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Thursday, July 30, 2009

Visa consolidates, restructures

Visa Inc. Chairman and Chief Executive Officer Joseph W. Saunders reported on July 27, 2009, that the company is reorganizing its executive management team to heighten the effectiveness of its global operations. As part of the restructuring, Visa's global sales, client services, marketing, product development and information technology functions will be consolidated under the leadership of John Partridge, the company's Chief Operating Officer.

During this changeover, John C. Morris will step down as President. He will remain with Visa until the end of 2009 and work with Saunders to assure the transition is seamless. Morris joined Visa in 2007 and played a central role in the company's successful initial public offering (IPO) in 2008.

"We've come a long way since October of 2007 when we merged five different independent Visa operating regions, Visa International and its global payment processing subsidiary, Inovant, into one company called Visa Inc. and successfully took the company public," Saunders said. "Since the IPO, we've expanded our core debit and credit business, reduced operating costs by hundreds of millions of dollars and heightened our focus on product innovation."

Pushing the stock

Visa officials were unavailable for comment. Meanwhile, opinions about the cause and potential ramifications of the company's restructuring are varied. Visa's IPO opened at just over $44 a share in April of 2008. The stock is currently at $66.60 per share, down from a 2009 high of $70 on June 5. In contrast, MasterCard Worldwide's stock price since its IPO in 2006 has gone from approximately $44 to just under $200 per share on July 29, 2009.

Paul Martaus, President of consulting firm Martaus & Associates, believes Visa's move was not done to consolidate the company as much as it was to bolster its stock. He feels that Visa has simply not responded well to its IPO.

"The board of directors had to announce their earnings yesterday and though they did meet the guidance, the bottom line is that their stock has gotten the stuffing beaten out of them by MasterCard, who is doing just fine," Martaus said. "So they take the architect of the IPO and, not wanting to embarrass him completely, put him in an unspecified capacity in what the banking industry calls the old lateral arabesque. I just think it means that they're no longer invulnerable."

Another take

But Lee Manfred, Partner, First Annapolis Consulting, sees Visa's restructuring a bit differently. He believes it shouldn't come as a big surprise given the present economic climate, which has forced businesses to make cost and workflow management streamlining a top priority.

"The company is 18 months out from their IPO, which involved a restructuring of massive proportions and was much more complex than the MasterCard IPO," Manfred said. "Visa not only moved from a member of an Association to a public company, but they consolidated from many regions and subsidiaries into a single company. So I see it as more of an ordinary course of health and hygiene in running a big business; you have to be ever-vigilant in addressing costs."

Indeed, Manfred believes Visa's performance during the transition has been commendable and that the company is on solid ground. "I think a more efficient Visa is good for the market," he said. "Aligning product, technology and client services makes all kinds of sense. And Partridge knows the tech and product side and has very strong customer relationships. That's one thing that Visa has always done very well, so I think they'll be just fine." end of article

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