Hypercom Corporation Annual Report - CiteSeer

Hypercom Corporation Annual Report

Forward Looking StatementS 

This Annual Report, including the letter entitled “To Our Stockholders, Customers, 

Partners, and Employees,” contains “forward-looking statements” as 

that term is defined in the Private Securities Litigation Reform Act of 1995, 

as amended (the “Reform Act”). “Forward-looking statements” include expressed 

expectations of future events and the assumptions on which the expressed 

expectations are based. The words “believe,” “expect,” “anticipate,” 

“intend,” “forecast,” “estimate,” “project,” “will” and similar expressions 

identify forward-looking statements. Such statements may include, but are 

not limited to, the severity and duration of the current economic and financial 

conditions, the state of the electronic payments industry and competition 

within the industry; projections regarding specific demand for our products 

and services; the level of demand and performance of the major industries 

we serve, including but not limited to the banking sector; the commercial 

feasibility and acceptance of new products, services and market development 

initiatives; our ability to successfully penetrate the vertical and geographic 

markets that we have targeted; our ability to improve our cost structure, 

including reducing our product and operating costs; our ability to develop 

more recurring revenue streams; our ability to successfully manage our contract 

manufacturers and our transition to a joint development manufacturing 

model, including the impact on inventories; our ability to allocate research 

and development resources to new product and service offerings; our ability 

to increase market share and our competitive strength; our future financial 

performance and financial condition; the adequacy of our current facilities 

and management systems infrastructure to meet our operational needs; the 

status of our relationship with and condition of third parties upon whom 

we rely in the conduct of our business; the sufficiency of reserves for assets 

and obligations exposed to revaluation; our ability to successfully expand 

our business and increase revenue; our ability to integrate and obtain expected 

results and benefits from future acquisitions; our ability to effectively 

manage our exposure to foreign currency exchange rate fluctuations; our 

ability to sustain our current income tax structure; the impact of current and 

future litigation matters on our business; our ability to fund our projected 

liquidity needs and pay down outstanding debt obligations from cash flow 

from operations and our current cash reserves; our ability to remain compliant 

with and provide transaction security as required by relevant industry 

standards and government regulations; and future access to capital on 

terms that are acceptable, as well as assumptions related to the foregoing. 

All forward-looking statements are inherently uncertain as they are based 

on various expectations and assumptions concerning future events and are 

subject to numerous unquantifiable risks and uncertainties, some of which 

are unknown, that could cause actual events or results to differ materially 

from those projected. Due to such risks and uncertainties, you should not 

place undue reliance on our written or oral forward-looking statements. We 

are under no obligation, nor do we intend, to update or revise such forwardlooking 

statements to reflect future developments, changed assumptions, the 

occurrence of unanticipated events, or changes to future operating results 

over time. 

We provide the risk factor disclosure contained in “Item 1A — Risk Factors” 

of our Annual Report on Form 10-K contained herein in connection with our 

continuing effort to qualify our written and oral forward-looking statements 

under the safe harbor protection of the Reform Act and any other similar 

safe harbor provisions. Many of the important factors currently known to 

management that could cause actual results to differ materially from those 

in forward-looking statements include the risks contained in such “Risk Factors” 

section. 

Hypercom Corporation Annual Report 

tabLe oF ContentS 

To Our Stockholders, Customers, 

Partners and Employees I. – II. 

2009 Highlights III. – IV. 

SmartPayments Mobile V. 

HRKS VI. 

Wynid VII. 

Phoenix Managed Networks VIII. 

End-to-End IX. – X. 

Form 10-K 1 – 92 

Stock Performance Chart XI. 

Company Information XII. 

NORTH AMERICA | CENTRAL AMERICA | LATIN AMERICA | ASIA/PACIFIC RIM | EUROPE | MIDDLE EAST | AFRICA

i. 

to our StoCkhoLderS, CuStomerS, partnerS, and empLoyeeS: 

Despite a global economic recession that created the most difficult business environment since the Great Depression, 

Hypercom Corporation made significant gains financially in 2009, increased our customer base, led the industry in security, 

and completed the transition of our business model from manufacturing to providing value-added solutions and services. 

The worldwide recession further validated our strategy already planned 

for 2009 to leverage localized capabilities across the organization, 

many of which resulted from completing the integration of our Thales 

e-Transactions acquisition. Our reshaped senior management team 

worked together to align our vision and processes globally in businesscritical 

departments, most notably in Finance with the hiring of Thomas 

B. Sabol as Chief Financial Officer, and in our software platform, which 

is now fully unified under the direction of Nassrin Tavakoli who joined 

us as Senior Director of Global Software Engineering. 

Among many other initiatives, our market-facing projects included 

repositioning our HBNet business to create Phoenix Managed 

Networks, LLC with The McDonnell Group to provide transaction 

transport service to payment processors, banks and retailers 

worldwide. Internally, we implemented a common IT infrastructure 

and ERP system for all Hypercom sites. Internally and externally, we 

pursued activities that aligned our organization with Hypercom’s 

global strategic goals. 

operating diSCipLine to inCreaSe 

groSS margin 

In line with our 2009 goal to reduce our production costs, we 

advanced beyond our fully outsourced manufacturing model to include 

joint design manufacturing (JDM), in which we provide specifications 

to partners who design, develop and manufacture our hardware. As 

a result, we expect to be in a unique position to add features to our 

hyperCom Corporation 

Philippe Tartavull 

Chief Executive Officer and President 

products while simultaneously reducing costs, as well as shorten our 

time to market with new products. JDM will enable the company 

to focus even more attention on our core competency of developing 

value-added services on our software platform. We began our 

transition to a JDM model in 2009, while paying close attention to 

minimizing any potential impact on our customers. 

In addition to these initiatives, which were targeted at increasing our 

gross margins, company leaders responded to the economic downturn 

by sharpening Hypercom’s focus on finding opportunities to align costs 

properly and utilize resources more effectively. These actions have 

not only helped us weather the economic downturn, but as soon as 

the global economy begins to recover, will enable us to compete more 

aggressively with resources focused directly on delivering the greatest 

results. We are more efficient, agile, and competitive today than we 

were before the recession began. 

paving the way with innovation 

in SeCurity 

2009 marked another year of increased market demand for valueadded 

solutions. In security, no competitor had a better product 

lineup than Hypercom, perhaps the most of which was our industryleading 

array of end-to-end encryption solutions. Some of Hypercom’s 

2009 security highlights include the following: 

• Introduced the HyperSafe ® Remote Key System (HRKS), the 

industry’s first standards-based remote key injection solution

that allows retailers to initiate on-site, in-store payment terminal 

key injection at the point-of-sale. For this achievement, we received 

the prestigious Sesames Award at the Cartes industry event in Paris 

last November. Although the award is granted for innovation, to 

us the Sesames was recognition of our customer focus, as the primary 

benefit of HRKS is reduced total cost of ownership for our 

customers. 

• Partnered with Voltage Security, Inc. to deliver highly innovative and 

scalable cryptographic technology to customers. 

• Began the process of bringing our Asia-Pacific-based EFTSec 

Server payment data encryption technology to North America, 

Latin America and Europe. 

• Achieved key product certifications in North America, the U.K., 

Germany, France and Switzerland, and delivered a common, unified 

EMV Level 2 implementation across our Optimum and Artema ® 

product lines. 

• Formed the Global Data Protection Business Unit to help address 

customer-specific security threats with five key approaches: line 

encryption for data in transit; protection of data end-to-end; 

protection of data during operation and maintenance; virtual 

terminals; and card authentication. 

• Established the Secure POS Vendor Alliance (SPVA) with industry 

leaders to advance payment card security standards. 

These 2009 accomplishments, individually and collectively, reinforced 

our position as the security innovation leader of the industry. 

Looking to the Future 

Even as we moved forward with the development of a new generation 

of products in fiscal 2009 for release beginning in fiscal 2010, our 

value-added services team at Hypercom continued to focus on longterm 

initiatives aimed at pioneering the next generation of customerfocused 

secure payment solutions. 

We are entering a period where secure payments and terminal payment 

devices are creating additional global opportunities in growth verticals, 

such as self-service, hospitality, mobile payments and healthcare— 

verticals in which we are exporting local expertise to develop global 

strategies. In the coming years, we expect to see secure payments 

growth in emerging markets including Latin America and Southeast 

Asia, both of which are regions where we made 2009 investments. 

In 2010, we will also focus on increasing the gross margin of our 

service business and will continue to develop our software to the 

highest level of compliance and security. We are adding top talent, 

establishing a new low-cost development center in the Philippines, 

and transitioning our corporate orientation from engineering to market 

verticals, which will structurally reinforce the company’s alignment 

with our customers. 

Although the economic climate is likely to remain challenging in fiscal 

2010, Hypercom’s opportunities are greater than ever. With new ways 

to initiate and accept payments, our clients will continue to look to 

Hypercom for security and value-added services. Our superb pipeline 

of products and ongoing long-term investments in our software 

platform and services will provide new opportunities to create 

additional value for Hypercom customers worldwide. 

Thank you, 



ii. 

annuaL report 2009

iii. 

2009 highLightS 

January - February 

• introduced the hyperSafe remote key System (hrkS). 

• rdm selected hypercom’s hbnet to speed electronic 

check conversion. 

• appointed Jacques-herve maupin managing director, 

hypercom asia pacific. 

• Smart transaction Systems selected hypercom’s mobile 

network to extend reach. 

marCh 

• gbC (Sia-SSb group) selected optimum t4200 terminals 

to expand electronic 

payments in Central and eastern europe. 

• aXS pet Ltd selected hypercom’s integrated Solution for 

d-pay kiosk rollout. 

• named thomas b. Sabol Chief Financial officer. 

apriL 

• S9 pin pad received apaCS Common Criteria accreditation 

in the uk. 

• elavon Class a certified the optimum t4205. 

• apriva Class a certified SpoS32 on the optimum m4230 

mobile payment terminal. 

• Sparkbase certified gift and loyalty processing on the 

optimum m4230. 

• transFirst ® Class a certified, rolled out optimum payment 

terminals. 

• expanded e-health initiative in germany, introduced 

medmobile. 

• Launched Secure poS vendor alliance (Spva) with other 

industry leaders to clarify and supplement industry 

security standards. 


may 

• handepay named hypercom provider of choice for high 

security payment terminals in the uk. 

• gasodata selected the artema modular self-service 

terminal for pay at the pump in portugal. 

• Chase paymentech Class a certified optimum t4205. 

• expanded product portfolio in germany; t4200 and 

m4200 are Zka approved. 

• medmobile is bCS (basic Command Set) approved. 

June 

• artema modular and p2100 pin pad received apaCS 

Common Criteria accreditation for use in the uk. 

• Central payment Corporation selected the t4205 for 

marketing to its more than 25,000 uS-based 

customers. 

• the phoenix group signed an agreement to purchase 

up to $6 million of optimum products. 

• merchants’ Choice began marketing optimum to more 

than 41,000 retailers. 

