Hypercom axes 14 sales and marketing jobs; outsources manufacturing

Source: Hypercom Corporation

Hypercom Corporation (NYSE: HYC) today announced a reconfiguration of the Company's global sales and marketing functions to create a focused platform for revenue growth, streamline the organization, and further strengthen accountability for client relationships and anticipated market share growth globally.

Reporting to Hypercom President Philippe Tartavull, the new organization structure creates a sales organization directly focused on key geographies, supported by a product and channel specialized marketing, development and services organization.

The following key executives will report to Mr. Tartavull:
  • Kazem Aminaee, Managing Director, Europe, Middle East and Africa
  • OB Rawls, Managing Director, Americas
  • TK Cheung, Managing Director, Asia Pacific
  • Neil Hudd, Senior Vice President, Global Marketing
  • Bret Zahn, Vice President, Development
  • Clint Jones, Vice President, Services Operations

"We are focusing our efforts to capture market share in high growth geographies where we have an established infrastructure and strong brand awareness, to capture more of the countertop market, and to aggressively target the mobile, multi-lane and unattended segments," said Mr. Tartavull. "We are doing this with an exceptional range of services and secure PCI-certified products and solutions sold and supported by the right professionals in the right geographies. The new organization will strengthen our ability to more quickly deliver the very best solutions to the market."

The reconfiguration follows a four month global review of the sales and marketing organization conducted by Mr. Tartavull, and results in a reorganized and de-layered sales and marketing function more closely aligned with product, market and segment needs.

The action is expected to result a net reduction of 14 marketing and sales personnel with employee severance costs estimated at less than $500,000, which are expected to be recorded in the Company's second quarter 2007 financial statements.

Separately, Hypercom Corporation (NYSE:HYC) today announced its intention to outsource its manufacturing and consolidate its assembly, software, repair and maintenance functions globally to drive improvements in product quality, quickly adapt to changing market needs and reduce costs. A number of these activities are already in process or substantially completed.

The initiative includes:
  • Outsourcing the Company's manufacturing requirements to third-party contract manufacturers, including supply chain, production, assembly, and testing presently performed in Shenzhen, China and in Atibaia, Brazil. Printed circuit board assembly operations formerly in Shenzhen have already been outsourced to the Company's manufacturing partner's facility in Johor Bahru, Malaysia.
  • Consolidating global software development activities to Singapore, Latvia, and India reducing similar activities now performed in the US and Sweden. This initiative is in process.
  • Relocating US service and repair operations from Phoenix, Arizona to Hermosillo, Mexico. This initiative has been completed.
  • Reorganizing and reducing the manufacturing and operations management team in Phoenix consistent with the move to third-party contract manufacturing. This initiative will generally align with the manufacturing contract management initiative.
  • Selling the Phoenix, Arizona facility and adjacent land as a result of the reduction of Phoenix-based development, repair, and manufacturing personnel and moving the Phoenix headquarters to smaller, more appropriate space. This sale transaction has been completed.

In line with these actions, the Company today announced a partnership with Venture Corporation Ltd. The partnership contemplates Hypercom transitioning its entire manufacturing operations in Shenzhen, China to Venture locations during 2007 and 2008.

Hypercom expects to wind-down its direct product manufacturing operations in Brazil, effective the end of September 2007. The Company anticipates that it will transition to third-party contract manufacturing in Brazil over time as products designed for the economic requirements of the Brazilian market become available.

"We are continuing our drive to improve product quality, efficiency, cost and time-to-market," said Hypercom Chief Executive Officer William Keiper. "By consolidating and outsourcing manufacturing to a global manufacturing leader and centralizing our software development, repair and service activities in efficient markets with highly qualified talent, we expect to streamline our operations, improve our cost structure and product gross margins, and over time enable significantly reduced component and product inventories."

The Company expects, in its second quarter 2007 financial statements, to record charges to cover costs associated with severance, inventory, certain tax-related items as well as other items, and to record a gain on the sale of the Phoenix property.

In addition the Company expects to record charges associated with additions to its current inventory reserve to recognize market uncertainty about the level of future demand for products that are non-compliant with PCI PED security requirements.

These items are currently being addressed as part of the closing of the financial reports for the second quarter, and will be disclosed during the financial results conference call for the second quarter, expected to be held in early August 2007.

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