Fiserv Inc (FISV) 2002 Q4 法說會逐字稿

Good morning and welcome to the Fiserv earnings conference call for the fourth quarter of 2002. We currently have 120 participants on this call and all participants will be able to listen only until the question and answer session following the presentation. At the request of Fiserv today's call is being recorded and also being broadcast live over the Internet. The call is expected to last 25 to 30 minutes and you may disconnect from the call at any time. Now we'd like to introduce the Fiserv management team in attendance on this call. Mr. Les Muma president and CEO. Mr. Don Dillon, chairman of the board and Fiserv product and technology. Mr. Ken Jensen, CFO and Mr. Tom Hirsch, senior vice president and controller. At this time I would like to turn the conference call over to Mr. Muma.

Good morning and welcome to Fiserv's fourth quarter conference call. We appreciate your participation and look forward to presenting our fourth quarter and year-end results and answering your questions.

Fiserv would like to state that the company may make forward-looking statements regarding 2003 earnings targets, sales pipelines and acquisition prospects during the course of this conference call. Such statements are covered by the safe harbor included in the securities litigation act of 1995. These statements may differ from actual results and are subject to a number of factors -- please refer to the last paragraph of our fourth quarter earnings press release for a discussion of these factors. Fiserv finished 2002 with record earnings for the fourth quarter. Our business model which includes approximately 85 percent recurring revenue and associated cash flows continues to fuel Fiserv's growth.

Most of our business units performed at or above our expectation in terms of revenue and profit growth through continued strength in both new client sales and cross sales, along with our ongoing initiatives in the area of operational efficiencies. We also closed three acquisitions in the fourth quarter. The consumer network services division of EDS, the life and health third party administration business of Willis group, and lenders financial services. In addition, our acquisition pipeline continues to be robust.

We will start our review today with Ken Jensen, who will present our financial performance. I will follow with a brief business overview. And we will then open the lines for questions.

Thanks, Les, as already stated Fiserv finished 2002 with record earnings for the fourth quarter. All revenues and operating margins discussed today exclude reclassification of customer reimbursements of 291 million in 2002 and TWA62 million in 2001.

This reclassification resulted from our adoption of the emerging issues task force No. 01 - 14. The adoption of this accounting standard had no impact on the company's financial position, operating income or net income.

All earnings per share numbers discussed today are before the recognition of realized gain and the sale of Knight trading group stock. We don't believe it's appropriate to include the customer reimbursements or realized gain on Knight stock in analyzed current performance of Fiserv. Effective January 1st, 2002 the company also adopted financial accounting standard No. 142, which requires that intangible assets with definite lives be amortized over their usefulized (ph) and goodwill and other intangibles with other definite lives not be amortized but be evaluated for impairment. The effect of adopting this standard in 2001 would have increased 2001 diluted net income per share by approximately two cents in the fourth quarter and nine cents for the full year. Due to the elimination of goodwill amortization.

Earnings per share for the fourth quarter of 2002 were 35 cents, compared to 27 cents in 2001. Earnings per share for 2002 were $1.36 compared to $1.07 in 2001. A dollar 36 in earnings per share for 2002 was within the range of consensus analysts estimates and our estimate made in the last conference call. Our estimate of full year earnings per share for 2003 is $1.58 to $1.62 and our EPS estimate for the first quarter of 2003 is 37 to 39 cents per share. Our fourth quarter revenues of 591 million increased 84 million for 16 percent over last year. Revenues for 2002 of 2.3 billion increased 351 million or 18 percent over 2001.

Revenue growth was positively impacted in 2002 by our financial institution services segment, which increased revenues 375 million, or 24 percent over 2001. This segment's overall revenue growth in 2002, however, was negatively impacted by a decrease in European revenue of 36 million dollars in 2002, compared to 2001, for our international banking system, primarily related to reduced customer spending on professional services.

In addition, total Fiserv revenue growth in 2002 was negatively impacted by a decrease in revenue and our securities and trust segment of 19 million dollars, excluding a 12 million dollar termination fee in 2001. We are currently estimating 2003 first quarter revenue for Fiserv to be approximately 630 to 645 million. I will now summarize our performance by business segment, starting with the financial institution services segment. Our fourth quarter operating income for this segment increased 32 percent over last year and for the year increased 30 percent.