JuLy 

• appointed peter vesco managing director, 

northern europe. 

• rbS worldpay Class a certified optimum t4200 terminals. 

• ibm selected hypercom for self-checkout rollout in 

germany. 

• achieved first two certifications in France for optimum 

t4200 and m4200. 

• Jr’s poS depot introduced anytime, anywhere 

payments with the m4230 mobile terminal and 

hypercom’s mobile network Service. 

• three of germany’s major regional rail transport 

operators began using artema modular with gprS to 

speed ticketing in 370+ trains serving 200 million+ 

commuters and other travelers annually.

auguSt 

• taSQ technology added optimum multilane to its 

product offering and became an authorized service 

partner for the devices. 

• apriva Class a certified SpoS32 on optimum t4230. 

• hbnet transaction transport Service gained third consecutive 

pCi certification. 

September-oCtober 

• Carrefour group began country-wide deployment of 

hypercom’s electronic payment solution in its France 

hypermarkets. 

• appointed nassrin tavakoli Senior director, global 

Software engineering. 

• evo merchant Services began marketing optimum. 

• Joined with heartland payment Systems ® to deliver 

integrated payment systems to retailers; implemented 

heartland’s end-to-end encryption e3 solution. 

• Stepped up payment card industry’s attack on card 

data fraud. 

• united with major payment industry players; 

established epaSorg to drive card payments 

interoperability. 

• teamed with voltage Security to develop end-to-end 

encryption that protects cardholder data from the point 

of card usage through the entire payment flow. 

november 

• westpac banking Corporation awarded hypercom five 

year product and services supply contract valued at up 

to uS$50 million. 

• unveiled r3210 contactless reader. 

• wymix pin pad achieved visa ® paywave certification. 

• awarded prestigious SeSameS award at Cartes 2009 

for hyperSafe remote key System (hrkS). 

• delivered a common, unified emv Level 2 implementation 

across optimum and artema product platforms. 

• raiffeisen international selected and began deploying 

30,000+ optimum terminals and pin entry devices to 

merchants in 15 eastern european countries. 

• Lvr infokom rolled out up to 230 medCompact 

e-health terminals to support some 7,000 health care 

professionals at 10 german hospitals serving more 

than 50,000 patients annually. 

deCember 

• permata bank selected optimum t4200 as part of the 

bank’s nationwide mini-atm rollout. 

• artema modular achieved ‘ep2’ certification in 

Switzerland. 

• Signed Letter of intent with the mcdonnell group to 

form phoenix managed networks, LLC. 

annuaL report 2009 

iv.

v. 

iphone SeCure paymentS SoLutionS 

“We are bringing to market a stylishly simple and highly secure 

fully functional end-to-end payment solution for savvy iPhone users 

who want to save time and money,” said Philippe Tartavull, Chief 

Executive Officer and President, Hypercom Corporation. “By adding 

additional battery capacity, barcode reading and iPhone camera 

accessibility, we are significantly enhancing the value proposition 

beyond competitive offerings and delivering a platform that enables 

a new range of payment related business applications.” 

Hypercom’s payment solutions for the iPhone extend the use of 

electronic payments beyond in-store retail to home merchants, doorto-door 

delivery and repair services, event vendors and an array 

of other merchants with business-critical features not provided by 

recently-announced competitive units. Unlike competitor products, 

SmartPayments Mobile is also designed for upscale retailers who 

want to stay close with high-value customers on the retail floor 

and expedite their purchases. SmartPayments Mobile will begin 

shipping in the second quarter and is available for pre-order now. 

Unlike recently announced competitor units, SmartPayments 

Mobile products feature a durable slider case with an encrypted, 

PCI, PA-DSS certified high security card reader that fully protects 

the iPhone from scratches and other damage that results from using 

less protective products, and lets merchants avoid the high cost of 

“card not present” transaction fees in application-only solutions. 

Also unlike competitive products, SmartPayments MobilePlus adds 

a barcode scanner for instantaneous pricing, inventory control, 

auto population and validation of drivers’ licenses or other forms of 

barcoded information as required for on-the-go merchants selling 

products and services. The addition of barcode scanning opens the 

door to an array of payment-enabled business applications and 

vertical market solutions available on the iPhone platform. 


SmartPayments Mobile 

iPhone Smart Phone Solutions 

For merchants not requiring barcode scanning, the SmartPayments 

MobilePro features the same iPhone-protective card reader and 

signature capture for simple, fast and secure card processing. 

Additional standard features on both models include Hypercom’s 

end-to-end payment data protection, a built-in rechargeable 

battery that significantly increases usage time by not relying solely 

on the iPhone battery, dual battery recharging capabilities with 

a single cable, itemized emailed receipts, and an opening for the 

iPhone camera lens. 

Hypercom’s iPhone payment solution will be available though 

existing bank acquirers and Independent Sales Organizations (ISOs) 

as well as direct from Hypercom. 

Transactions initiated by SmartPayments Mobile will be managed 

through Hypercom’s SmartPayments Server and routed to one of 

many credit card processors for near instantaneous authorization 

and settlement. 

Both SmartPayments Mobile card readers fully encrypt all magnetic 

stripe card information immediately at card swipe, thus eliminating 

the potential of compromise either on the iPhone or when 

information is transmitted over WiFi or cellular wireless. 

Hypercom’s SmartPayments Server gateway processing solutions 

are deployed by more than 50 ISOs and transaction processors 

and offer a broad range of card processor and third-party payment 

certifications. Current merchant account users will be able to set 

up SmartPayments Mobile with their processor, and those in need 

of a merchant account will be provided with a variety of processing 

relationship options. First product shipments are expected in June 2010.

HRKS 

Hypercom Remote Key System 

hyperCom remote key SyStem 

In April 2009, we introduced Hypercom’s HyperSafe Remote 

Key System (HRKS) the industry’s first standards-based 

remote key injection product that allows retailers to quickly 

and securely initiate on-site, in store payment terminal key 

injection at the POS. The new system offers a fast and highly 

secure alternative to the industry’s traditional secure room key 

injection process. 

In November 2009, HRKS was awarded the globally 

prestigious Sesames Award in November at Cartes 2009. The 

Sesames Awards represent an unchallenged seal of approval 

for innovation and are regarded as the global standard for 

card manufacturers and related industries. 

By April 2010, HRKS had successfully completed more than 

250,000 injections. 

“We are thrilled with the response in the US, are ramping 

this up globally and have the potential to remotely inject 

an installed base of more than 800,000 Optimum payment 

terminals. HRKS streamlines the entire key injection process 

for retailers. It is a well proven and widely implemented 

product that lets merchants expedite migration to 3DES and 

eliminate shipping their terminals off-site,” said T.K. Cheung, 

Vice President, Global Quality and Security, Hypercom 

Corporation. 

vi. 

“Hypercom’s HRKS is the gold standard for remote key 

injection. Others will undoubtedly introduce their own 

variants, and while imitation is the highest form of flattery, 

savvy business professionals will opt for the proven leader 

over a wanna-be,” said Mr. Cheung. 

HRKS eliminates the need for off-site secure room key injection 

by incorporating PKI (Public Key Infrastructure) to securely 

distribute symmetric 3DES keys. HRKS meets ANSI x9.24 and 

Visa PIN Security Guidelines for remote key management, and 

is FIPS 140-2 Level 3 and X509 compliant. 

HRKS is available with Hypercom’s Optimum product line, 

including the T4200 countertop and M4200 mobile payment 

terminals, M4100 (“The Blade”), and L4100, L4150 and L4250 

multilane terminals installed globally since 2004. 

annuaL report 2009

vii. 

SmartpaymentS wynid Server-baSed payment SoLution 

In February 2010, we announced that Carrefour, the largest 

retailer in Europe and second largest worldwide, will deploy 

Hypercom’s Wynid ® server-based payment solution and more 

than 12,000 PIN Pads with EMV contactless readers at 210 of 

its French hypermarkets, as well as at all of Carrefour’s petrol 

stations in France. 

The multi-million dollar agreement is believed to represent 

one of the world’s largest deployments of EMV contactless 

readers and represents a significant expansion to Hypercom’s 

existing business with Carrefour. The giant retailer already 

uses Hypercom’s Wynid secure payment solution at 15,000 

cash registers in its Market, City and Contact stores. 

In March 2010, we announced that the Monoprix Group, 

one of the largest city center retailers in France, is now using 

Hypercom’s Wynid ® secure payment server to manage and 

process all card transactions from more than 300 of its 

retail outlets. The leading retailer has deployed Hypercom 

contactless-enabled PIN pads and mobile GPRS payment 

terminals to process IP transactions throughout its network of 

stores. Under the terms of the multi-year agreement, Hypercom 

is providing complete hosting and data management services 

for the Monoprix supermarket chain as part of a fully managed 

secure payment service. 


SmartPayments Wynid 

Server-based Payment Solution 

“More and more large retailers are turning to Hypercom 

to simplify the maintenance and support of their payment 

transactions. Monoprix’s adoption of our innovative, stateof-the-art 

payment technology is a splendid endorsement 

of the Wynid solution and represents a boost to our market 

share in the growing European multi-lane retail sector,” said 

Kazem Aminaee, President and Managing Director, Hypercom 

Southern EMEA. 

With the Wynid solution, consumers are ensured a secure 

and seamless payment process, using magnetic stripe, chip 

or contactless cards. Major retailers like Monoprix benefit 

from the ease and efficiency of the centralized transaction 

routing system, which enables them to proactively manage 

card transactions from all their points of sale, across a 

network of many different stores. The Wynid solution provides 

highly reliable network access and unmatched speed for all 

transaction types. 

Hypercom is a leading supplier of integrated payment solutions 

for the retail, petroleum, ticketing and parking sectors, with 

more than 120,000 points of sale using its Wynid payment 

system.

phoeniX managed networkS: 

data CommuniCationS ServiCeS For tranSaCtion-baSed appLiCationS 

In February 2010, Hypercom and The McDonnell Group 

completed the formation of a new venture, Phoenix Managed 

Networks, that will enable payment processors, banks and 

retailers worldwide to use highly reliable and cost-effective 

data communications services for transaction-based applications. 

“We are providing a focused, world class alternative for 

companies that are clearly seeking best-in-class solutions to 

their transaction transport needs, and we are doing it with 

a management team that is second to none. We believe this 

new venture led by Jack McDonnell will significantly enhance 

our ability to expand market share and deliver strong returns 

for Hypercom’s stockholders and business partners,” said 

Philippe Tartavull, Chief Executive Officer and President, 

Hypercom Corporation. 

“We are signing up new customers, demand is substantial, 

and we are moving quickly to seize growth opportunities in 

North America, Europe, Australia and New Zealand,” said 

Jack McDonnell, Chief Executive Officer of Phoenix Managed 

Networks, Managing Member of The McDonnell Group and 

former Chairman and CEO of Transaction Network Services, 

Inc. “We are bringing state-of-the-art, reliable and costeffective 

transaction communications services to the payments 

industry and we will aggressively expand the international 

business Hypercom established with HBNet.” 

viii. 

