Wednesday, July 7, 2010

VeriFone Annual Shareholder Meeting (2010)

VeriFone (PAY) held its 2010 annual shareholder meeting at company headquarters in San Jose, California. CEO Douglas Bergeron handled most of the meeting, but Senior VP and General Counsel Albert Liu also played a significant role.

The person manning the front desk offered only coffee to visiting shareholders, but we later found a small treasure trove of pastries, Egg-McMuffin-type sandwiches, and Odwalla juices on our own. (Note to VeriFone: if you're going to have food and drinks, have some class and offer some to non-employee shareholders--don't hide the goodies in the back. Also, the coffee was terrible. Sigh.)

I estimated that fourteen people attended the meeting, including just three non-employee shareholders. Prior to the meeting, one of the attendees mentioned that he recently traveled to Cleveland, Ohio and was very impressed with the city. Members of the Board of Directors praised Cleveland, calling it a hidden gem. (Personally, I believe LeBron James will stay in Cleveland, Ohio. If you read the book, Shooting Stars, it's hard to see LeBron James turning his back on Ohio.)

VeriFone didn't have an informal presentation, so we went directly to the Q&A session after the business portion of the meeting concluded. Some shareholders asked a few questions. One shareholder asked about payments/purchases via cell phone. CEO Bergeron responded that the security of cell-phone-payment transactions was currently "questionable." At the same time, VeriFone was working on a way of encrypting personal/financial data before it reaches the cell phone, making the transaction more secure.

I asked why international sales of System Solutions had lower gross margins than North American sales (see 10K, page 27). CEO Bergeron indicated that homogeneity leads to a premium. After the meeting, I asked him to clarify his answer, and he indicated that if you're trying to sell someone 10,000 machines for the first time, obviously the price will be lower versus a situation where you've already sold a company 100,000 machines. Why? I surmised that the more machines VeriFone sells to a particular company, the more the company benefits from scale. Thus, once a company allows VeriFone to set its payment standard, disengagement might be difficult, which gives VeriFone more pricing power.

All of the people attending the meeting were male, and, with the exception of one employee (Mr. Liu), all of the Verifone employees appeared to be at least 50 years old. I asked the CEO about his thoughts on diversity. He responded that VeriFone was open to diversity and recruits the "best and the brightest," which, in this case, happens to be "middle-aged, white" males.

Overall, VeriFone's meeting was short and simple.

Disclosure: I own an insignificant number of VeriFone (PAY) shares.

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