ViVOtech Plans IPO as Early as 2012 Amid Boom in Mobile-Payment Technology

ViVOtech Inc., a maker of in-store payment systems, is planning an initial public offering for as early as 2012, Chief Executive Officer Mick Mullagh said.

The company is capitalizing on demand for payment systems that rely on mobile phones, rather than cash or physical credit cards. As Internet companies, wireless carriers, banks and retailers embrace the technology, ViVOtech expects to become profitable in mid-2012, Mullagh said in an interview.

ViVOtech’s reader devices rely on a technology called near- field communications, which lets smartphone users pay for goods and redeem coupons at checkout. ViVOtech, which provides software and hardware, has already installed more than 800,000 NFC systems worldwide. The company has 80 percent of the U.S. market for NFC readers, which are sometimes offered under other companies’ brands, Mullagh said.

“Mobile commerce will be bigger and grow faster than e- commerce did,” he said. “This market will be absolutely huge.”

The company’s sales are in “double-digit millions,” Mullagh said. Its customers include McDonald’s Corp. (MCD), Home Depot Inc., Dairy Queen Stores Inc. and Rite Aid Corp. ViVOtech has 90 employees, and offices in Santa Clara, California, and Singapore.

Google’s Plan

Google Inc. (GOOG), which will be testing mobile-payment systems in U.S. cities this year, is using some ViVOtech hardware and software, a person familiar with the project said earlier this month. Google’s backing may help speed adoption of NFC technology. The number of in-store NFC readers worldwide has reached about 5 million, and that number should double in the next three years, consulting firm ABI Research estimates.

The number of phones with built-in NFC chips also is climbing. Thirty-five million will be shipped this year, and that number will double next year, ABI estimates.

ViVOtech’s success will hinge on carving out a niche for itself among larger rivals. VeriFone Systems Inc. (PAY), a San Jose, California-based provider of point-of-sale systems, is aggressively pushing into NFC hardware. Gemalto NV (GTO), an Amsterdam-based maker of smart-card systems, is targeting the market as well.

The spread of NFC has spurred investor interest in mobile- payment stocks, said Tom Taulli, an independent technology analyst. VeriFone’s shares have climbed 42 percent this year, after more than doubling in 2010. The company, which has a valuation of $4.85 billion, used to resell ViVOtech’s NFC equipment before developing its own.

“ViVOtech could be on its way to a $1 billion valuation,” Taulli said.

Venture Capital

ViVOtech has raised $80 million from investors, including Citigroup Inc. and venture-capital firms Alloy Ventures and Draper Fisher Jurvetson. It also has the backing of Nokia Growth Partners; Sprint Nextel Corp. (S); NFC chipmaker NXP Semiconductor NV; payments processing company First Data Corp.; and NCR Corp. (NCR), which makes ATMs and self-help checkout systems.

“The company is poised for greatness,” Tim Draper, managing director of Menlo Park, California-based Draper Fisher Jurvetson, said in an e-mail.

ViVOtech has already conducted more than 30 market trials around the world, Mullagh said. It ran a test with Sprint and First Data in San Francisco in 2008, and with AT&T Inc. in Atlanta in 2005.

Many of its investors also are strategic partners. NCR resells ViVOtech’s gear, and it expects to collaborate with the startup on future hardware and software products, said Richard Bravman, chief marketing officer at NCR. ViVOtech is working with NCR to outfit ATMs in China with NFC technology, Mullagh said. In addition to handling payments, ViVOtech’s software lets merchants and banks send ads to mobile phones, and to redeem coupons and loyalty points at the cash register.

“It’s the software dimension that ViVOtech has that we think represents the key opportunity,” Bravman said. “ They are well set up to be very successful.”

To contact the reporters on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net

To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net

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