I just wanted to make a few remarks regarding an article published by the Motley Fool published on 6/15/2020 titled "Is Fiserv A Buy?" which you can search for on the internet. I want to highlight this article because it is typical of the way the financial press reports on Fiserv and how this reporting misleads investors and employees of the company.
1) "Fiserv provides payment solutions to banks, financial institutions, and other organizations – including ACH, bill payment, lending and credit solutions, financial software, and point-of-sale terminals through its Clover subsidiary."
This is a pretty typical description of Fiserv by the financial press but it is wrong. Fiserv is not just an "electronic payments" company. Fiserv is an "electronic payments" company and an "acquisitions" company. This omission is important because the "acquisitions" part of the company accounts for the high growth story of the company. The "electronic payments" part of the company is slower growth and more competitive. Fiserv acquires other companies with debt or stock to quickly increase its client base and expand its product offerings which gives a large boost to earnings. Fiserv then sells off excess real estate and has mass layoffs as a result of the acquisition which also gives a large boost to earnings. The problem with the "acquisitions" part of the company's business is that it is a "scheme" and just like any "scheme" when it comes to an end, things will unravel in a big way. The "scheme" will end when Fiserv has no more large companies to "acquire" that make any sense and this will bring the high growth story of Fiserv to an end. No one knows when this will happen but it will happen due to the fairly small number of large financial companies left for Fiserv to "acquire" that makes sense. When the high growth story hits the skids for Fiserv when "acquisitions" end, investors will start caring about the massive debt and debt service Fiserv carries. Investors will start caring about the missed deadlines, mistakes, and poor client boarding practices of Fiserv as a result of underinvestment in human resources (i.e. employees). In other words, the large "acquisitions" will no longer be able to disguise other parts of the business that are slow growth or poorly run.
The end result of all of this is that there will be a massive repricing of the stock. Nonetheless, it won't matter because the company executives (Yabuki, et al) will have cashed out long ago.
2) "Once the dust settles, this fintech firm could emerge even more profitable. The company has ramped up its efforts at fully integrating First Data, and said it's upping its outlook for full-year 2020 synergies from $300 million to $500 million (basically, operating expenses it can eliminate due to redundancy). It's accomplishing this by consolidating real estate, data centers supporting its cloud software, and other back-office procedures. It expects a cost-saving synergy of about $700 million in 2021, as well as additional revenue due to the merger totaling about $600 million over the next five years."
Notice one word missing in the article when it describes the "cost cutting" measures Fiserv is taking?
Layoffs?
No mention of "layoffs" anywhere in the article and that is pretty typical in the financial press reporting of this company. With labor being the most expensive cost of any business including Fiserv, Fiserv saves a lot of money and increases its profits through mass layoffs. Its really important for investors (and employees who are considering working for Fiserv) how important layoffs are to the high growth story of Fiserv.