Our increase in operating income over the prior year for this segment was due to a number of factors, including revenue growth across a majority of our business lines, operational efficiencies, a acquisitions, and the elimination of goodwill amortization of approximately 20 million dollars.

And our securities and trust services segment, 2002 fourth quarter operating income was seven million dollars, which was approximately equal to the amount reported in the fourth quarter of 2001.

Our securities and trust segment operating income continued to be negatively impacted by the very weak retail trading environment, which impacts our securities division and expenses associated with our conversion to a new securities processing system developed by CSS, comprehensive software systems limited, a joint venture with several firms, including Fiserv.

Our securities division has implemented several front end modules of the CSS software system for our clients in 2002 and plans to be fully converted to the entire CSS system by the middle of 2003. In 2003, we are anticipating expensing approximately eight to $10 million related to our implementation of the CSS system. Now I'd like to turn the call over to Les who will provide additional details and highlights for the fourth quarter.

Thanks, Ken. As Ken indicated, our fourth quarter earnings performance like previous quarters met the street's spec expectation and management's forecast. Our fourth quarter revenue was in line with management's forecasts. Our increase in revenue for the fourth quarter was 84 million or 16 percent over last year and for the full year increased 351 million or 18 percent. Our revenue growth resulted from a combination of organic and acquisition growth.

Our acquisitions for 2002 -- our acquisition growth in 2002 was derived from our 2001 acquisitions and five acquisitions that closed in 2002. In the fourth quarter, we closed three acquisitions, including consumer network services division of EDS, one of the nation's largest electronic funds transaction funds processor and automated teller machine operators. Through this agreement Fiserv has become one of the top processors of fund transaction service the industry as measured by number of clients we enhanced our insurance solutions by acquiring the life and party insurance of Willis group. At the end of the year we announced the acquisition of lenders Adding another strategic piece to our end-to-end lending services offering.

In addition, our previously announced agreement to acquire AV died, Inc. a provider of specialized health care services was completed in early January 2003. On a year-to-date basis, internal revenue growth was four percent, and includes the impact of a business disposition and a 12 million dollar termination fee in 2001 -- I'm sorry, excludes the impact of a business disposition and a $12 million dollar termination fee. Our year-to-date internal revenue growth rate was negatively impacted by a decrease in our European revenue in 2002 versus 2001 of 36 million dollars for our internal -- our international banking system due primarily to reduced spending by customers on professional services. In addition our securities processing and trust segments continue to experience sluggish conditions in the U.S. retail financial markets, contributing 19 million dollars less in revenue in 2002 than 2001.

Excluding a 12 million dollar termination fee in 2001. The year-to-date internal revenue growth rate for our financial institution services segment excluding the weakness in our international professional service business was between our overall target of eight to 10 percent. Our financial institution services segment continued its e exceptionally strong operating performance in 2002, increasing its revenue 24 percent and operating income 30 percent over 2001. Fueling this revenue and earnings growth were strong sales, continued cost efficiencies and acquisitions.

This segment of our business generates approximately 85 to 90 percent of our revenue and is largely recurring and continues to be virtually immune to broad economic swings. As Ken mentioned earlier, the operating performance of our securities division within our securities and trust segment, which today represents only five percent of overall company revenue, was impacted by continued lower transaction volume and margin balances due to sluggish market conditions, along with continued expenses associated with our conversion to CSF software system.

On a positive note, during the fourth quarter we successfully converted the clients acquired in the Investec (ph) acquisition to the Fiserv securities platform in Philadelphia, adding both retail and institutional volume to our securities clearing business. In 2002, our sales efforts generated more new banking lending securities and insurance relationships than the prior year. Our ability to deliver a full suite of automation services and products continues to provide a fertile sales environment.

Significant client relationships side in the fourth quarter include the following: Commercial federal corporation, the parent company up 13.5 billion dollar Omaha, Nebraska based commercial federal bank renewed its technology services relationship with Fiserv in a six year agreement valued at more than 120 million.