Phoenix Managed Networks has acquired and will operate 

Hypercom’s HBNet secure transaction transport business. 

Former TNS executive Matthew Mudd has joined the venture’s 

management team as President and Chief Operating Officer. 

Thirteen HBNET network operators and staff have transitioned 

to the new entity. The McDonnell Group has acquired a 

majority interest in the venture and will be responsible for its 

day-to-day operations. Hypercom remains a significant equity 

holder in the business. 

Phoenix Managed Networks utilizes Hypercom’s HBNet 

network to speed the authorization and processing of 

electronic transactions for retail point-of-sale, financial, 

government, health care and other customers in dial, wireless 

and IP POS markets. In addition, the company will utilize 

Hypercom’s SmartPay gateway technology to support wireless 

and IP-initiated transactions. 

HBNet is powered by robust, ultra high-density Hypercom 

technology strategically positioned within the North American 

Public Switching Telephone Network (PSTN) and at processor 

data centers. It supports all POS terminal protocols, provides 

uninterrupted service with no single point of failure, seamless 

load balancing, state-of-the-art Web-based reporting, and 

simple all-inclusive pricing. 

annuaL report 2009

iX. 


End-to-End 

Payment Solutions 

hyperCom StepS up end-to-end payment data proteCtion 

In October 2009, we announced that the Company was 

bringing its Asia-Pacific-based EFTSec Server payment 

data encryption technology to North America, Latin America 

and Europe, teaming with Voltage Security, Inc. to deliver 

highly innovative and scalable cryptographic technology, and 

forming a global data protection business unit to address 

customer-specific security threats with five key approaches to 

data security. 

End-to-End Payment Data Protection: 

Hypercom believes end-to-end payment data protection 

encompasses protecting data throughout its lifecycle—not 

only encrypting it when in transit but also when at rest in 

a merchant or payment processing enterprise environment. 

Hypercom also believes that the scope of payment data 

protection includes the use of strong security technology 

throughout the design, deployment, operation and maintenance 

of payment terminals and their applications including the 

loading and storage of debit keys that reside on those devices. 

• Line Encryption for Data in Transit: 

Line encryption encrypts cardholder data during transaction 

processing, starting at the payment terminal and ending 

at a trusted point where the data is decrypted. That trusted 

point can be within a large merchant or payment service 

provider environment. Hypercom was the first electronic 

payment solutions provider to initiate card data encryption 

with its EFTSec technology introduced in 2006. Developed 

to combat attacks then prevalent in several Asian 

countries, EFTSec is now the defacto industry standard for 

payment terminal initiated link encryption in Asia. EFTSec 

is already in use by seven major banks with combined assets 

of more than US$178 billion, and licensed to and 

implemented by several major terminal manufacturers. 

Unlike recently introduced competing solutions that require 

customers to purchase custom equipment or utilize third 

party decryption services, EFTSec leverages existing 

network infrastructure.

• Protection for End-to-End Data: 

Hypercom has teamed with Voltage Security, Inc. to 

implement cryptographic technology that delivers an array 

of end-to-end encryption across its product line. 

Management of card data at rest and in use is critically 

important and must be protected at all times. That 

said, portions of the data must be available for legitimate 

business purposes. Voltage’s technology provides 

businesses with strong protection without compromising 

flexibility or requiring major changes to existing business 

processes. The key benefit for banks, processors and large 

retailers: provides the technology to protect cardholder 

data throughout the enterprise. 

• Protection for Data During Operation and Maintenance: 

Protecting the operational procedures and maintenance 

of payment terminals is just as important as protecting 

cardholder data. Hypercom’s HyperSafe ® suite of security 

products defends terminals from rogue applications and 

malware, protects the terminal management system from 

communicating with fraudulent terminals and provides 

the industry’s only remote key management system. The 

key benefit for banks, processors and large retailers: 

protects their investment in the point of sale estate, reduces 

the potential for fraudulent use of terminals and ensures 

the secure transport of cryptographic keys. 

• Virtual Terminals: 

Segmenting a merchant’s point of sale system data from 

payment data is one method of reducing the scope of 

PCI DSS compliance for merchants. Virtual terminals are 

web-based secure platforms which easily integrate payment 

processing and business critical processes with ubiquitous 

client side applications and devices. By utilizing advanced 

server capabilities such as Hypercom’s SmartPayments 

and Wynid ® product suites, data segmentation can be 

easily achieved, enabling “large store functionality” for 

mid-size business environments. The key benefit for small 

and mid-size retailers: provides top-level security for 

sensitive cardholder data, reduces PCI DSS compliance costs. 

• Card Authentication: 

X. 

In addition to complete enterprise-wide end-to-end payment 

data protection, Hypercom supports the strengthening 

of card authentication as an important tool to prevent card 

skimming. Hypercom supports a number of technologies 

that, if broadly adopted, would significantly reduce 

fraud through card skimming. Technologies include 

contact and contactless chip cards, and Magnetic Stripe 

Image Authentication. Magnetic Stripe Image 

Authentication is an innovative dynamic digital 

authentication solution that detects counterfeit magnetic 

stripe credit, debit, gift and ATM cards. Whenever a card is 

used at a payment terminal, magnetic stripe security imaging 

authenticates the card’s legitimacy in real time by matching 

each magnetic stripe’s unique ‘noise fingerprint’ against 

the ‘fingerprint’ originally obtained from the legitimate card. 

The key benefit to retailers: protects the cardholder against 

credit card ‘skimming’ fraud wherein criminals copy the 

data encoded on a legitimate card and produce a 

fraudulent card. 

“One solution does not fit all when it comes to payment 

card data protection. The payment industry is highly complex 

and requires a range of solutions each of which can protect 

the various elements that comprise an end-to-end solution. 

To that end, we are making available the smartest array of 

security approaches providing choices for businesses of all 

types to fortify their defenses and protect cardholder data 

against current and future threats. The addition of Voltage 

Security’s end-to-end encryption to our arsenal of crimefighting 

technologies together with EFTSec and HyperSafe 

suite of security products allows us to deliver the industry’s 

most comprehensive selection of security solutions,” said 

T.K. Cheung, Vice President, Global Quality and Security, 

Hypercom Corporation. 

annuaL report 2009

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

________________ 

Form 10-K 

� ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2009 

or 

� TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from to 

Commission file number: 1-13521 

Hypercom Corporation 

(Exact name of registrant as specified in its charter) 

Delaware 86-0828608 

(State or other jurisdiction of (I.R.S. Employer 

incorporation or organization) Identification No.) 

8888 East Raintree Drive, Suite 300, 

Scottsdale, Arizona 85260 

(Address of principal executive offices) (Zip Code) 

(480) 642-5000 

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act: 

Title of Each Class Name of Each Exchange on Which Registered 

Common Stock, $.001 par value per share New York Stock Exchange 

Securities registered pursuant to Section 12(g) of the Act: 

None 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes � No � 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 

and (2) has been subject to such filing requirements for the past 90 days. Yes � No � 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will 

not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part 

III of this Form 10-K or any amendment to this Form 10-K. � 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 

reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 

of the Exchange Act. 

Large accelerated filer � Accelerated filer � Non-accelerated filer � Smaller reporting company � 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 


As of June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was 

$51,308,669 based on the closing sale price as reported on the New York Stock Exchange. Shares held by executive officers, directors 

and persons owning directly or indirectly more than 10% of the outstanding common stock have been excluded from the preceding 

number because such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a 

conclusive determination for other purposes. 

Class Outstanding at March 9, 2010 

Common Stock, $.001 par value per share 54,647,787 shares 

DOCUMENTS INCORPORATED BY REFERENCE 

Document Parts Into Which Incorporated3 

Notice and Proxy Statement for the 2010 Annual Part III (Items 10, 11, 12, 13 and 14) 

Meeting of Stockholders (Proxy Statement)

TABLE OF CONTENTS 

Item No. Caption Page 

PART I 

1. Business 2 

1A. Risk Factors 13 

1B. Unresolved Staff Comments 25 

2. Properties 25 

3. Legal Proceedings 26 

4. (Removed and Reserved) 27 

5. 

PART II 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 

Securities 

27 

6. Selected Financial Data 27 

7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 

7A. Quantitative and Qualitative Disclosures About Market Risk 42 

8. Financial Statements and Supplementary Data 43 

9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 43 

9A. Controls and Procedures 43 

9B. Other Information 46 

PART III 

10. Directors, Executive Officers and Corporate Governance 46 

11. Executive Compensation 46 

12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 46 

13. Certain Relationships and Related Transactions, and Director Independence 47 

14. Principal Accountant Fees and Services 47 

PART IV 

15. Exhibits and Financial Statement Schedules 47 

Signatures 48 

Exhibit Index 87

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

This report and certain information incorporated by reference herein contains forward-looking statements within the meaning of 

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In 

passing the Private Securities Litigation Reform Act of 1995, as amended (the “Reform Act”), Congress encouraged public companies 

to make “forward-looking statements” by creating a safe harbor to protect companies from securities law liability in connection with 

such forward-looking statements. We intend to qualify both our written and oral forward-looking statements for protection under the 

Reform Act and any other similar safe harbor provisions. 

“Forward-looking statements” include expressed expectations of future events and the assumptions on which the expressed 

expectations are based. The words “believe,” “expect,” “anticipate,” “intend,” “forecast,” “estimate,” “project,” “will” and similar 

expressions identify forward-looking statements. Such statements may include, but are not limited to, the severity and duration of the 

current economic and financial conditions, the state of the electronic payments industry and competition within the industry; 

projections regarding specific demand for our products and services; the level of demand and performance of the major industries we 

serve, including but not limited to the banking sector; the commercial feasibility and acceptance of new products, services and market 

development initiatives; our ability to successfully penetrate the vertical and geographic markets that we have targeted; our ability to 

improve our cost structure, including reducing our product and operating costs; our ability to develop more recurring revenue streams; 

our ability to successfully manage our contract manufacturers and our transition to a joint development manufacturing model, 

including the impact on inventories; our ability to allocate research and development resources to new product and service offerings; 

our ability to increase market share and our competitive strength; our future financial performance and financial condition; the 

adequacy of our current facilities and management systems infrastructure to meet our operational needs; the status of our relationship 

with and condition of third parties upon whom we rely in the conduct of our business; the sufficiency of reserves for assets and 

obligations exposed to revaluation; our ability to successfully expand our business and increase revenue; our ability to integrate and 

obtain expected results and benefits from future acquisitions; our ability to effectively manage our exposure to foreign currency 

exchange rate fluctuations; our ability to sustain our current income tax structure; the impact of current and future litigation matters on 

our business; our ability to fund our projected liquidity needs and pay down outstanding debt obligations from cash flow from 

operations and our current cash reserves; our ability to remain compliant with and provide transaction security as required by relevant 

industry standards and government regulations; and future access to capital on terms that are acceptable, as well as assumptions 

related to the foregoing. All forward-looking statements are inherently uncertain as they are based on various expectations and 

assumptions concerning future events and are subject to numerous unquantifiable risks and uncertainties, some of which are unknown, 

that could cause actual events or results to differ materially from those projected. Due to such risks and uncertainties, you should not 

place undue reliance on our written or oral forward-looking statements. We are under no obligation, nor do we intend, to update or 

revise such forward-looking statements to reflect future developments, changed assumptions, the occurrence of unanticipated events, 

or changes to future operating results over time. 

