InteliData Technologies Gets New Honco, Mission By Bob Starzynski
InteliData Technologies Corp.'s new chief executive has clear marching orders: Grow the struggling company's home banking business.
As might be expected, Alfred Dominick brings banking experience to the job he began Aug. 17, the same day his appointment was announced by the Herndon, Va.-based company that has undergone a metamorphosis in the past year.
Dominick most recently served as president of retail delivery products at M&I Data Services, where he tripled the size of the St. Louis-based home banking business in three years while almost quadrupling profits. He replaces John Backus, a founder, significant shareholder of InteliData and an influential leader in Washington's technology community.
Traditionally a tele-communications equipment developer, Inteli-Data has shed most of its assets since January and is now roughly one-tenth as large as it was late last year. It unloaded its caller identification technology and is seeking a buyer for its home office business phones, retaining a small but promising operation that develops software for banks to link up with customers on home computers.
But Dominick makes clear he does not view his role as that of Mr. Fix-It.
"This isn't a repair mission," he told Washington Technology. "We have a fine product set ... and we are already looking at the next generation of products in R&D."
"The company needs someone who can grow the business now," said Backus, who said he left the company voluntarily. He said the company lost money regularly in the past because it was involved in too many product offerings. Backus will remain on the company's board and head up the effort to finish divesting its telecommunications business.
According to company officials and analysts, most banks that offer home banking services to customers do so through a third-party outsourcer, just as many banks do with their credit card offerings.
InteliData's products give banks the capability to link up directly with the customer, cutting out the need for a third party and subsequent costs.
Kevin Timmons, an analyst with First Albany Corp. of Albany, N.Y., said InteliData will break even in the fourth quarter of this year and turn a profit in 1999. Timmons said Dominick has the advantage of coming into a company that has no direct competitors.
"They're the only guys out there doing specifically what they're doing," he said.
The biggest challenge for InteliData is finding banks willing to "in-source" their home banking efforts, said Timmons.
Many banks are holding back on technology spending now because of year 2000 fears and because of all the consolidation in the industry, he said.
"Banks will not move on to the issue of delivering electronic services until they feel they have those other two issues under control," he said.
In Timmons' estimation, large regional banks would be more likely to bring their home banking efforts in-house than small community banks. Smaller banks that already outsource their electronic services will see little reason to use InteliData's new products, he said.
But Dominick maintains that the products will sell themselves.
"Outsourcing to third parties is onerous," he said. "We give them back control of the payment system."
So far, InteliData has signed up a handful of customers with its banking software, including BB&T Corp. of Winston-Salem, N.C., and Mid-Atlantic Corporate Federal Credit Union of Philadelphia.
InteliData's banking software business currently has annualized revenue of $6 million ? one-tenth of the company's revenue before the divestiture ? but expectations are high, according to company officials.
"The board's expectation isn't $6 million or even $12 million," Robert Borella, an Inteli- Data spokesman, said, alluding to the high expectations. However, neither Borella nor any other company official would offer specific revenue expectations nor offer any indication as to when the company will reverse its red-ink ways. The company lost $90 million last year and $95 million in 1996.
|"This isn't a repair mission. We have a fine product set...and we are already looking at the next generation of productions in R&D"|
- Alfred Dominick
The company was formed in November 1996, when U.S. Order of Herndon merged with Colonial Data Technologies of New Milford, Conn. The company sold everything from caller identification contraptions and software to smart telephones.
But InteliData was spreading itself too thin, according to Backus. Other companies that had wider ties in the retail industry undercut the prices of caller ID products. Software was not producing a noticeable revenue stream, and smart telephones were not ringing consumers' bells.
Company officials had expected to generate $150 million last year but settled for a meager $60 million. Valued at $8 a share on the Nasdaq National Market at the time of the 1996 merger, InteliData's stock hit rock bottom earlier this month at 56 cents.
While the stock slide was going on, Backus realized the company could not be all things to all people. He needed to pick his battles. Beginning last fall, the company started cutting back its product offerings and laid off 15 percent of its work force. At the time of the 1996 merger, InteliData had more than 300 employees. When Dominick came on board last week, the employee count was about 150.
In February, the company retained NationsBank Montgomery Securities to find a buyer for a fledgling interactive services division that was in dire need of cash. No suitors were found in three months of searching, and the division was shut down.
Then June 1, Cidco Inc. of Morgan Hill, Calif., InteliData's primary competitor in the telecommunications equipment market, bought the caller ID inventory from InteliData for $3.5 million, allowing Backus to move his company out of that market.
That leaves the company Backus handed over to Dominick with only the home office telecommunications equipment and banking software businesses. Much of Backus' time between now and the end of the year will be spent on finding a buyer for the telecommunications equipment.
"We should get north of $10 million for those products," he said. "My job is to turn that business into cash."
When that is done, Backus said he will help the company on a part-time basis and likely will work with other entrepreneurs as a consultant and angel investor, a person who offers early-state financing to small businesses.