FDC is an American Express spinoff of April 16, 1992. -- ERG trade data forum

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Date Posted: 16:37:16 02/25/03 Tue
Author: FIRST DATA
Subject: FDC is an American Express spinoff of April 16, 1992.

pourquoi5 (ID#: 224751) Buffett Buying Into First Data Corporation 26/2/03 10:32:58 AM 6077210
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First Data Corporation. Looking over Warren Buffett�s Shoulder
wonder why?
Article

We know a sly investment advisor who, over the years, developed a series of moderately successful investment strategies. Finally, he started putting his investors in Berkshire Hathaway and let Warren Buffett (a legend in his own time) make the decisions and more or less retired from active management. Did his investors have a problem with that? Don�t know, but I suspect not as they prospered and so did he.

Even though the shares of Buffett�s investment vehicle, Berkshire Hathaway are off a third from their 52 week high he�s still making shrewd guesses. Now we know that Buffett is buying into First Data Corporation. Whatever happens, that is good news for owners of this Big Board information and transaction processor.

FDC is an American Express spinoff of April 16, 1992. In year one as an independent, FDC racked up $1.2 billion in revenues and earned 65 cents a share. Since then both sales and earnings have soared, to $5.4 billion and $1.75 in 1999, it looks like. Exciting elements are at work. American Express remains one of the company�s largest customers though it has cut its stake dramatically, so it�s always possible American Express could shift this business elsewhere. The Schott Letter, with FDC it is stock spotlight, in an issue out a week or so discounts that prospect. First Data performs credit and debit card authorizations and processes credit and debit card transactions. It embosses cards and offers distribution services, does risk management assessments, and makes electronic consumer money transfers.

Editor John Schott says as we �move closer and closer to a cashless society, this basic business can be expected to grow at a rate greater than the general economy for at least a decade.� He adds that two lesser segments of First Data�s businesses are growing explosively: the payment instruments and Internet transactions divisions.

In 1994, FDC acquired Western Union Financial Services, the cornerstone of its rapidly expanding international money order business. The number of IMOs transacted has grown at a greater than 50 percent annual rate for the past three years.

But the most exciting element of the business is its rapidly expanding servicing of Internet transactions. In the aggregate, Internet commerce last year was estimated at $3 billion and Schott expects that to triple to $9 billion this year.

Through Paymenteck, acquired earlier this year, FDC now offers an all-in-one service for small and medium sized businesses wishing to do business on the �Net. This firm designs and operates the web sites, but, more significantly, handles credit card authorizations and processes the billings. Schott sees the potential as huge.

Some $750 million in proceeds from the sale of an FDC unit will be used to buy back shares of which 420 million shares are now outstanding. In future, FDC is thought likely to focus on buy backs more than on the dividend, which is meager.

In any case, here is a profitable company favored by Buffett with more Internet business than many dot coms will ever see. While not cheap at 46 at this writing, FDC could be a prospect for dollar cost averaging. It is hardly pie in the sky.

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