Industrial bank, the sixth largest bank in China, with 36 billion U.S. dollars in assets, selected Fiserv core banking and customer service solutions through a Fiserv partnership with IBM China. Fiserv has been active in the Asia Pacific region for more than a decade but this agreement marked the company's entry into the Chinese domestic banking market. Fiserv gained additional business in this region through an agreement with Australia's bank of Queensland limited to provide a new core banking system for the 6.6 billion dollar bank.

Finally, in a multi year agreement, first Ontario credit union Canada selected Fiserv to provide core processing teller platform and contract management solutions. These selected major client wins highlight the product offering and our ability to successfully attract new clients away from our competitors and to cross all additional product and services to our existing 13,000 clients. In closing I would stress that our businesses continue to grow within management's expectations heading into 2003.

Our sales and acquisition pipelines remain very robust across all of our businesses and we anticipate continued strong growth both organically and through acquisitions. Looking forward, we are confident that we will be able to attain our 2003 earnings per share target, which is $1.58 to $1.68 per share. We'll now open the lines for question.

At this time we're ready to begin the formal question and answer session. If you would like to ask a question, please press star 1. You will be announced prior to asking your question. To withdraw your question please press star two. Once again to ask a question please star 1. Our first question comes from Jennifer Dugan of Merrill Lynch. Ms. Dugan, you may ask your question.

Thanks. In the insurance portion of the financial institutions division, can you give us some commentary on new sales trends in the quarter and for the year?

Well, I would say that 80 percent of our revenue coming from that part of Fiserv, the insurance division, comes from business process outsourcing, as you know. In both the flood business and in the benefit business, we had a very strong year of sales. And we entered 2003 with strong pipelines. So that business continues to do very, very well. In the software services part of that business, which is 20 percent, a little less than 20 percent of revenue, I don't think we've seen any material change year over year, as that business continues to plod along. I would say overall the strength of our insurance business Jennifer comes from the business processing out source piece.

Are both pieces growing within that eight to 10 percent targeted range or is BPO above this and systems is below it.

Generally we don't break it down by operating group. We just like to stick to the overall eight to 10 percent. But I would say that overall we're happy with the way the insurance group is growing.

Great. One other question. Can you actually tell us the organic growth rate and the brokerage services division?

You know, I don't have it. Normally we don't break that down. But I do --

You can tell by looking at the segment, though, it's not much.

The securities business has been flat to down, Jennifer for the whole year. I mean that business has not firmed up and picked up at all. We've added customers to that business and we added Investec (ph) to that business. But the trading volumes and the margin balances have languished.

Okay. So organic growth, sounds like it was down again in the quarter in total?

Organically, I would say it's flat to down.

Okay. Great. Thanks

David Togut of Morgan Stanley you may ask your question.

Is it possible to quantify the total contract value of the business that you signed in the fourth quarter?

We do internally, we do not release those numbers. I mean you could just hear from the big ones we signed. There's some awful large numbers and also David I would tell you from an operating standpoint, although we look at total contract value, we tend to look at annual revenue produced by the new contract. But I don't have those numbers on the tip of my fingers either. And as I say we don't normally release that much detail.

Okay.

Sales were strong, though, David. I think that's the important thing. Across particularly the banking and insurance business we're very strong and insurance also held up very nice, I mean securities held up very nicely in the new sales area.

And can you give us a sense of the annual cost savings from moving to the CSS platform mid '03 and '04?

We would expect our costs that we're estimating it's eight to ten now probably six to eight of that would go away any cash flow or balance sheet data in the quarter?

You can get some feelings from that by talking to Tom after the call. If you have a specific question we might be able to answer it for you.

Thanks a lot.

Thanks.

Carla Cooper of Robert W. Baird. You may ask your question.

Could you talk about whether there was any specific sort of one time cost associated with the movement of the Investec (ph) clients onto your platform. The reason I'm asking that is I was surprised to see the margin in that division down from the third quarter.

There were one time costs related to that, the exact number, Tom, do we have what that was, exactly?

We don't.

The conversion costs of that were expense in the current quarter, Carla. So that may have been where you were off. I just don't have the number.

Okay. I guess as you think about it Tom would you say that's one reason that the margins in that division were weaker or should I think about other impacts?