We provide the risk factor disclosure contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K in connection 

with our continuing effort to qualify our written and oral forward-looking statements under the safe harbor protection of the Reform 

Act and any other similar safe harbor provisions. Many of the important factors currently known to management that could cause 

actual results to differ materially from those in forward-looking statements include such risks contained in our “Risk Factors” section. 

- 1 -

PART I 

Unless otherwise indicated, the terms “Hypercom,” “the Company,” “we,” “our,” and “our business” refer to Hypercom 

Corporation and its subsidiaries on a consolidated basis. 

Item 1. Business 

General 

Hypercom Corporation is one of the largest global providers of complete electronic payment and transaction solutions and valueadded 

services at the point of transaction. Our vision is to be the world’s most recognized and trusted brand for electronic transaction 

solutions through a suite of secure and certified, end-to-end electronic transaction products and software, as well as through a wide 

range of support and maintenance services. Our customers include domestic and international financial institutions, electronic 

payment processors, transaction network operators, retailers, system integrators, independent sales organizations (“ISOs”) and 

distributors. We also sell our products to companies in the hospitality, transportation, healthcare, prepaid card and restaurant 

industries. Customers around the globe select us because of our proven leadership and expertise in the global electronic payments 

industry, commitment to our customers’ success, continued support of technologies and the quality and reliability of our products and 

services. We deliver convenience and value to businesses that depend on reliable, secure, high-speed and high-volume electronic 

transactions. 

We believe our strength lies in our people, technology and a commitment to delivering excellent value to our customers. Our 

products enable our customers to accept a wide range of payments and other transactions, including credit cards, signature and PIN 

(Personal Identification Number) based debit cards, contactless identification and near field communications (“NFC”), stored-value 

cards, and electronic benefits transfer. We will continue to enhance our product and service portfolio, and make long-term investments 

in technology for the evolving needs of our customers. We are positioned to meet the increased demands of the global marketplace 

and capitalize on key geographic and vertical market opportunities in order to achieve our goal of increasing market share and 

profitability. 

Recent Developments 

In a transaction that closed in February 2010, Hypercom and The McDonnell Group formed a new venture, Phoenix Managed 

Networks, LLC, which equips payment processors, banks and retailers worldwide with highly reliable and cost-effective data 

communications services for transaction-based applications. Phoenix Managed Networks acquired and operates Hypercom’s HBNet 

secure transaction transport business. Industry veteran John McDonnell, Jr. serves as CEO of Phoenix Managed Networks. Mr. 

McDonnell is the founder and former Chairman and CEO of Transaction Network Services, Inc. We believe that the combination of 

our HBNet business and Mr. McDonnell’s in-depth knowledge and expertise in data communications will enhance our ability to 

expand market share and deliver strong returns for Hypercom’s investors and business partners. 

Business History 

We design and sell a variety of electronic transaction terminals, peripheral devices, transaction networking devices, transaction 

management systems, application software and information delivery services. Additionally, we provide directly, or through qualified 

contractors, support and related services, which include maintenance, on-site technology assessments, network training, and design 

and implementation. 

Founded in 1978, in Australia, our operations were primarily focused on Asia-Pacific markets until 1987, when we expanded our 

operations into the United States, and later into South America, Central America, Europe, and the Middle East. We reincorporated in 

1996 under the laws of Delaware and shortly thereafter, through a series of corporate restructurings, became a U.S. holding company 

for the Australian corporation and its subsidiaries. In 1997, we completed an initial public offering of our common stock, which is 

listed on the New York Stock Exchange (“NYSE”) under the symbol “HYC.” 

We report our operating information in four business segments as follows: (i) the Americas, (ii) Northern EMEA (“NEMEA”), 

(iii) Southern EMEA (“SEMEA”), and (iv) Asia-Pacific. The Americas consist of the U.S., Canada, Mexico, the Caribbean, Central 

America, and South America. NEMEA consists of Germany, Austria, Scandinavia, and the Benelux countries. SEMEA consists of 

France, Spain, the United Kingdom, Ireland, Eastern Europe, Russia, the Middle East, and Africa. Asia-Pacific consists of China, 

India, Japan, Korea, Southeast Asia, Australia, and New Zealand. See Note 22 to our consolidated financial statements included 

herein. 

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On April 1, 2008, we acquired all of the outstanding shares of Thales e-Transactions SA, Thales e-Transactions GmbH, Thales e- 

Transactions Ltd, and Thales e-Transactions España, (collectively, “Thales e-Transactions” or “TeT”). Thales e-Transactions was a 

leading provider of secure card payment solutions in some of Europe’s largest markets, including France, Germany, Spain and the 

United Kingdom. With the acquisition, Hypercom has become one of the largest providers of electronic payment solutions and 

services in Western Europe, solidifying our position as the third largest provider globally, and expanded our team of industry experts 

that will lead our operations going forward. 

With worldwide headquarters in Scottsdale, Arizona, we market our products in more than 100 countries through a global 

network of sales, service and development offices. Our main regional sales headquarters are located in the U.S., Brazil, Mexico, 

France, Germany, and the Philippines. 

Electronic Payments Industry 

Over the past several decades, consumers worldwide have increasingly utilized card-based payment methods, such as credit, 

debit, and gift cards, to replace checks and cash. Card-based payments require the use of a point of sale (“POS”) terminal capable of 

reading a cardholder’s account information from the card’s magnetic stripe or chip and combining this information with the 

transaction information. The POS terminal electronically captures and securely transmits this information over a communications 

network to an authorized computer data center and then displays the returned approval or denial response. 

The structure of the electronic payments industry is best described by examining the entities involved and their relationship to one 

another. Card associations, like Visa and MasterCard, which license their “brand” to card issuers, such as banks, operate high volume 

communications networks connecting card issuers with transaction processors. Card associations also define the standards that POS 

terminals must meet to be certified for use in their respective networks. Transaction acquirers and their agents sign up merchants, 

install POS terminal equipment, capture the transaction data, and route it through the credit or debit card network to obtain transaction 

approval. Payment processors charge an interchange fee to authorize the customers’ transactions, providing a tally of these 

transactions to merchants, and transfer funds to merchants to cover card purchases. Card issuers provide consumers with the payment 

card and settle their accounts. Equipment providers make the POS terminal hardware and software and, in our case, also network 

equipment upon which high-performance and secure payment processing networks rely. Transaction services providers facilitate the 

delivery of the transaction data between merchants and payment processors. This structure may vary in each geographic region or 

country where multiple functions may be performed by a single entity such as a bank. 

Card associations, bank card issuers, transaction acquirers and payment processors are differentiating their offerings, in part, by 

offering value-added applications and incorporating innovative acceptance technologies including contactless, biometrics and flexible 

connectivity options like wired and wireless internet protocol technologies. As a result, electronic payment systems that can run 

multiple value-added applications and incorporate emerging technologies are becoming increasingly important in today’s market. 

Payment systems require an exceptionally high level of reliability and security, as even an apparently small system failure or a 

security breach can have significant consequences. The electronic payments industry operates in a secure environment of dedicated 

systems, applications, specialized hardware products and access networks. The industry will continue to evolve as the demands of the 

market and the rules that govern its standards and security change rapidly. 

During 2009 and continuing into 2010, there has been continuing focus on the security of the payment system. Several large 

breaches of transaction processors’ and retailers’ systems around the world have resulted in increasing levels of fraud. As a result, 

there has been an increased focus on the security standards and audit requirements followed by the industry. In order to promote a 

common understanding of published security requirements and develop security best practice guides, Hypercom, Ingenico SA 

(“Ingenico) and VeriFone Holdings, Inc. (“VeriFone”) formed the Secure POS Vendors Alliance (“SPVA”) in April 2009. 

Under current industry rules, retailers around the world have been forced to invest considerably in security audits in order to 

demonstrate compliance with the Payment Card Industry (“PCI”) security requirements. These audit expenses can extend into the 

millions of dollars yet, as has been demonstrated by several breaches, does not guarantee immunity from security breaches. As a 

result, in 2009 we began to see some major retailers outsource to third parties their complete payment systems, from card swipe or 

insertion through transaction settlement and reporting, in order to remove all payment card data from their systems and significantly 

reduce or eliminate their PCI audit expense. Hypercom has been successful in providing outsourced payment solutions for several 

large retailers in France, and our expectation is that this is a trend that will continue to grow across all major card payment markets 

and geographies, which we believe will provide us with future growth opportunities. 

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Market Size and Barriers to Entry 

The POS terminal market is highly concentrated with the top three POS terminal providers accounting for the majority of 

terminals shipped. A recent independent research report estimated the three top companies (VeriFone, Ingenico and Hypercom) 

represent 79.6% of worldwide shipments. The remaining portion of the market is spread among approximately 15 providers who 

compete on either a regional or local country basis, within specific markets or with a limited range of products and services. We 

believe the following market constraints are barriers to entry and may inhibit the ability of certain terminal providers to take advantage 

of future market growth in our industry: 

• Price. Pricing is a significant consideration in our customers’ purchase decisions. Consequently, terminal providers have 

been increasingly challenged to deliver products and services that target critical specifications at competitive price points. 

• Scale. The design, manufacture and distribution of POS terminals on a global basis requires a significant investment in 

development, manufacturing and distribution resources. As a result, smaller or regional providers may have limited ability to 

compete with larger providers who can spread costs on a broader basis at higher volumes. 

• Certification Standards and Costs. All payment solutions must be certified with card associations, financial institutions and 

payment processors. Many banking organizations have their own national or even regional standards for communications 

messaging, user operation, security and local card acceptance. These standards and certification requirements are constantly 

changing and the certification process can be a lengthy and expensive undertaking. Several terminal providers in the industry 

lack the relationships, knowledge and experience necessary to obtain these certifications quickly and cost-effectively, thereby 

limiting or delaying their time to market and overall competitiveness. 

• Commitment to Future Technologies. New standards, regulations and certifications in the electronic payments industry 

require terminal providers to continually develop new technologies that enhance the performance and profitability of both 

customers and end-users. Such requirements necessitate significant annual investment in research and development. 

• Global Presence. Large customers may prefer terminal providers that have a worldwide presence with the ability to provide 

services and support in many geographic regions. Smaller or regional providers may be competitive in their niche, but they 

may not be able to provide cost-effective equipment, services and timely support on a global scale. 

Market Growth Drivers 

The following are a number of factors that have contributed to recent growth in our industry that we believe will continue to do so 

in the near future: 

• Security Standards. New industry security and interoperability standards are driving recertification and replacement of 

electronic payment systems, particularly in Europe and the U.S. In order to offer electronic payment systems that connect to 

payment networks, electronic payment system providers must certify their products and services with card associations, 

financial institutions and payment processors as well as comply with government and telecommunication company 

regulations. The major card associations have introduced new security standards to address the continually growing need for 

transaction security. The two major security standards initiatives in the industry are EMV and PCI. The name EMV comes 

from the initial letters of EuroPay International, MasterCard International and Visa International, the three companies that 

originally cooperated to develop the standard. EMV is a set of global specifications for cards, terminals, and applications 

designed to ensure interoperability between smart cards and electronic payment systems on a global basis, increase 

functionality of electronic payment systems and reduce fraud. The move to comply with EMV specifications should continue 

to significantly promote terminal replacement, particularly in regions such as Europe, Asia-Pacific, and Central and South 

America, where EMV implementation conversion dates have been established. Visa International and MasterCard 

International cooperated in recent years to develop and release the PCI specification and test methods for the certification of 

electronic payment systems for secure debit transactions. This new set of standards supersedes previous security standards 

separately issued by Visa and MasterCard (not including EMV) and has been a driver of additional terminal replacement. 

In late 2008 and early 2009, there were several high profile security breaches in Tier 1 payment transaction processors in the 

U.S. These breaches in systems that had been certified as compliant with PCI standards is causing a review of the existing 

standards and may result in an industry move, at least in the U.S., to mandate end-to-end encryption (“E2EE”) of payment 

transactions. During 2009, we have seen an increasing focus on E2EE. As of the end of 2009, few customer pilots are 

operational; however, we expect that, in 2010 and following years, large rollouts of E2EE systems will take place in the U.S. 

and other countries that have not migrated to EMV style chip cards. It should be noted, however, that EMV is not a complete 

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solution against payment card fraud. Several large transaction processors and acquirers in EMV based countries (particularly 

the United Kingdom) are considering rolling out E2EE solutions to securely encapsulate the EMV transaction messages. 

• Interoperability Standards. In the U.S., payment processors have two levels of certification, referred to as Class A and Class 

B. Class B certification ensures that an electronic payment system adheres to the payment processor’s basic functional and 

network requirements. Class A certification adds another stipulation that the payment processor will support the electronic 

payment system on its internal help desk systems. Obtaining these certifications can be costly and time intensive, and is 

required by U.S. payment processors. In other countries outside of the U.S., payment applications have to be certified with 

local banks, processors or card schemes. Electronic payment systems must also comply with evolving country-specific 

security regulations. Countries such as Australia, Canada, Germany, the Netherlands, New Zealand, Singapore, Sweden and 

Switzerland have particularly stringent and specific security standards. Electronic payment systems must also comply with 

recommendations of quasi-regulatory authorities and standard-setting committees, which address, among other things, fraud 

prevention, processing protocols and technologies utilized. New standards are continually being adopted as a result of 

worldwide fraud prevention initiatives, increasing the need for system compatibility and new developments in technology. 

These complex and evolving requirements will provide an opportunity for continuous replacement of outdated equipment 

with newly certified electronic payment systems. 

• Broadband & Internet Protocol. Internet Protocol (“IP”) connectivity provides faster transmission of transaction data at a 

lower cost, enabling more advanced payment and other value-added applications at the point of sale. Major 

telecommunications carriers have expanded their communications networks and lowered fees to allow more merchants to 

utilize IP networks cost effectively. The faster processing and lower costs associated with IP connectivity have opened new 

markets for electronic payment systems, many of which have previously been primarily cash-only industries such as quick 

service restaurants (“QSRs”). 

• Contactless. Contactless technology, based on the deployment of contactless cards or NFC-enabled mobile telephones, 

creates a convenient way to pay for goods and services. It is an emerging technology that is rapidly gaining acceptance due to 

its delivery of extremely fast transaction times, reduced waiting times and elimination of the need for paper signatures and 

receipts. It is especially suitable for access control and use in cafeterias, QSRs, gas stations and public transit systems. 

• Wireless. Wireless electronic payment solutions are being developed to increase transaction efficiency and mobility. 

Wireless terminals can provide consumers with additional security by allowing them to maintain control of their payment 

card at all times. Additionally, the cost per transaction using wireless terminals may be lower than that of wired terminals in 

regions burdened with high telecommunications costs such as Europe and Asia-Pacific. It also enables terminal deployment 

in those regions lacking an established landline telecommunications infrastructure. We provide IP, Code-Division Multiple 

Access (“CDMA”), General Packet Radio Service (“GPRS”), Bluetooth and Wi-Fi connectivity across our range of wireless 

products. 

• Debit. Debit is the dominant payment instrument in most international markets and is rapidly growing in the U.S. Debit 

cards allow banks to reach a wider population of potential cardholders, thereby increasing the number of transactions. The 

cost of a debit transaction is generally lower than that of a credit transaction and combined with PIN-based security or 

biometric technology, provides a solution that helps reduce fraud. As a consequence, electronic payment is now an affordable 

and convenient option in markets lacking a significant consumer credit base as well as for small ticket or lower margin 

merchants. 

• Emerging Regions and Markets. In the U.S. and Europe, consumer markets such as QSRs and unattended/self service have 

started using IP terminal devices. These lesser penetrated vertical markets represent a significant opportunity for us, as well 

as other geographies in each of our business segments, such as Brazil, China, Eastern Europe, India, Mexico and Russia, 

which are experiencing rapid growth in the usage of card-based payments. The increasing adoption of electronic payments in 

these regions is driven primarily by economic growth, improving telecommunications infrastructure development, strong 

support from governments seeking to increase sales tax collection, and the dramatic increase of wireless networks for voice 

and data communications. 

• Multiple Applications. In addition to payment, terminals have the capability to perform concurrent applications like loyalty, 

stored value, on-screen advertising, electronic signature capture, age identification, and benefits authorization and transfer. 

The secure integration of these applications along with payment processing provides a comprehensive solution that allows 

merchants a means of competitive differentiation, revenue enhancement and cost reduction. 

• Smartphone Based Terminals. With the increasing processing power and popularity of Smartphone and PDA devices in the 

hands of the small or occasional merchant, there is an emerging opportunity to enable these devices to accept card based 

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payments. These devices have been capable of taking card payments where the card number is manually entered into the 

application running on the device for some time. However, a manually-entered card number attracts a considerably higher 

transaction cost than one where the physical card is swiped or entered (card present transaction). Recently, some providers 

have offered mobile “add-on” hardware and software applications, particularly around the Apple iPhone, whereby a device 

can be attached to the Smartphone or PDA to enable card present transactions to take place. While deployment of these types 

of devices may have some effect on the sales of existing mobile payment terminals, it is expected that the overall total 

available market for mobile payments will increase. 

• Non-Traditional Applications. The healthcare sector is a significant opportunity for terminal providers, particularly in 

European Union countries. Electronic transaction terminals and transaction services technology can be utilized in the 

healthcare sector to provide fast and secure transmission of health benefits eligibility, authorization and payment. 

Additionally, strong industry and consumer support for unattended payment terminals and kiosks, particularly in the areas of 

gasoline/petrol stations and mass transit, provides a growing market for these equipment makers. Lastly, the government 

sector, particularly in the U.S., has produced initiatives such as identity verification, check imaging/conversion, electronic 

benefit transfer programs, and the U.S. military’s payment programs, all of which are potential drivers of terminal 

deployment. 

Competition 

The electronic payments industry is intensely competitive and subject to an increasing rate of technological change, evolving 

customer requirements and changing business models. Despite the previously discussed barriers to entry, the rapid pace of 

technological change creates new opportunities for existing competitors and start-ups, and may render existing technologies less 

valuable. Customer requirements and preferences continually change as new technologies emerge or become less expensive, and as 

concerns such as security and privacy rise to new levels. 

We face competition from well-established companies and entities with differing approaches to the market. Our main direct 

global competitors are Ingenico, a French company, and VeriFone, a U.S. company, both of which are publicly-held companies that 

are substantially larger and historically more profitable than we are. These two competitors have grown larger and have entered new 

markets through a spate of acquisitions in recent years, including Ingenico’s acquisitions of Sagem Monetel in France and EasyCash 

in Germany, and VeriFone’s acquisition of Lipman Electronic Engineering in Israel. In any particular market, we may also find 

ourselves in competition with local or regional providers. 

In our multi-lane business line (department stores, grocery stores, QSR and other merchants), we compete with additional vendors 

including Fujitsu, Hand Held Products (a division of Honeywell International Inc.) and Retail Solutions Inc. 

Competitive Strategy 

Our strategy is to distinguish ourselves by combining operational excellence, technology and customer relationships with an endto-end 

comprehensive portfolio of products and services that drives merchant revenues and reduces their total cost of ownership. Key 

elements of our competitive strategy include: 

• Further Penetrate Existing Markets. We plan to continue promoting and marketing the functionality of our product portfolio 

to address the specific needs of key vertical markets. We intend to continue to focus on increasing our penetration in the 

following markets: automatic teller machines (“ATMs”), Electronic Benefit Transfer (“EBT”) and eHealth, as well as 

unattended applications such as transportation ticketing and integrated kiosks. In planning to maintain our leadership in the 

independent retail market, we have further organized our products to target high-end and low-end markets, through 

acceptance of magnetic stripe and smart cards, support of credit, debit, check, EBT and a full range of prepaid products, 

including gift cards and loyalty programs, among others. Our products are easily integrated with a full range of optional 

internal or external devices, including secure PIN pads, check imaging equipment, barcode readers, contactless and NFC 

readers and biometric devices. Our secure PIN pads support credit and debit transactions, as well as a wide range of 

applications that are either built into electronic payment systems or connect to electronic cash registers (“ECRs”) and other 

electronic payment systems. 

• Capitalize on Demand for Wireless Transactions. We plan to accommodate the growing demand for reliable, secure, 

convenient and cost-efficient wireless devices. Potential users of this technology include mobile merchants such as taxi and 

delivery drivers, in-flight airline service providers, stadium event operators, off-site services and pay-at-table restaurants. 

These merchants are looking for a terminal that utilizes the convenience of wireless communication technologies and the 

security of being able to receive real-time authorizations with the reliability of a wired terminal. Simultaneously, we are 

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aggressively transitioning into the consumer transaction market by providing processing alternatives like stored value and 

prepaid replenishment services for the transportation sector and digital wallet technology as an alternative to cash payments. 

• Capitalize on Terminalization Requirements of Emerging Geographic Regions. We plan to continue seeking opportunities to 

expand global market share by leveraging our product portfolio and distribution channels in emerging, high-growth regions in 

Europe, Asia-Pacific and South America. In addition to expanding into new geographic markets, we will benefit from a 

replacement cycle that is ongoing in various geographic regions for a variety of reasons, including valued-added technologies 

(signature capture, contactless, multi-application); new security standards (EMV and PCI); and newer communications 

technologies (wireless, IP connectivity). 

