innovation, the Elite 700 range of mobile terminals. By the end of 1997, Ingenico's sales had grown to more than FFr 450 million.
In 1998, Ingenico made two new acquisition that enabled the company to climb to the number two position worldwide, behind U.S.-based leader Hypercom. In May of that year, De La Rue Ltd., of the United Kingdom, the world's leading banknote printer, agreed to merge its Fortronics electronic terminals division into Ingenico, in a deal that transferred 20 percent of Igenico's stock to De La Rue. The acquisition, which reduced Ingenico founder Poutrel's position in the company to that of minority shareholder, was also seen as a means to prepare for his retirement from the company. With the completion of the acquisition in 1999, the new subsidiary was renamed Ingenico Fortronics.
The acquisition of the De La Rue division boosted Ingenico into the position as second largest in its market. That deal was soon followed up by the announcement in September 1998 that Ingenico was acquiring Bull's electronic terminals division, including its Spain-based Telesincro subsidiary. Under the terms of that acquisition agreement, Bull became Ingenico's new majority shareholder, with more than 29 percent of its stock. The deal gave Ingenico Telesincro a 70 percent share of the Spanish market and also boosted the company to more than FFr 1 billion in revenues.
IVI merged with the U.S. company Checkmate, forming IVI Checkmate, the third-largest terminals supplier in the United States. The merger reduced Ingenico's position in the larger company to just 9 percent, but placed it in a prime position for an eventual acquisition of that company. Back in Europe, the company also acquired a 40 percent stake in Veron, the Italian market leader.
Ingenico continued its expansion into 1999, setting up a subsidiary in Sweden and launching a new subsidiary, Ingenico Software. The company also rolled out two new product lines, the Elite 790 GSM and the Ingenico smart card reader for Internet-based transactions. Parallel to that launch, the company formed a new subsidiary, Ingenico.com, dedicated to secure online transactions, especially transactions made through next-
Bull restructured its operations at the end of 1999 and sought a buyer for its nearly 30 percent stake in Ingenico. In December 1999, that share was sold to Marc Lassus, founder and head of Gemplus, which by then had grown into the world's leading smart card maker. One month later, Ingenico stepped up to the acquisition plate, buying French-based IT services and consultancy firm EAC. In April 2000, Ingenico acquired Lexem, a leading French secured internet transaction specialist. Then in June of that year, Ingenico turned to the United Kingdom, acquiring software publishing and payment application hosting services provider Saunders & Jeffries. Not all of the company's activities were positive, however. At the end of 2000, the company decided to sell off its 40 percent stake in struggling Veron.
Ingenico nonetheless had good reason to cheer at the turn of the century. In January 2001, the company debuted its latest transaction coup. The company partnered with Palm, the maker of the highly successful Palm Pilot personal digital assistant, to enable Palm user to complete purchasing transactions using the Pilot's infrared port and specially equipped Ingenico terminals.
A more important moment for the company came in August 2001, when Ingenico announced its agreement to takeover IVI Checkmate for $55 million. The deal not only gave Ingenico a strong position in the United States, it also boosted it to the number one position worldwide. By November of that year, Ingenico was cheering as it saw its sales top the FFr 2 billion mark for the first time. Yet by the end of the year, the company had outperformed even its own forecast, topping EUR 380 billion. At that time, Poutrel, who was said to be preparing to retire soon after, announced the company's plan to boost its sales to EUR 600 million by 2003.
The company's prominence in the fast-growing Chinese market was certain to aid the company in reaching its goal. Meanwhile, Ingenico seemed on its way toward dominating the United States market as well. In January 2002, Ingenico announced that it had been awarded a five-year, $200 million contract to develop and implement a multiple-technologies terminals network, including smart-card capacity, for First Data Corporation. The contract represented Ingenico's largest ever, and confirmed its rise to market leader.
Principal Subsidiaries: I.D.S.--Sofracin SA; DSI International SA; S.C.I. du 5 Parc Floral; INGENICO International (PACIFIC) PTY Ltd (Australia); INGENICO SINGAPOUR; INGENICO Fortronic Ltd (UK); Ingenico Iberia SL (Spain); TELESINCRO S.A. (Spain); INGENICO Hansea GmbH (Germany); EPOS SERVICE GmbH (Germany); INGENICO GmbH (Germany); EPC GmbH (Germany); INGENICO AB (Sweden); IVI INGENICO (76%); INGENICO TRANSACTION SYSTEMS Ltd (United Kingdom); LEXEM; INGENICO ITALIA (95%); Ingenico do Brasil LTDA (97.91%).
Principal Competitors: Hypercom Corporation; Verifone, Inc.; V-Star; Thales SA; Schlumberger SA; Lipman plc; NCR Corporation.
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