Troubled CardSystems to Be Sold

CyberSource, an electronic payment company, plans to buy CardSystems,the transaction processing company which had data on 40 millioncustomers compromised when hackers broke into its servers recently. OnFriday, CyberSource announced that it has signed a letter of intent toacquire the CardSystems assets, a transaction that could close byyear’s end.

The deal gives CyberSource an opportunity to expand into new areasbeyond the e-commerce transaction services that have built the 175person company, said Bruce Frymire, a company spokesman. “It brings alot to CyberSource,” he said. “It’s a processing platform, which wehave not had at this point. It also gives us retail point of saleprocessing.”

CardSystems is used by 120,000 merchants to process more than $18 billion worth of transactions annually, Frymire said.

Online thieves were able to break into CardSystems’ Tuscon, Arizona,operations center and steal credit card information from the company’sservers. The intrusion, which was disclosed in June, was detected afterfraudulent charges began appearing on some of the stolen accounts.

CardSystems’ Chief Executive Officer John M. Perry has since admittedthat the stolen records were improperly kept, and his company’sbusiness has taken a hit following the disclosure. Both AmericanExpress Co. and Visa U.S.A. have said that they intend to sever theirrelationship with CardSystems by the end of October.

Whether or not the planned CyberSource acquisition will affect thesedefections may be a factor in the deal. “Certainly that would be amatter of serious interest to us,” Frymire said of the impendingdepartures.

CardSystems and CyberSource are working to ensure that merchants experience no disruption of service, he added.

CyberSource says the transaction is subject to further due diligenceand may also be subject to regulatory approval. Frymire would not sayhow much CyberSource expected to pay for the privately held Atlantacompany.

Robert McMillan, IDG News Service