• Focus on Market-Driven Product Development. We plan to continue concentrating our research and development resources 

on new products and services that address current and near future requirements of our customers. We plan to focus our 

development efforts in the following areas: enhanced security at the terminal and transaction level; advanced communications 

technologies such as IP-enabled and wireless terminals; multiple-application; contactless technologies; and products for new 

vertical markets such as unattended/integrated kiosks and ATMs. We will continue to work with our customers to ensure our 

products meet their needs and technical requirements, and are brought to market in a timely and cost-effective manner. 

• Continue to Pursue Recurring Revenue Opportunities. We plan to further identify and pursue opportunities that are 

complementary to our existing products to provide recurring revenue, including expanding our services business, which 

provides deployment, help-desk, repair and other post-sale services in Australia, Brazil, Chile, France, Germany, Mexico and 

the United Kingdom. We will continue to pursue similar opportunities that will help us enhance our primary business of 

terminal manufacturing to a more diversified business model that includes both one-time and recurring revenue streams. 

• Consider Strategic Acquisitions and Joint Ventures. We may augment our growth by acquiring complementary businesses, 

new products to enhance our core competencies, or new technologies to complement our research and development activities 

or enter into additional joint ventures. Any acquisition or joint venture would be intended to broaden our suite of electronic 

payment solutions, expand our presence in selected geographies, broaden our customer base, expand recurring revenue 

opportunities or increase our penetration of selected channels and vertical markets. 

• Clearly delineate our business from that of our customers. During 2009, we have seen our two main competitors execute 

strategies that place them in direct competition with some of their customers. We believe that we can gain market share as a 

result of these actions. Our marketing message emphasizes that we will respect our customers’ businesses and try to avoid 

entering into arrangements that place us in direct competition with customers, unless mutually agreeable. 

Product Lines and Services 

Our products and services include electronic transaction terminals, peripheral devices, application software, transaction 

networking devices, transaction management systems, asset management services, transaction services, and payment solutions. Unless 

otherwise noted below, we sell a full range of products and services in the Americas, NEMEA, SEMEA and Asia-Pacific business 

segments. We completed the migration from the TeT product set and are moving to a common terminal architecture. 

Terminals and Peripherals 

We currently offer the following terminal and peripheral products, the sale of which accounted for 74.7%, 73.9%, and 71.3% of 

total revenues during the years ended December 31, 2009, 2008, and 2007, respectively. 

• Terminals — includes the Optimum L4150, and L4250—compact, high-performance signature capture and PIN entry card 

payment terminals specifically designed for multilane retailers; the Optimum T4200 family—powerful 32-bit desktop 

terminals for true multiple applications; the Artema Hybrid, Artema Compact and Artema Desk family of countertop 

terminals specifically designed to manage highly secure EMV transactions in markets formerly served by TeT; the Optimum 

M4100, M4230 and M4240—mobile terminals that leverage the latest in wireless communication technologies. 

• Peripherals — includes printers, PIN pads, check readers, receipt capture devices, biometric, NFC verification devices and 

external modems. Our family of durable, high-security PIN pads and card acceptance devices are designed for either indoor or 

outdoor use. The products include the Optimum P2100—a PIN pad for integrated retail environments (currently offered only 

in our NEMEA and SEMEA segments); the P1300 family—PIN entry devices that meet the latest PCI security standards; the 

S9 family—secure PIN pads that include integrated card readers; and the S1200 and S1300—the outdoor components to our 

QSR drive-thru solution. The PIN pad product family is augmented with the Artema PIN Hybrid and Artema S10 PIN Pads 

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servicing the high security markets formerly served by TeT. The Wymix PIN Pad, which has a built-in contactless reader, is 

installed in the large retail market segment serviced by the Wynid family of retail payment solutions, including some of the 

world’s largest retailers. 

• Unattended Solutions — includes a range of PIN pads and keyboards, card readers and payment controllers designed to 

permit the efficient integration of payment functionality in a variety of self-service environments such as transportation 

ticketing, gasoline/petrol station pumps, on and off-street parking machines, and general purpose kiosks. As well as being a 

leading supplier of highly secure Encrypting PIN Pads (“EPPs”) for ATMs, our unattended payment solution, Artema 

Modular, is widely regarded as best-in-class by the many system integrators who have deployed it worldwide. 

• eHealth — in 2008 we launched the medLine family of terminals to support the next generation German eHealth healthcare 

system. The medLine family includes a full range of terminal devices for both attended and unattended environments within 

the public healthcare environment. 

Transaction Networking Devices, Transaction Management Systems and Application Software 

Products that interface with our terminal technology include our industry exclusive network access controllers and gateway 

devices specifically designed to support the unique requirements of high volume/high value transaction-based networks. Products in 

this family include the MegaNAC 180 and 8000, ATMConnect and the IN- tact family of Ethernet/Internet gateway devices. Every 

network application software program we produce includes a management and control module that interacts with our HypercomView 

management system to monitor system operations. We also offer a complete portfolio of software applications for terminal operations, 

network device operations, systems development and management, and retail POS systems designed for use on a personal computer 

(“PC”). 

Services 

We are committed to providing a high level of service and support to our customers either directly, or through our distributors or 

other third-party providers. We offer a wide range of support services that contribute to the increased profitability of our customers 

and meet their individual needs. Our service business is organized around three important markets: asset management services; trusted 

transaction services; and payment solutions. Services accounted for 25.3%, 26.1%, and 28.6% of total revenues during the years ended 

December 31, 2009, 2008, and 2007, respectively. 

Asset Management Services — Our services organizations are focused on protecting our customer’s investment in payment 

systems and principally provide deployment, help desk, repairs, extended warranties, on-site support, logistics and inventory 

management services, as well as payment systems supplies provisioning. Additionally, these entities manage special projects such as 

software uploads or terminal enhancement programs requested by our customers. Terms of our service arrangements are set forth in 

separate service contracts ranging from one to five years, although termination is allowed with appropriate advance notification. In 

many cases we provide services not only for our products, but also for other manufacturers’ terminals and other hardware. Revenues 

under these contracts are recognized as we perform the service. Asset management revenue accounted for 15.2%, 17.2%, and 24.4% 

of total revenues during the years ended December 31, 2009, 2008, and 2007, respectively. 

• Full Service Centers — In several markets we offer the full array of Asset Management Services to major banks, card 

associations and other customers in our industry. Our service organization in Brazil is our largest, covering, directly and 

indirectly (through the use of third-party contractors), all of Brazil with multiple service centers and service resources located 

throughout the country. We continually seek to expand our service market share by increasing the deployed population of our 

terminals and product offerings in Brazil, as well as servicing terminals manufactured by our competitors. Our service 

organizations in Mexico, Chile, the United Kingdom, France, and Australia operate under a similar business model as that in 

Brazil and cover substantially all of their respective countries. 

• Pan-region Repair Services — Through NetSet Americas Centro Servicio, our repair facility in Hermosillo, Mexico, we 

provide quality repair services for in-warranty and out-of-warranty equipment repairs to North American customers. Similar 

Hypercom repair depots are strategically located in other locations, including the United Kingdom, Germany, and China. 

• Authorized Repair Facilities — In addition to our direct repair service offerings, we selectively authorize capable third-party 

repair facilities to service and repair Hypercom equipment through our Authorized Repair Facility program. This program 

seeks to offer increased choices for repair service with our assurance of repair service quality and cycle time for our 

customers. 

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Trusted Transaction Services — Our Trusted Transaction Services provide value-added data communication and other value 

added services for transaction-based applications through our new venture with the McDonnell Group, Phoenix Managed Networks, 

LLC. These capabilities include such functionality as protocol conversion, intelligent transaction routing and web-based, transactionlevel 

reporting. As technologies such as IP and wireless take hold at the point of sale, this market will see a growing shift toward more 

sophisticated applications. Trusted Transaction Services provide a support infrastructure for our multi-application operating systems to 

quickly and cost-effectively deliver transactions to diverse processing entities. Early adopters include organizations involved in 

biometrics, health care, prepaid, micropayments, gift and loyalty. Market penetration of these complex applications is expected to 

dramatically increase in coming years as the consumer interaction can be transacted in several seconds with broadband connectivity, 

as compared to several minutes over dial-up connection. We believe Trusted Transaction Services will continue to support our growth 

beyond the payments industry into the information delivery market. 

Additionally, in 2008 we launched the Hypercom Mobile Network (“HMN”). HMN permits a wireless payment device to be 

provisioned with a HMN SIM (subscriber identity module card) at the manufacturing or logistics center. The HMN SIM is only 

activated on deployment of the device and permits the terminal to connect to the wireless communications carrier with the strongest 

wireless signal in the area. The HMN offers a range of control and reporting functions to ease management of a large number of 

wireless devices, thereby significantly reducing the total cost of ownership for the device owner. 

Hypercom Payment Solutions — Traditionally, only large retail merchants have been able to implement POS systems with 

interactive payment terminals. Through the acquisition in December 2006 of the existing technology and assets of TPI Software, LLC 

(“TPI”), a U.S.-based enterprise payment solutions business, we expanded our transaction services portfolio with the introduction of 

PC-based payment solutions, including support for PC-based retail POS systems, which enables us to broaden our customer base to 

include small- and medium-sized retailers. Hypercom Payment Solutions is also enabling the generation of new revenue streams by 

addressing the technology requirements of, and rising market interest in, a converged payment infrastructure that places electronic 

payment functionality on PC-based cash registers. Our strategy is to increase our recurring revenue stream by charging for enterprise 

payment services. Hypercom Payment Solutions is currently offered only in the Americas. 

Wynid Solution – Through the acquisition of TeT we were able to complement our payment solutions business with the 

integrated payment solution developed by the Wynid Technologies business unit in France. This powerful, server-based payment 

solution has been widely deployed by many of the leading retailers and hospitality organizations in France, and is being deployed 

internationally by some major petrol companies. The Wynid solution was one of the first integrated payment solutions to be EMV 

certified worldwide, and has recently evolved to support transactions using contactless cards and NFC-enabled mobile phones. 

Product Marketing 

Our marketing organization benefits from a global product marketing group with product managers assigned to manage the life 

cycle of all new and legacy products. Our marketing communications strategy, which coordinates key market messaging across 

regions, is directed from our Scottsdale, Arizona headquarters; however, each region develops programs to meet the requirements of 

local markets. Components of our marketing program include product marketing, trade shows, news releases, editorial interviews, 

industry analyst briefings, speaking platforms and engagements, training and technology seminars, sales collateral and white papers, 

print advertising, articles and newsletters. 

Sales and Distribution 

Our major sales, marketing and distribution regions, broken down by business segment, include: 

• the Americas; 

• NEMEA; 

• SEMEA; and 

• Asia-Pacific. 

In 2009, approximately 16.7% and 83.3% of our consolidated revenue came from U.S. and international sources, respectively. 

Our global customers include: 

• Payment processors; 

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• Distributors/resellers; 

• Large retail chains and QSRs; 

• Financial institutions; 

• System integrators; 

• ISOs; and 

• Government entities. 

