Remember Lipman? Verifone (PAY) does
Written by: Israel Investor Newsletter | December 4, 2007
Remember Lipman Engineering, the Israeli payment terminal company Verifone (NYSE: PAY) bought in 2006?
Verifone’s stock dropped almost 50% yesterday on news that they needed to restate earnings for the first three quarters of 2007. Management blamed accounting issues that accounted for inventory on their books too cheaply.
A Goldman Sachs report published yesterday said that while management didn’t say it, at the heart of the matter was the Lipman acquisition and friction that is derived from differing business models. Until the Lipman acquisition, Verifone had fully outsourced production of its payment terminals used at point-of-purchase in thousands of retail locations internationally. Lipman does manufacture some of its equipment and it’s this hybrid model that is causing Verfine to struggle.
Lipman was a value play and we made money off of it way back when. Lipman, like many other Israeli companies, had a distribution advantage when it came to selling into emerging markets. This same know-how is part of the reason Verifone bought them. We’re on the sidelines on this one to see what’s really going on under the hood.
Disclosure: Author’s fund has no position in any stock mentioned as of 12/04/2007.
Please see our Disclaimer HERE.
NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.
*******************************
Zack Miller is the Managing Editor of the Israel Opportunity Investor newsletter and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com, call 1-888-327-6179, or email zack@israelnewsletter.com
Share with others:
