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Apple Inc. (AAPL)..And Is This the End for VeriFone Systems Inc (PAY)?

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Shares of VeriFone Systems Inc (NYSE:PAY) plunged after the company reported earnings earlier this week. Before that decline, shares of the company had already fallen nearly 40% in the past year.

VeriFone is a company primarily involved in credit card transaction terminals. As it struggles on execution, and consumers begin to embrace alternative, digital forms of payment, this might only be the beginning of VeriFone Systems Inc (NYSE:PAY)’s problems.

VeriFone Systems Inc (NYSE:PAY)

VeriFone’s poor earnings

Wednesday’s release was the second consecutive disappointment for the company. Earlier in the year, (now former) CEO Doug Bergeron stepped down after the company issued poor guidance for the first quarter.

As Piper Jaffray noted in their downgrade of the stock back in February, VeriFone Systems Inc (NYSE:PAY) blamed its problems on global economic weakness, particularly in Europe, and difficulty in the Brazilian market.

Historically, VeriFone has made its money selling the terminals that process credit card payments (go into your local gas station — they probably have one). But recently, they’ve shifted their strategy to a system of subsidized hardware supported with a stream of monthly payments. That might’ve been the cause behind some of the company’s problems.

But also playing a factor is an ongoing technological shift. The rise of new mobile payment systems, like Square, could be eating away at VeriFone’s market. The company’s interim CEO,
Richard McGinn, said (in the company’s most recent earnings release) that VeriFone Systems Inc (NYSE:PAY) would spend the next 12 months investing heavily in research and development.

But at this point, it might be far too late.

The rise of Square

After founding Twitter, Jack Dorsey turned his attention to the mobile payment company Square. In the last few years, Square has grown rapidly, largely on the proliferation of tablets and smartphones.

Square’s readers plug right into one of these devices, which can then accept credit card payments through a mobile app. Square has made a deal with Starbucks, and has received investment money from Visa Inc (NYSE:V).

Hedge fund manager Karen Finerman has been short VeriFone, and has called Square’s deal with Starbucks “highly disruptive” to VeriFone.

VeriFone Systems Inc (NYSE:PAY) launched a competitor to Square last year (called Sail), but killed it in December, citing razor-thin margins.

Could Apple Inc. (NASDAQ:AAPL) shake up the mobile payment world?

While Apple Inc. (NASDAQ:AAPL)’s devices are integral to Square’s business, some analysts have wondered if Apple would soon move to assert itself directly in the space. To be sure, the building blocks are already there: millions of consumers have iPhones, which are linked to iTunes accounts, which are in turn linked directly to credit cards.

At least year’s WWDC, Apple Inc. (NASDAQ:AAPL) announced Passbook — an app to digitally store boarding passes, movie tickets, and reward cards. Could this app be expanded to payment systems?

Further, the company’s 2012 acquisition of Authentic has left many speculating that future models of the iPhone and iPad would include fingerprint scanners — an ideal security measure for any form of mobile payment.

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