I think that's one of them but obviously we continue to invest in CSS and there were some additional costs in there in the fourth quarter also. So I don't think there's any substantial change there though in the business when you look at it from Q3 to Q4. SS and there were some additional costs in there in the fourth quarter also. So I don't think there's any substantial change there though in the business when you look at it from Q3 to Q4. Besides the incremental costs from Investec (ph). You're talking some pretty small numbers when you look at that business.

Then I wondered if you could give two sort of updates in Q1 thus far on two areas. One would be the bank outsourcing and software domestically and the other would be if you've seen any change thus far in Q1 in Europe.

I'll answer those in reverse form. In Europe we don't see any real pick up yet. We see some early signs that maybe it's stabilizing, but you can see our international activity is all in the Asia Pacific area right now. And our guys feel optimistic they're not excited about coming out of the first and second quarter real strong from what they see. Domestically on the banking our outsourcing sales continue strong from our software standpoint software is also picking up from what we see in the first quarter. So sales are picking up. Which may be is an indication that banks have a more positive attitude at this point.

Our outsourcing business, Carla, has always stayed strong through of the financial turmoil that's been going on in the bank business. It's the software that's softened up a little bit now we're seeing a light at the end of the tunnel.

Thank you

Gred Gould from Goldman Sachs.

This is Robert Tso (ph) for Greg. In terms of the factors for the lower margins this quarter how should we look at that going forward and what other things that we should expect?

Factors for lower margin?

It was slightly lower this quarter and how can we look at that going forward?

I think historically you've seen that our margins, I mean the margins are very close to where they were in the other quarter. If we go back a few years we typically have some higher expenses from the business we have. The margin is down slightly but there's no significant changes there from that standpoint. And the overall margin obviously impacted a little bit by the securities. But there's really no substantial changes there.

Just to give you an idea it was 19 in the first quarter, 20 in the second quarter, 19 in the third quarter and 19 in the fourth quarter.

Okay. Looks like you also purchased about 800,000 shares. Can we expect any more buy backs in the future?

We'd still have an authorization to do buy backs and we will periodically do them.

Great. Thank you

Kartik Mehta from Midwest Research.

Good morning. Have you seen any fundamental change from your banking clients in relationship to going with outsources versus buying in-house software systems over the last 12 to 18 months?

I would say if anything the software license business has picked up a little bit in the fourth quarter and as we go into the first quarter.

But the trend, overall trend still seems to be outsourcing.

Our outsourcing businesses are much stronger.

I noticed that -- are you seeing banks that you would typically say they wanted software all of a sudden saying I'd rather go with the outsourcing, especially in this climate, or has it just been those that are buying software just didn't buy software last year as much as they did in the past?

I think it's more the latter. I think the outsourcing business -- although we may be taking some outsourcing business from competitors, which is how we grow our outsourcing business, we haven't seen a marked move from our software customers to outsourcing. I think it's just been those people that license software have been retrenched a little bit until recently.

Another question. The check 21 actor there's been a lot of potential of that passing this year. Are you seeing banks make a little bit more proactively on this and buy more imaging software and systems and ask for more imaging products from your outsourcing part? And the second part to that question would be what would be the benefit to Fiserv once a check 21 act passes in terms of possible expense reductions?

First of all, there's definitely a strong sales in check image area. We continue to convert about a bank a day onto our check image platform in Atlanta. In Atlanta is where we house, we have a national archives down there. We are well positioned because of our many years that we've been in image products for the law change, when and if it comes. As far as an expense reduction, I'm not sure I'm qualified to answer that right off the top of my head. How about if I get back to you and talk to you a little bit more about expense reductions in that area?

One last question, what percentage of banks do you think currently of all your FI customers are on check imaging?

My guess would be 20, 25 percent, up. About half.

About half?

I'm sorry.

Thank you very much.

You're quite welcome

Art Bender of Credit Suisse First Boston. You may ask your question.

Good morning. Can you give us an update on the status of both the NCR acquisition last year and the EDS this quarter, how is the integration going? What kind of expense savings do you think you can realize over the next year as the integration proceeds?

