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Financial Analysis of Fisker Automotive

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Netra Shetty
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netrashetty
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Financial Analysis of Fisker Automotive - February 11th, 2011

Fisker Automotive is an American automaker based in Anaheim, California [4]. The company's first product, the Fisker Karma is the world's first luxury plug-in hybrid electric vehicle (PHEV). It debuted at the 2008 North American International Auto Show, creating the premium green car segment in which most major manufacturers have since announced they would compete.
The Karma has a claimed total range of 300 miles (483 km), the first 50 miles (80 km) of which is on tailpipe-emission free electric-only charge. After 50 miles (80 km) a gasoline range-extending engine turns on to add an additional 250 miles (403 km) of range.
An estimated 15,000 cars per year will be assembled by Valmet Automotive in Uusikaupunki, Finland.[5] Valmet currently builds the Porsche Cayman and Boxster sports cars for Porsche AG. The contract manufacturer was selected because a suitable North American facility could not be identified.
Fisker originally intended to start selling its Karma PHEV in late 2009, but, due to funding delays[citation needed], as of October 2010 it expects to begin customer deliveries in March 2011.[6] The Karma S hardtop convertible concept unveiled at the 2009 North American International Auto Show in Detroit is planned to arrive in 2012, at an as-yet unstated price.
Fidelity National Information Services (NYSE:FIS) provides transaction and processing services to financial institutions to help them monitor and maintain everyday activities. In addition, FIS also offers risk management and fraud detection software to financial institutions, credit unions, and mortgage providers. In April 2009 FIS announced that it would be acquiring rival Metavante. Though the acquisition has been stalled due to stockholder lawsuits on both companies, FIS expects the acquisition to ultimately be beneficial to the company, allowing it to cross sell services and applications to Metavante's former clients. [1] FIS currently serves 40 out of 50 of the nation's top banks and over 14,000 other clients in over 100 countries.[2]

The 2008 financial crisis has caused yet immeasurable impact on FIS' revenue streams. With the trend of consolidation in the banking industry, FIS has seen a decrease in revenue from sales of its risk management and fraud detection software, although the impact on its other services have yet to be seen. FIS plans to overcome this loss in revenue by increasing revenue from its card transaction services and outsourcing consulting. FIS expects increased revenue from its card transaction services as more people begin to use debit cards instead of cash in their everyday transactions. With the acquisition of companies specializing in outsourcing services such as Second Foundation Inc, FIS has also positioned itself to increase revenues from its outsourcing services as well.

Contents
1 Company Overview
1.1 Acquisitions
1.2 Business and Financial Metrics
1.3 Business Segments
1.3.1 Payment Solutions
1.3.2 Financial Solutions
1.3.3 International
2 Trends and Forces
2.1 FIS' high client retention rate to increase card transaction services revenue
2.2 FIS to benefit from increased financial services outsourcing
3 Competition
4 References
Company Overview

FIS was created in 1962 as a financial services technology division of FNF. That changed after FNF's 2006 merger with Catergy. The result was the creation of FIS as an independent company, with parts of the original division under FNF combined with similar divisions under Catergy, though FNF currently hold over 50% of the company's shares. In 2008, FIS spun off its lender processing services (LPS) into a separate company in order to concentrate more on its other services. FIS currently offers a broad range of software and services that help its clients manage day to day activities as well as asses risk and help prevent fraud. Software offered by FIS include risk management applications to help financial institutions assess the risk of opening new accounts, lending software to allow mortgage lenders to assess the credit worthiness of potential borrowers, and pattern detection software to help detect fraud. Services offered by FIS include core processing, card transaction services, and check clearing and electronic funds transfer (EFT) services. FIS' core processing services allows smaller community institutions to outsource their everyday processes such as deposits, loans, mortgages, and IT infrastructure maintenance. FIS' card transaction services offer cardholder services (such as the processing of regular and prepaid credit cards), loyalty programs, and collection to financial institutions. Finally FIS' check clearing and EFT services helps institutions process and monitor such activities as ATM activity, online banking, wire transfers, and checking while also detecting fraud in such activities.

Acquisitions
FIS has grown rapidly through the acquisition of both domestic and foreign companies. Notable acquisitions include Second Foundation Inc in 2007, eFunds in 2007, and Metavante, which was announced in 2009 but still pending. FIS' acquisition of Second Foundation Inc allowed it to expand into off shore global information technology services. Finally, the acquisition of former rival Metavante was completed on Cotober 1, 2009, and the company predicts the acquisition will increase revenues due to the selling of services and software to Metavante's former clients.[3]

Business and Financial Metrics
FIS posted consolidated revenue of $3.74 billion in 2009, an increase from the previous year's total revenues of $3.43 billion.[4]


FIS Business Metrics
Processing and Maintenance Revenue
Professional Services Revenue
Software, Equipment, Term Fees Revenue
TPS Operating Margin
2007 Revenue
(in Millions)[5] $2,500 $224 $168
2007 Percentage of Revenue
[6] 86% 8% 6%
2007 Operating Margin
[7] 24.6%
2008 Revenue
(in Millions)[8] $3,000 $257 $188
2008 Percentage of Revenue[9] 87% 8% 5%
2008 Operating Margin[10] 25.5%



[11]
Business Segments
FIS is divided into 3 business segments: payment solutions, financial solutions, and international. Payment solutions includes its electronic funds transfer as well as its card and checking services. FIS' financial solutions segment includes its core processing services and its risk management and fraud detection software. Finally, international includes FIS' outsourcing services and includes all transaction done with international and foreign institutions.

