Visa Buys CyberSource – Analyst Blog

In a special shareholder meeting, held on July 20, majority of the shareholders of CyberSource Corporation (CYBS) voted in favor of the acquisition of CyberSource by Visa Inc. (V)

The CyberSource acquisition by Visa would help the latter in expanding its e-commerce business as well as fortify its position internationally. The company will pay $26.00 per share, or approximately $2.0 billion to CyberSource.

Based in Mountain View, California, CyberSource is a leading provider of electronic payment, risk management and payment security solutions to online merchants. It processes approximately 25% of all e-commerce payment in the U.S. CyberSource serves more than 295,000 merchants through its CyberSource and Authorize.Net branded solutions. Its major clients include British Airways PLC (BAY), Home Depot Inc. (HD), Facebook and Google Inc. (GOOG). Visa will win access to these merchants via this acquisition.

Visa continues to bank on new technologies and emerging market for growth. The acquisition will help Visa in its pursuit of offering e-commerce capabilities and guaranteeing secure online payments. The acquisition will also give Visa access to CyberSource’s fraud prevention technology, thus helping it to increase the online use of credit, debit and prepaid cards. Visa already has an 11-year alliance with CyberSource and will now collaborate on risk models built into CyberSource’s automated fraud management solutions.

Visa expects more than 50% of its revenue to come from international sources by 2015. In this context it may be noted that CyberSource has market opportunities worldwide, particularly in Asia and Latin America, thus fitting in with Visa’s expansion schemes.

Visa projects top-line estimates in the range of $310 million to $315 million for 2010 and estimates bottom line income in the range of $14.5 million to $15 million. Visa estimates its earnings in fourth-quarter 2010 to be diluted by 4─5 cents a share owing to acquisition-related amortization and one-time transaction costs.

The Zacks Consensus Estimate is earnings of 93 cents per share for the third quarter of 2010. For full year 2010 and 2011, the Zacks Consensus Estimates are a respective $3.90 per share and $4.72 per share.

Based in San Francisco, California, Visa operates the world’s largest retail electronic payments network, and manages the world’s leading electronic payments brand. Strong cash flow generation, solid cash balance and a focus on enhancing shareholder value are among the other positives of the company.

The quantitative Zacks #2 Rank (Buy) for the company indicates an upward directional movement for the shares over the near term.