On the NCR acquisition, we have eliminated two of the products that the banks were running on and moved those customers over on the Fiserv product. FWU major product that they have will take a number of years before those customers are moved over. And so any gains there will be realized I'd say over the next 18 to 24 months. On the C and S side, the integration has just begun there.

We've put the organizations together and the management teams in place to take it forward. And on the C and S business, as we explained when we acquired it, there's about 150 million in revenue there which probably is going to stay relatively flat over a 30 month period of time as we go through that migration phase. Any growth in that area will be incidental. But what we've done there is to buy out a customer base that, when combined with our customer base, will give us a platform to grow as we go forward.

Thanks. Can you give us or a ballpark estimate of the annual revenue contribution from the deal you signed in China this quarter?

It's a licensed software deal. There's professional services attached to it. It's a deal that won't really kick in until the latter part of this year. And there will be a maintenance on top of that. But the exact numbers I don't have. It's a pretty good sized deal to be our first China deal. But I don't have the exact numbers.

Thanks a lot

Craig Peckham of Jeffreys, Inc. you may ask your question.

As a percentage of your total European revenue, how much is derived from the professional services that you referenced earlier in the call.

Not as much. Not much right now. It's way off. Percentage wise --

Historically it's been a greater percentage than obviously the life of piece of that business, but we have -- you can give me a call later on that and I can get back to you on that.

It's really depressed right now, though.

Okay. Is that characteristic of spending at larger banks, smaller banks, how should we be looking at that from a customer standpoint.

It's a characteristic of larger banks sucking in their spending and one thing they'll go after very quickly is professional services.

Thanks

Nik Fisken of Stevens, Inc. you may ask your questions.

Good morning, everyone. I'd like to comment on the software sales stronger in Q4 ending in the third quarter, are the sales firming up across all lines or is it specific to, let's say, your bank in-house system?

I think we're talking more specifically about banks in-house systems, and understand that Fiserv may not be your best gauge at about five percent of our revenues comes out of that particular area. But we are starting to see, with our ITI and S software domestically signs of a pickup. Looks like we'll have a good quarter. We had a good fourth quarter.

Is there a specific mix size that you're seeing that trend?

Not really.

Okay. And then, Ken, just to make sure I heard you right, in going to CSS, you guys expect six to eight million dollars of annual savings?

Relative to the expenses that we're currently incurring.

We're talking about a reduction of the development phase of that software. It's a -- is the question more what we will save more operationally once we're --

Right.

I don't have those numbers we can get to those. I can tell you there will be a cost savings there. We reduced the number of main names from about five to six that we're running now down to one. So there will be related hardware as well as people savings as we move in that direction. Most of that comes as we install the second phase of this, which, as Ken indicated, is mid-year.

Okay. I'll get with Tom then. Thanks so much.

You bet

Bryan Keane of Prudential Securities. You may ask your question.

Good morning. My question is on the kind of on the operating performance. You guys have done an excellent job hitting targets. Just is there some things we can point to that you're taking expenses out or what's helping you hit targets? Because I know originally I don't think we all believed that proceed growth should be this weak for this song and revenue would fall. But as the revenue has gone from eight to ten historically down to four to five, what's the difference that you've able to cut c costs to hit targets.

: Let me give you an example would be the 36 million dollars of professional services revenue or predominantly professional services revenue in Europe that we have lost this past year. That effectively is replaced with another 36 million dollars of other revenue. The European revenue may have had like a five percent margin and the replacement revenue has like a 20 percent margin. So that helps immensely by itself. And in fact if you look at in terms of internal growth, you'd rather have that replacement revenue than another 36 million dollars on top of the old 36 million dollars of five percent revenue.

I would add to that, Brian, at the same time we have gone through some efficiencies in consolidations within our domestic operations from the NCR acquisition, we've eliminated seven to eight item processing centers as we've eliminated them. We've consolidated other operations as we do on an evolutionary basis nothing spectacular but it's a steady process of becoming more efficient operationally across the country and that also obviously helps that bottom line in earnings per share. Are you still with us, Brian?

Jennifer, we need another caller

Ashwin Shirvaikar from Salomon Smith Barney.

Thanks for taking my question. Just going back to the internal growth rate question. When might we expect to return to a normalized eight to 10 percent? Is it during the course of this year or given the conditions in Europe should we not expect that?