Sales to specific customers have historically accounted for a significant portion of our revenue. Beginning in 2007, and 

continuing through 2008 as a result of the TeT acquisition, we saw greater diversification of our customer base. However, we remain 

reliant on certain large customers for our revenue streams. For example, First Data Corporation (which includes TASQ Technology) 

accounted for approximately 5.2%, 6.2%, and 5.3% of our revenue in fiscal 2009, 2008, and 2007, respectively. In 2009, our top five 

customers accounted for 19.0% of our revenue compared to 22.1% in 2008. 

We distribute and sell our products internationally primarily to large retailers, financial institutions and distributors. Domestically, 

we primarily distribute and sell our products to financial institutions, payment processors, retail chains, ISOs, distributors and 

resellers. 

Some of our key sales attributes are: 

• Global Presence. We are one of the largest worldwide providers of electronic payment system solutions for use at the point 

of sale. We have developed a global network of sales, support and development centers. We believe that our experience and 

global presence enable us to market, distribute and service our products more effectively, and in more markets than most of 

our competitors. 

• Comprehensive Product Portfolio. We offer a full range of products and services that address the spectrum of market 

requirements. Our product portfolio ranges from the low-cost, established and reliable T7 family of terminals to the more 

recently released, high-performance 32-bit Optimum family and the Artema family of secure high-performance terminals 

acquired in the TeT transaction. Our terminals are further complemented by a wide variety of peripherals that enhance their 

capabilities. Our services include networking, deployment, help-desk, repair and maintenance. We have major service centers 

in each of our business segments: the Americas—Brazil, Chile and Mexico; NEMEA—Germany; SEMEA—the United 

Kingdom and France; and Asia-Pacific—Australia. 

• Low Total Cost of Ownership. The total cost of ownership includes the following costs: deployment, implementation, 

application certification, repair and maintenance and product obsolescence. We continue to support and focus on providing 

our customers with a clear migration strategy for new technologies, versus a buy today, replace tomorrow strategy. 

• Technology Adoption. Our technological advances have continued to support industry adoption of value-added features, such 

as electronic receipt capture, smart cards, electronic signature capture, positive identification and multi-application. We offer 

network products to host such multi-application offerings. Other technology innovations include IP and wireless connectivity, 

as well as RFID and contactless acceptance. Our engineering has consistently focused on quality and performance, including 

speed of the transaction, number of and type of completed transactions, the speed of application download and the user 

interface. Our modular design allows our customers to select only those features they require, thereby minimizing their costs 

and increasing their flexibility. We have reorganized our development team in recent years to more rapidly develop, 

prototype, and release new products to meet customer needs. 

• Terminal Management and Networking Expertise. We are a leader in terminal management and networking with a 

significant number of installations of our POS network controllers worldwide, managing not only our terminals, but those of 

our competitors as well. 

• Security Expertise. We are an industry leader in secure, state-of-the-art, network payment transactions providing full EMV 

and PCI certification, regulatory certifications, association certifications, contactless authentication, signature capture, identity 

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and biometric authentication and enterprise security management, ensuring both physical and logical high performance 

interfaces are secure and certified for use globally, by both public telephony and mission critical computing processors. We 

are also on the forefront of bringing E2EE solutions to the electronic payments industry. 

Research and Development 

Our market-focused research and product development activities concentrate on developing new products, technologies and 

applications for our products, as well as enhancements and cost reduction measures for existing technologies and applications. We 

typically design and develop all of our own products and incorporate, where appropriate, state of the art technologies from leading 

third party vendors. We are in the process of transitioning to a joint development manufacturing model, whereby we will co-design 

and co-develop the hardware platform for our products. Development projects are evaluated and coordinated by our global product 

marketing team and follow a management review process that includes input from our sales, local marketing, finance, supply chain 

and engineering teams. Our product development process generally involves the following: 

• Identification of the applicable market and development parameters; 

• Rapid development of engineering specifications, including target costs; 

• State of the art design and engineering; 

• Accelerated testing; 

• Quality assurance; and 

• Pilot production. 

Through this process, we can assess the requirements of individual customers and markets, and develop products and platforms 

that address those needs globally. Bringing quality products to market in a timely manner is the primary objective of our product 

development initiatives. 

Our research and development activities are coordinated through our Scottsdale, Arizona headquarters. To serve the needs of 

customers around the world, we “localize” many of our products to reflect local languages and conventions. Localizing a product may 

require modifying the user interface, altering dialog boxes, translating text and altering the communications messaging to suit local 

requirements. Each of our regional geographic sales and marketing units has in-region development resources that can provide 

customization and adapt products to meet the needs of customers in local markets. International development groups are located in 

Australia, Brazil, China, France, Germany, Hong Kong, Hungary, Latvia, Mexico, Puerto Rico, Singapore, Sweden, and the United 

Kingdom. 

Our research and development expenses were $44.5 for the year ended December 31, 2009, $45.9 million for the year ended 

December 31, 2008, and $28.8 million for the year ended December 31, 2007. 

Manufacturing and Resource Procurement 

During 2007, we began to outsource our manufacturing requirements to a third-party contract manufacturer, Venture Corporation 

(Singapore) LTD (“Venture”), including supply chain, production, assembly, and testing previously performed in our facilities in 

Shenzhen, China and in Atibaia, Brazil. The transition of our entire manufacturing operations in Shenzhen, China to Venture’s 

locations concluded in 2008. See “Item 1A — Risk Factors” for certain risks related to operating and conducting business in China. 

With the acquisition of TeT on April 1, 2008, we expanded our network of third party manufactures, primarily with the addition of 

ElectronicNetwork Hersfeld GmbH in Germany. Additionally, in 2009 we began outsourced manufacturing operations in Brazil with 

Jabil Circuit, and transitioned our operations from Partnertech AB in Sweden to Zollner Electronik, AG in Romania. Under the 

agreements with Venture and our other contract manufacturers, such manufacturers procure components and test, package and prepare 

all covered products for shipment. With limited exceptions, we are not required to purchase any minimum quantities or units of 

products. We are required to complete open purchase orders we placed that fall within certain periods of time prior to shipment. We 

have commenced moving to a joint development manufacturing model where we will provide hardware specifications to a third party 

to design, develop and manufacture certain hardware. Based on currently anticipated timelines, we expect that a majority of our 

products will be designed utilizing this joint development manufacturing model by the end of 2011. 

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To control product costs, we centrally manage product documentation, procurement and material requirements planning from our 

Scottsdale, Arizona headquarters, utilizing an integrated enterprise system linking all of our manufacturing and design centers. 

Centralized management of the planning processes, combined with regional procurement, enables us to ensure the quality and 

availability of our components. We continue to look for opportunities to reduce the cost of existing products by working with our 

suppliers to seek more favorable pricing, purchasing components in volume to achieve lower unit costs, and seeking greater 

efficiencies in product design. 

Industry Standards and Government Regulations 

Electronic payment system providers must certify products and services with card associations, financial institutions and payment 

processors, as well as comply with government and telecommunications company regulations. We are also subject to other domestic 

and international legal and regulatory requirements. 

We comply with the following standards and requirements: 

• Security Standards. Security standards in our industry are promulgated largely by regional bank associations and card 

associations, as well as certain government regulations. These standards ensure the integrity of the payment process and 

protect the privacy of consumers using electronic transaction systems. New standards are continually being adopted or 

proposed as a result of worldwide fraud prevention initiatives, increasing the need for new security solutions and 

technologies. We have developed a security architecture that incorporates physical, electronic, operating system, encryption 

and application-level security measures in order to remain compliant with the growing variety of international requirements. 

This architecture is particularly successful in countries that have stringent and specific security requirements. 

• EMV and PCI Standards. EMV standards define a set of requirements to ensure interoperability between chip cards and 

terminals on a global basis, regardless of the manufacturer, the financial institution, or where the card is issued or used. 

Specific certifications are required for all electronic payment systems and their application software. PCI provides a set of 

standards and certification criteria to validate the security of payment devices and ensure the protection of confidential 

transaction data during storage and transit. We obtain EMV and PCI certifications at a global level, prior to specific local 

market certifications. 

• Payment Processor/Financial Institution Requirements. We are required to certify our products with payment processors. 

We actively perform Class B and Class A product certifications with all the major payment processors in the U.S. and 

international markets. The Class B certification process pertains to successful testing of the integrity of the host (interface) 

message formats with the payment processor’s requirements and specifications. Once the Class B certification process is 

completed, the payment processor may elect to take the software application and the hardware for additional in-house testing 

and support. Class A certification (which may take up to 12 months or more) includes more intensive functional and useracceptance 

testing in order to establish their help-desk infrastructure. Class A Certification enables payment processors to 

provide direct support, deploy and promote the new products with their merchant base and sales force. We have significant 

experience in attaining these critical payment processor certifications and have a large portfolio of Class A certifications with 

major U.S. payment processors. In international markets, we also obtain certifications from local financial institutions and 

payment processors so that our products can be used on their specific networks. 

• WEEE and RoHS Directives. In the European Union, we are subject to the Waste Electrical and Electronic Equipment 

(“WEEE”) Directive and the Restriction on Hazardous Substances (“RoHS”) Directive. The WEEE Directive requires 

producers of electrical and electronic equipment to label all covered products and also establish collection, treatment, and 

recovery systems for their electric and electronic waste. The RoHS Directive restricts the use of certain material in physical 

devices that include our solutions and/or requires active steps to promote the recycling of materials. 

• Telecommunications Regulatory Authority and Carrier Requirements. Our products must comply with government 

regulations, including those imposed by the U.S. Federal Communications Commission (“FCC”) and similar 

telecommunications authorities worldwide regarding emissions, hazardous materials, radiation, safety and connections with 

telephone lines and radio networks. Our products must also comply with recommendations of quasi-regulatory authorities and 

of standards-setting committees. Our products have been certified as compliant with a large number of national requirements, 

including those of the FCC and Underwriters Laboratory in the U.S., and similar requirements in other countries. Wireless 

network carriers also have standards with which systems connected to their networks must comply. In addition to national 

requirements for telecommunications systems, many wireless network carriers have their own certification process for devices 

to be used on their networks. 

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Proprietary Rights 

We rely upon patents, copyrights, trademarks and trade secret laws to establish and maintain our proprietary rights in our 

technology and products. We currently hold U.S. and international patents relating to POS terminal products. We also have a number 

of pending patent applications relating to our POS terminal products and networking products. 

We currently hold trademark registrations in the U.S. and numerous other countries for the “Hypercom” mark and logo. In 

addition, we have a number of other U.S. and foreign trademark registrations, and pending trademark applications, relating to our 

products and services. 

We embed copyright notices in our software products advising all users that we own the rights to the software. We also place 

copyright notices on documentation related to these products. We routinely rely on contractual arrangements to protect our proprietary 

software programs, including written contracts prior to product distribution or through the use of click-through license agreements. 

We typically do not obtain federal copyright registrations for our software. 

