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Reader and NFC Software Vendor Vivotech to Cease Operations

Jul 30 2012 (All day)

U.S.-based contactless reader and NFC software vendor Vivotech has told employees that it plans to cease operations, NFC Times has learned.

The vendor is holding conference calls today with employees in branch offices to explain the move to discontinue operations–though it could continue to fulfill some contracts–as it seeks to reach deals to sell its reader and possibly the software businesses, sources told NFC Times. The company has had as many as 90 employees, said a source. 

UPDATE (11:00 a.m. PDT, July 27): Vivotech executive chairman Mick Mullagh said in a statement that would be posted on the company's Web site that "Vivotech's business fundamentals are strong." He said that over the past six months, the company has been trying to find a qualified buyer for its reader business.

"This sale has moved slower than anticipated,” he said in the statement. “Vivotech has not ceased operations but is in the process of restructuring operations and has reduced its team to a smaller group with the goals of maintaining customer relationship and core contract work and to address our supplier relationships and commitments."

The statement also said the company would be focusing on its software business and was in touch with suppliers and customers to explain the situation.

But in response to a follow-up call from NFC Times to elaborate on the statement, Mullagh declined to say how many employees would remain after the restructuring. And he said the company could "not project the outcome" of the restructuring.

He also said Vivotech would be maintaining its customer relationships “to the maximum extent possible." And he declined to give more details on how Vivotech planned to focus on its software business, which includes a trusted service manager and mobile-wallet product, only that there are a "variety of alternatives" available.

UPDATE (July 30): One employee told NFC Times that Vivotech instructed the staff in the conference call Friday to no longer do any work on behalf of the company on or around Aug. 1, except they could fill existing orders or service existing contracts, as Vivotech tries to sell the business. But there will be much fewer staffers left even to do this. The company is to update employees soon on efforts to sell the reader business. While Vivotech hopes to continue with the software business, the company could try to sell this, as well, said the employee. END UPDATE.

A source said the Silicon Valley-based vendor had cash-flow problems. If true, it means Vivotech has burned through the nearly US$100 million in capital it has raised since its founding in 2001 from venture capital firms or the venture capital arms of such companies as U.S.-based Citigroup, Singapore-based SingTel, and handset makers Nokia and Motorola.

Sources say Vivotech has been in talks to sell its reader business to PAX Global Technology, owner of Shenzhen, China-based PAX Technology, a maker of point-of-sale terminals. Vivotech’s software business, including its TSM and mobile wallet services and products is also believed to be up for sale.

Vivotech was among the first companies to jump on the contactless and NFC bandwagons, but some observers believe it hit the market too early, and had to endure years of delays in rollouts of NFC and the takeoff of contactless.

The company’s venture capital backers brought in interim CEO John Peters in March to try to sell the company or possibly launch an IPO, said sources. He replaced Mick Mullagh, who became “executive chairman.” Co-founder Mohammad Khan has remained as president.

Peters served as interim CEO of at least three companies that were subsequently sold.

UPDATE (July 27): Peters' profile has been taken off of Vivotech’s Web site, but Mullagh, in response to a question from NFC Times, declined to say whether he was still with the company. END UPDATE.

Vivotech as recently as March had announced a new funding round, which it said at the time brought the amount of its total venture capital financing to nearly $100 million over more than 10 years.

The vendor, however, declined to reveal the amount or name the contributors of the series D funding round. But it likely amounted to around $6 million since the vendor in June of 2011 confirmed that it had raised a total $90 million after announcing its series C funding round of $24 million.

For that round, Vivotech announced the contributors, including new investors EDBI and SingTel Innov8, both of Singapore, along with Motorola Solutions Venture Capital. They joined existing investors, which put up more money as part of the $24 million round, including Alloy Ventures, Citi Ventures, Draper Fisher Jurveston, First Data Corp., Motorola Mobility, Nokia Growth Partners and NCR.

So, since its founding in 2001, Vivotech has raised a total $96 million, according to earlier company statements.

The vendor had hoped the extra money would help it move its business away from its dependence on unprofitable and commoditizing contactless point-of-sale payment readers to software and services used for payment and to deliver, track and redeem mobile offers, such as coupons and loyalty, for consumers on their smartphones. 

Besides having shipped nearly 1 million terminals globally over the past several years, Vivotech noted that its software and POS terminal technologies were being used by Google for its Google Wallet and is also being integrated with the Isis mobile-commerce platform.

Vivotech also served as TSM for some NFC and related pilots for banks, including one or more of Bank of America’s trials of mobile-payment using microSD cards. Citibank also used Vivotech as TSM for a large trial in Bangalore, India, in 2009. There were also one or more pilots using Vivotech’s loyalty software.

And Vivotech has been supplying its TSM platform for use by TSM startup Sequent, which has a contract to manage the secure elements for the planned launch by No. 3 mobile carrier Sprint of its Touch Wallet.

In Singapore, Citibank and mobile operator SingTel, both Vivotech shareholders, awarded contracts to the vendor for mobile wallets. They haven’t launched the wallets.

Competing mobile wallet supplier C-Sam filed a patent infringement suit against Vivotech last September.

Vivotech is not the only point-of-sale technology vendor that Google and Isis are working with, and Vivotech is facing stiff competition on both the hardware and software side from such vendors as VeriFone, the largest POS terminals supplier in the United States, which earlier dropped Vivotech as a supplier in favor of using its own readers.

Vivotech last year was rumored to be planning an initial public offering for as early as 2012. Mullagh had told NFC Times in June of 2011 that he projected the company would turn a profit sometime in 2012 and then would consider an IPO. 

He declined to release Vivotech’s revenue figures, but has said earlier this year they are in the double-digit millions.

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