Let me say as looking at this company long range we still target eight to 10 percent. 2003 depends on a lot of things. One of them you hit on is the European professional services what's going to happen there. Obviously the securities business is still flat. I would say flat to down. So it depends largely on what happens in that area. I would also add that the C and S deal was a great deal for this company, positions us well in the electronic transaction area, but there's 150 million dollars of revenue right there that we expect to be flat for several years, which is a drag of one percent on our began Nick growth.

And the NCR situation also does have a drag on our internal growth because we are in a migration phase there and not in a growth phase. But again great business for the company, because what we've done in both C and S and NCR we count them, when I say we, you guys count them as acquisitions we look at them as another way to grow organically by customers as opposed to signing them.

When we do acquisitions like this we feel it's more economical to buy these clients as opposed to sign them one at a time. So the core banking business of Fiserv is still a bright spot, but the overall organic growth for 2003 depends on a lot of things. I would add only to tend of that that it's undoubtedly going to be back end loaded which means the second half of the year we would expect to be picked up over the first half of the year. I probably evaded your question completely but that's about the best we can do.

No, that's fair. I understand. Just perhaps divesting the European situation a little bit more, and are we assuming that the downturn continues, given the labor laws are different in parts of Europe, can you do -- to what extent do you have the flexibility to do lay-offs and stuff like that.

We have a good amount of flexibility, good sized operation over there. We've already done some of that. We look at that all the time, and based on what we see in that marketplace, we will be prepared to do it, to do more of that.

Okay. And a final question with regards to the acquisition pipeline. Could you characterize it in terms of do you expect more TPA health kind of deals or what's in that pipeline?

We've got a very broad pipeline as we always do. I would expect us to do some more TPA acquisitions. But I'd also expect us to do other areas of the insurance business and in the banking and securities businesses that we service, Ashwin are still very fragile, there's a lot of people who provide the services we do not only in insurance securities but in banking. And although we've been consolidating for a number of years there's a lot of competitors out there that lend themselves to acquisition over time.

Okay. Thank you.

You're quite welcome

Glen Greene of Thinkequity Partners.

I was wondering if you could give us the organic growth level for the FI outsourcing business for the fourth quarter and also the amount of revenue included from CNS from the fourth quarter. I know you closed it early in December.

What we tried to do, because those numbers vary so much, is we tried to stick to an annual organic growth rate for the entire company, and that was up a little A bit over four percent for the year. And we just stay away from breaking them down because they vary so much because I think they're more misleading than beneficial when we look at them for the total company we're better off.

What about the level for CNS, would you share that

It's about eight to ten.

Then the final question you mention in the press release still good strong cross selling activity. Which products are you seeing the strength in is it across the board or any c certain products you'd quantify it to.

In the bank thrift business I would say image is very strong. ATF processing we continue to cross sell very well to our customer base. Customer relationship management is a hot area right now in our products lines and another thing that continues to grow is teller automation. And a lot of our banks move off of old windows systems into a browser environment which is how we deliver our teller automation today.

So it's pretty broadly spread. Now, in the lending area you go to other areas and we certainly have done lot of acquisitions into the lending area over the past year or two. And those products are cross selling very well across our mortgage customers. One of the advantages of Fiserv is we don't just have one or two products, we have 20, 25 products in these business areas which lend themselves to organic growth through cross sales.

That's great. Thank you

Charles Trafton of Adams, Harkness and Hill. You may ask your question.

Do you guys have an AR number for the December 31st?

We don't. Our accounts receivable really haven't, as you know, through the year it hasn't been from a cash flow standpoint they've been fairly flat and that's what we anticipate for the full year.

When did you close the EDS deal?

December 5th.

Do you think the AR will be a little artificially high then?

Actually, there's very little ARs associated with that business.

The number might be higher but it's not going to have any significant impact on our balance sheet.

Do you guys have a number for cash from ops or should I wait for the Q?

You can wait until our 10K is filed. And again there won't be any surprises there from an operating cash flow standpoint.

Can you give a number or back of the envelope what you think the European consulting business was in the Q4 or how much you lost from there?

