Steve Rowen, a research analyst at Retail System Research in Miami, Fla., said the merger of these two players is not in and of itself earth-shattering or surprising, but the size of the deal does reveal a lot about retail interests.
?CyberSource acquiring Authorize.Net is a highly logical move. Is it an industry-changing deal? Not at all,? he said, but a deeper look at the metrics behind data-theft suggests an importance lying elsewhere surrounding this $565 million deal.
?To a data criminal, a personal account number has a street value of $3. By way of comparison, the full track data from a credit card swipe at a card-present merchant yields anywhere from $35-$50. As a result, e-commerce retailers are not as attractive to thieves as those who operate physical stores," Rowan said. "So what this deal?assuming it wants to be profitable at this price tag?really shows us is how seriously the online retail community has taken the responsibility and the prioritization of secure payment and authorization. If only card-present merchants were so demanding."
The companies positioned the pair as not competing as much as focusing on non-overlapping market segments.
"CyberSource, with approximately 20,000 customers, has traditionally focused on managing payments for mid-sized and enterprise customers" while "Authorize.Net, with more than 175,000 customers, has specialized in small businesses," the two companies said in a joint statement.
The pair reportedly processed approximately 1.1 billion transactions in 2006, in what the companies said repsented "$65 billion of e-commerce."
Under the agreement, Authorize.Net shareholders will receive 1.1611 shares of CyberSource common stock for every share of Authorize.Net common stock. Additionally, shareholders will receive a pro-rata share of approximately $125 million in the form of a cash payment.