Verifone CEO Doug Bergeron just dissed Square, its upstart rival in the credit-card-processing market, by calling it “Pets.com.”Oh boy, that was stupid.
That was Bergeron’s reaction, delivered to American Banker, to the news that the San Francisco-based payments startup is poised to raise another $200 million at a $3.25 billion valuation.
VeriFone, which is publicly traded, is worth $4 billion. That’s about 2.5 times its annual sales. It has about 3,800 employees.
Square’s latest financing values it at approximately 40 times the best guess anyone’s made for its annual revenues—about $80 million. Square’s headcount just topped 350.
So we understand why Bergeron is jealous of Square.
Square has tapped a huge, underserved slice of the small-business market that Verifone and other big payments providers just can’t figure out how to handle efficiently.
It has also captured attention with its appealing cofounder and CEO, Jack Dorsey, who is also the cofounder of Twitter—a marketing edge that VeriFone simply can’t match.
But by comparing Square to Pets.com, a flash-in-the-pan online pet-supplies retailer that has Bergeron is treading on dangerous territory.
First of all, Square is worth far more than Pets.com ever was, and it is a real business—unlike Pets.com, which recorded revenues of $619,000 in its first fiscal year.
At its IPO, Pets.com raised $82 million. Square has already raised twice that, even before its most recent megaround.
And at the public offering, Pets.com was only worth $1.2 billion—and its shares promptly slumped.
Besides Bergeron’s maths being laughably off, this kind of trash talk has the tendency to energize its target.
Remember when Michael Dell said that if he were CEO of Apple, he’d close it down and return the cash to shareholders?
Apple went on to become the most valuable company in the world.
So if Bergeron were smart, he’d quietly praise Square’s innovation—and get to work fixing the obvious problems in VeriFone’s hardware, software, and pricing structure that Square has exploited to gain a niche that Bergeron should never have allowed it to occupy.