We were down 30 million dollars year-over-year.

36 million year-over-year.

For the year or for the quarter?

For the year.

Okay

So the amount of revenue in the quarter was probably negative.

Did that get worse through the year. I know Q3 was pretty bad. Did that get worse, Q3 to Q4.

I think we announced on our last call the number year-to-date was approximately 26, 27 million. So I think another eight, nine million here in the quarter for the fourth quarter for the full year at 36.

Right. Okay. Great. Thanks

Tim Willi of AG Edwards. You may ask your question.

Your comment about cross sells, you mentioned CRM as being one of the hotter products. And if I remember correctly, maybe upwards around a year ago, when questioned, I think you said you just didn't necessarily see the demand at that point in time despite the buzz. And I was curious if you might be able to at least give your thoughts on what you're hearing as to why this seems to be a product that you're seeing people really go after now?

A year ago I think my comment was probably there was a lot Mr. In the press than reality. More hype than reality at the time. And even though we're seeing growth in that area, it's certainly not a major part of our business. And maybe what we're seeing here, and this probably is speculation and dangerous, is RM products or products that banks will buy when they see better times ahead. They're first of alls so maybe we're seeing some of that.

How were Internet related products selling during the quarter? Is that still fairly strong and are you taking away from some of the sort of pure Internet only vendors?

I would say insert sales continued strong in Fiserv and over the year I would say we had great sells on moving our customers who were using a competitive SNT product onto our own SNT product. The growth in Internet, using inter net transaction volume in the inter net continue to move up. The beauty of our relationship is that we have all these banks core processing and we believe that over time they will move towards our neither banking product and it's certainly something we're pushing on from a sales, cross sales standpoint.

Lastly on the EDS acquisition. Could you in terms of the flat revenue for upwards of maybe 24 to 30 months, I'm assuming that as you migrate and do stuff with that, there's margin expansion opportunities. But could you little talk maybe more about some of the cross sell opportunities with that franchise that you see happening farther down the road?

I think from a cross sales standpoint, any bank that we have that doesn't use our ETF processing our debit card process SG a cross sell prospect. Probably one of the hottest areas right now in both CNS and our existing EFT business is the debit card and we'll continually aggressively sell debit card across the customer base. The C and S thing, our EFT process over the next several months, it will be to consolidate there will be sales, we'll continue to sell and cross sell but the emphasis in the near term is to get this platform consolidated because the leverage we have on the expense side by doing that.

Okay. Great. Thank you

Chris Rowen from SunTrust Robinson Humphrey.

What have you said about internal growth rates? Are you saying four to five percent until further notice or kind of what is the official guidance there?

Official guidance at this stage is long range target is eight to 10 percent. Where we're going to be in 2003 depends on lot of things, and I would be speculating and just guessing. Four to five percent is probably as good a guess as any but I certainly wouldn't want to hang my hat on it until we see what happens during the quarter.

Thanks a lot

Pete Heckmann of Stifel Nicolaus.

You've covered most of it. I'm curious as regards to EFT business do you feel that there are additional opportunities to make acquisitions and build your share in that EFT business both domestically and internationally and secondly what W would be your outlook for head count in 2003?

As far as the acquisition in the area of EFT, certainly we'll look for other opportunities as they present themselves. As far as head count goes, across all of Fiserv, we have about 19,000 employees. I generally expect that as we grow to go up. But to pin head count is kind of hard to do right now.

Thanks much.

You bet.

Our last question comes from Chris Penny of Friedman Billings Ramsey. You may ask your question.

Thanks very much. Your comments about the organic growth rate in '03. Looks like it slowed down a little bit in the fourth quarter. Obviously from acquisition standpoint you're going to be inquisitive in '03, can you talk about the funding requirements necessary and have you changed your, are you possibly changing your outlook as to how you're going to fund some of these vis-a-vis possibly the senior debt type structure?

We've looked at various methods of financing the acquisitions right now given our very strong cash flow, we don't have any plans to do any senior debt offerings.

Okay. Thank you very much

I'd now like to turn the call back over to Mr. Muma.

We appreciate your interest and your questions and your ongoing support of our company. Thanks a lot and have a great day.