Payment Solutions
FIS largest business segment, payment solutions, focuses on providing payment and electronic fund transfer services to its clients. Payment solutions' largest service is its electronic funds transfer (EFT) service, allowing consumers and institutions alike to move money electronically, making electronic banking and online bill payment possible. The segment also includes card services, which allow institutions to issue debit and credit cards as well as prepaid cards to consumers and businesses. Finally, the segment also includes check authorization services to help institutions detect fraud and clear checks.

Financial Solutions
FIS’ financial solutions segment offers risk management and fraud detection software to organizations such as banks,credit unions, and savings institutions. Applications such as its syndicated loan applications and automotive finance applications allow financial institutions to quickly evaluate credit risk, streamlining the loan application process. Applications such as its core processing applications and channel solutions help institutions streamline consumer interaction in all its channels (e.g ATM, internet, branch offices etc.) as well as allow the institutions to manage everyday deposits and its current loans. FIS' decision solutions and risk manage software help institutions detect both loan and account fraud as well as asses the risk of opening an account.

International
FIS' international segment offers the services and software in the financial and payment solutions segments to foreign companies. In addition, FIS offers outsourcing services as well.

FIS has a presence in over 90 countries, being the third largest credit card processor in Brazil and a leading provider of core processing services in Europe and Asia. The company's largest sales region comes from the EMEA region (Europe, Middle East, and Africa) making up 42% of revenues with Asia Pacific and Latin America making up 39% and 19% of sales respectively.

Trends and Forces

FIS' high client retention rate to increase card transaction services revenue
FIS traditionally has had a strong client retention rate and expects an increase in revenue from its card transaction services as its existing clients continue to contract services to FIS rather than its competitors. As debit card transactions increase (market research firm Packaged Facts projects debit card transaction volume to reach $2 trillion by 2010, more than double the 2005 volume of $907 billion, there will an increased demand for card transaction services from financial institutions. FIS expects increased revenues from its card transaction services as it picks up the increased need for such services from its existing clients.

FIS to benefit from increased financial services outsourcing
FIS expects an increase in demand for its outsourcing services as more [[financial institutions] begin to outsource with higher expectations of returns. Accounting Firm Deloitte predicts that by 2010, $400 billion or 25% of the costs in the financial service industry will be offshore, more than twice the amount in 2005.[12] While more financial institutions are projected to begin outsourcing services to reduce costs, Deloitte also predicts that they will expect more returns. FIS’ acquisition of companies that specialize in outsourcing solutions such as Aurum Tech, Sanchez Computer Associates, and eFunds has given it more resources and control over the outsourcing process as well as the scale required to reduce costs, factors that FIS expects will cause financial institutions to pick FIS over its competitors as more of them begin to consider outsourcing.

Competition

As a technology and services firm, FIS faces competition from financial services firms offering the same services as FIS. Direct competitors include FIS' industry rivals Fiserv, SunGard, Misys, First Data Inc, Online Resources (ORCC), and Global Payments (GPN).[13] Indirect competition comes from such sources as financial institution's and retailer's internal departments, third party payment processors, and large data processing and software development companies (like IBM).

Fiserv (FISV): Fiserv is a fortune 500 company offering information management systems and services to financial and insurance industries and FIS' main domestic competitor. Its leading services include transaction processing, outsourcing, and software and systems solutions.[14] Though it has lost its title of largest provider of information technology services worldwide, losing out to FIS, it still has a dominant portion of credit processing market. It is currently the second largest provider of technology services worldwide with over 4.7 Billion in total revenues for the 2009 fiscal year. [15]

SunGard: SunGard is a privately held fortune 500 company that offers a wide range of software and continuity-assurance services to companies. The company is best known for its disaster recovery division, which it helped pioneer. SunGard brought in over $5.9 B in revenues for the 2009 fiscal year.[16]

Misys (LON:MSY): Misys offers broker systems and outsourcing services as well as transaction processing. It also offers risk management programs to insurance and financial companies.[17] It made over $7 B dollars in the 2008 fiscal year.[18]

First Data Inc: A privately traded company, First Data Inc provides e-commerce and merchant transaction and fraud detection services. First Data gets its revenue from merchant transaction processing services; card offerings, private-label, gift, and payroll offerings; fraud protection and authentication solutions; electronic check acceptance services; and Internet commerce and mobile payment solutions.[19] First Data's main competitor is Total System Services (TSS).

Online Resources (ORCC): ORCC offers electronic payment solutions to financial institutions, helping banks streamline their online services.[20] ORCC posted 39.2 million in revenues in Q1 2009

Global Payments (GPN): GPN offers card processing services to small business.
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Last edited by netrashetty; February 11th, 2011 at 04:08 PM..
   
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