Ahead of the Bell: VeriFone shares drop
NEW YORK—Shares of VeriFone Systems Inc. slid in premarket trading on Tuesday after the electronic payments company said that a jury ruled against it in a patent dispute.
VeriFone updated its February-April quarter results to reflect the June 8 verdict, saying late on Monday that it was recording $18 million in expenses after a jury ruled in favor of a company called Cardsoft Inc. The jury decided that VeriFone owes damages based on a royalty rate of $3 per unit on past U.S. sales of products that Cardsoft said infringed on its patent.
Philip Stiller of Citi Investment Research said in a client note that VeriFone may have to pay $15.4 million in past infringement and royalty payments if it is unable to successfully appeal the verdict.
Further, VeriFone said that if a court orders royalty payments on future sales at that rate, its earnings per share will be cut by a half-cent per quarter, or 2 cents per year. The company posted earnings of $2.92 per share in its most recent fiscal year, which ended last October.
Stiller backed a "Buy" rating on the company, which is based in San Jose, Calif., and kept a $55 price target. He said investors had a good opportunity to buy in after a recent decline in the stock price. Shares have lost a third of their value in the past three months, and are off 20 percent in the last 12 months.
The company's stock fell another $1.68, or 5 percent, to $32.26 in premarket trading Tuesday.