ViVOtech on the Ropes

by Mercator Advisory Group 0

Contactless reader manufacturer and software services firm ViVOtech is in danger of ceasing operations altogether as it attempts to sell product lines and reorganize its other business. Finding itself in a cash crunch, the company has reduced staffing. See quote below from ViVOtech CEO Mick Mullagh.

ViVOtech has been a long time leader in contactless hardware technology. But two trends have squeezed the range of opportunities for the company.

First, far larger terminal manufacturers are now offering contactless capabilities built from discrete components as opposed to ViVOtech board-level components. That’s put pressure on ViVOtech’s hardware sales.

Second, and significant for the long term, mobile transactions and contactless payment acceptance are increasingly a function of software and services on the handset, the terminal, and server-based functions. Trusted service manager (TSM) functions are also required. Together, this is a lot of capability to deliver, maintain, and enhance, all in advance of widespread smartphone-based NFC transactions and, therefore, any revenues.

In some respects, ViVOtech is a victim of being both too tied to a particular technology – contactless – and too early for the development of mass adoption. Contactless card payments were never valuable enough to merchants, consumers, or issuers to become commonplace. The irony is that we are at the beginning of a contactless renaissance via NFC. At first, that renaissance will involve only commerce and personal transactions. Until 2016 or later, payments will not be heavily involved. From this news, it looks like ViVOtech may not be involved either.

Mullagh has sent out the following statement:

ViVOtech’s business fundamentals are strong and orders and contracts are building in both its reader and software businesses. Over the last six months the company has been executing a strategy to divest its reader business to a qualified buyer. This sale has moved slower than anticipated. ViVOtech has not ceased operations but is in the process of restructuring operations and has reduced its team to a smaller group with the goals of maintaining customer relationship and core contract work, and to address our supplier relationships and commitments, as the company completes plans to divest the reader business and focus on the Software Business. ViVOtech is in dialog with its customers and suppliers on the current situation but will be no making no other public statements.

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