Employees 

As of December 31, 2009, we employed approximately 1,365 people on a full-time basis, 246 of which are located in the U.S., 

with the remaining 1,119 located internationally, as set forth in the following table: 

U.S. International Total 

Sales, Marketing and Operations 64 165 229 

Development 66 275 341 

Service Operations 15 517 532 

Manufacturing 42 51 93 

Finance and Administration 59 101 160 

Total Employees 246 1,119 1,365 

Employees by business segment, as of December 31, 2009, are as follows: the Americas (410); NEMEA (136); SEMEA (277); 

Asia-Pacific (199); and Shared Cost Centers (343). 

We believe that we have an excellent relationship with our employees. We believe we have been successful in our efforts to 

recruit qualified employees, but we cannot guarantee that we will continue to be as successful in the future. Certain of our employees 

globally are subject to collective bargaining agreements, or are members of unions or other organized labor associations. 

Available Information 

Our principal executive offices are located at 8888 East Raintree Drive, Suite 300, Scottsdale, Arizona 85260, and our telephone 

number is (480) 642-5000. Our website is located at www.hypercom.com. We make available free of charge, through our website, our 

Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as 

soon as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission 

(“SEC”). The information found on our website is not part of this or any other report we file or furnish to the SEC. 

Item 1A. Risk Factors 

The risks set forth below may adversely affect our business, financial condition and operating results and cause actual results to 

differ materially from the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K or 

elsewhere in our SEC filings. In addition to the risks set forth below, and the factors affecting specific business operations identified 

elsewhere in this Annual Report on Form 10-K, there may also be risks of which we are currently unaware, or that we currently regard 

as immaterial based on the information available to us, that later may prove to be material . 

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Risks Related To Our Business 

International operations pose additional challenges and risks that if not properly managed could adversely affect our financial 

results. 

For the year ended December 31, 2009, we derived approximately 69.6% of our total net revenues outside of the U.S., principally 

in Europe, Asia-Pacific and Central and South America. We expect that international sales will continue to account for a significant 

percentage of our net revenues and operating income in the foreseeable future. In addition, all of our manufacturing operations are 

located outside of the U.S. Accordingly, we face numerous risks associated with conducting international operations, any of which 

could negatively affect our results of operations and financial condition. These risks include the following: 

• changes in foreign country regulatory requirements; 

• various import/export restrictions and the availability of required import/export licenses; 

• imposition of foreign tariffs and other trade barriers; 

• political and economic instability; 

• changes in local economic environments, including inflation, recession and foreign currency exchange rate fluctuations; 

• inability to secure commercial relationships to help establish our presence in international markets; 

• inability to hire and train personnel capable of marketing, installing and integrating our products, and services, supporting 

customers and managing operations in foreign countries; 

• building our brand name and awareness of our products and services among foreign customers; 

• competition from existing market participants that may have a longer history in and greater familiarity with the foreign 

markets we enter; 

• extended payment terms and the ability to collect accounts receivable; 

• the ability to repatriate funds or transfer funds among our subsidiaries and between our subsidiaries and their parent entities; 

• complicated tax and regulatory schemes where failure to comply may result in fines, penalties or litigation; 

• complications associated with enforcing legal agreements in certain foreign countries, including, but not limited to, Brazil, 

China and in developing countries; and 

• availability of qualified and affordable staff with which to manage our foreign operations. 

Additionally, we are subject to the Foreign Corrupt Practices Act, which may place us at a competitive disadvantage to foreign 

companies that are not subject to similar regulations. 

Quarterly revenues and operating results can vary, depending on a number of factors. 

Our consolidated results of operations and financial position can vary significantly from quarter to quarter, which is not conducive 

to a predictable business or operating environment. Consequently, this can impact our overall business. The following factors impact 

our quarterly business operations and results: 

• variations in product mix, timing and size of fulfilled orders as a result of customer deferral or cancellation of purchases 

and/or delays in the delivery of our products and services; 

• accomplishment of certain performance parameters embedded in our service level agreements; 

• market demand for new product offerings; 

• delays in the delivery of our products and services; 

- 14 -

• the type, timing and size of orders and shipments; 

• product returns and warranty claims; 

• variations in product mix and cost during any period; 

• development of new relationships and maintenance and enhancement of existing relationships with customers and strategic 

partners; 

• deferral of customer contracts in anticipation of product or service enhancements; 

• deferral of certain revenue or gross margin in accordance with U.S. GAAP requirements; 

• incremental costs incurred as a result of product quality and/or performance issues; 

• inventory obsolescence and write-downs related to product life cycles; 

• write-off of doubtful accounts receivable; 

• variations in operating expenses, including research and development, selling, and general and administrative expenses; 

• lease portfolio risk adjustments and loss provisions; 

• restructuring activities; 

• employment and severance agreement charges; 

• foreign currency exchange rate fluctuations; 

• availability and cost of financing; 

• variations in income tax as a function of income recognition by tax jurisdiction; 

• changing security standards or other technological changes; and 

The loss of one or more of our key customers could significantly reduce our revenues and profits. 

We have derived, and believe that we may continue to derive, a significant portion of our net revenues from a limited number of 

large customers. For the fiscal year ended December 31, 2009, our largest customer accounted for 5.2% of our net revenues, and our 

five largest customers accounted for 19.0% of our net revenues. In addition, our largest customer does substantial business with some 

of our most significant competitors. Our customers may buy less of our products or services depending on their own technological 

developments, end-user demand for our products, internal budget cycles and market conditions. A major customer in one year may not 

purchase any of our products or services in another year, which may negatively affect our financial performance. If any of our large 

customers significantly reduces or delays purchases from us or if we are required to sell products to them at reduced prices or 

unfavorable terms, our revenues and results of operations could be materially adversely affected. See “Item 1, Business — Sales and 

Distribution” for more information on our customer base. 

Our products may contain defects that may be difficult or even impossible to correct. Product defects could result in lost sales, 

additional costs and customer erosion. 

We offer technologically complex products that, when first introduced or released in new versions, may contain software or 

hardware defects that are difficult to detect and correct. The existence of defects and delays in correcting them could result in negative 

consequences, including the following: 

• delays in shipping products; 

• cancellation of orders; 

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• additional warranty expense; 

• delays in the collection of receivables; 

• product returns; 

• the loss of market acceptance of our products; 

• claims against us; 

• diversion of research and development resources from new product development; and 

• write-downs of and creation of reserves against inventory in our possession or located at our contract manufacturers. 

Even though we test all of our products, defects may continue to be identified after products are shipped. In past periods, we have 

experienced various issues in connection with product launches, including the need to rework certain products and stabilize product 

designs. Correcting defects can be a time-consuming, difficult and expensive task. Software errors may take several months to correct, 

and hardware errors may take even longer. 

We or our third-party contract manufacturers may accumulate excess or obsolete inventory that could result in unanticipated 

price reductions and write downs and adversely affect our financial results. 

Managing the proper inventory levels for components and finished products is challenging. In formulating our product offerings, 

we have focused our efforts on providing to our customers products with greater capability and functionality, which requires us to 

develop and incorporate the most current technologies in our products. This approach tends to increase the risk of obsolescence for 

products and components we or our third-party contract manufacturer hold in inventory and may compound the difficulties posed by 

other factors that affect our inventory levels, including the following: 

• the need to maintain significant inventory of components that are in limited supply; 

• buying components in bulk for the best pricing; 

• responding to the unpredictable demand for products; 

• responding to customer requests for short lead-time delivery schedules; 

• failure of customers to take delivery of ordered products; and 

• product returns. 

In addition, we may in some cases have to reimburse, or incur other charges from, our third-party contract manufacturing partners 

for excess or obsolete inventory or unfulfilled, non-cancelable open purchase orders resulting from changes in product design or 

demand. If we accumulate excess or obsolete inventory, price reductions and inventory write-downs may result, which could 

adversely affect our results of operations and financial condition. The total impact of excess and obsolete inventory, including 

inventory held by our third-party manufacturers, on our financial results was $4.2 million, $8.7 million, and $8.5 million for the years 

ended December 31, 2009, 2008, and 2007, respectively. 

Security is vital to our customers and therefore breaches in the security of transactions involving our products or services 

could adversely affect our reputation and results of operations. 

Protection against fraud is of key importance to the purchasers and end-users of our solutions. We incorporate security features, 

such as encryption software and secure hardware, into our solutions to protect against fraud in electronic payment transactions and to 

ensure the privacy and integrity of consumer data. Our solutions may be vulnerable to breaches in security in the security mechanisms, 

the operating system and applications or the hardware platform. Security vulnerabilities could jeopardize the security of information 

transmitted or stored using our solutions. In general, liability associated with security breaches of a certified electronic payment 

system belongs to the institution that acquires the financial transaction. We have not experienced any material security breaches 

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affecting our business. However, if the security of our solutions is compromised, our reputation and marketplace acceptance of our 

solutions will be adversely affected, which would adversely affect our results of operations, and subject us to potential liability. 

If we are unable to adequately protect our proprietary technology, our competitors may develop products substantially similar 

to our products and use similar technologies, which may result in the loss of customers. 

We rely on patent, copyright, trademark and trade secret laws, as well as confidentiality, licensing and other contractual 

arrangements, to establish and protect the proprietary aspects of our products. Our efforts may result in only limited protection, and 

our competitors may develop, market and sell products substantially equivalent to our products, or utilize technologies similar to those 

used by us. If we are unable to adequately protect our proprietary technology, these third parties may be able to compete more 

effectively against us, which could result in the loss of customers and adversely affect our business. 

In addition, the legal systems of many foreign countries do not protect or honor intellectual property rights to the same extent as 

the legal system of the U.S. For example, in China, the legal system in general and the intellectual property regime in particular, is still 

in the development stage. It may be very difficult, time-consuming and costly for us to attempt to enforce our intellectual property 

rights in such jurisdictions. 

Our products and other proprietary rights may infringe on the proprietary rights of third parties, which may expose us to 

claims and litigation. 

Although we believe that our products do not infringe on any third party’s patents, from time to time we have become involved in 

claims and litigation involving patents or proprietary rights. Patent and proprietary rights litigation entails substantial legal and other 

costs, and diverts the attention of our management resources. There can be no assurance that we will have the necessary financial and 

other resources required to appropriately defend or prosecute our rights in connection with any such litigation. 

In the past, we have received third-party claims of infringement and may receive additional claims of infringement in the future. 

To date, such activities have not had a material adverse effect on our business and we have prevailed in litigation, obtained intellectual 

property or a license thereto on commercially acceptable terms or otherwise been able to modify any affected products or technology. 

However, there can be no assurance that we will continue to prevail in any such actions, or that any intellectual property or license 

required for such products or technology would be made available on commercially acceptable terms, if at all, or that we would be 

able to successfully modify our products or technology to negate claims of infringement. 

A disruption in our third-party manufacturers or suppliers would negatively impact our ability to meet customer requirements. 

We currently rely on third-party manufacturers, and in the future will rely on one or more original design manufacturers as we 

transition to a joint development manufacturing model, to manufacture and assemble (and in the future, co-design and co-develop) 

substantially all of our products and subassemblies. We also depend upon third-party suppliers to deliver components that are free 

from defects, competitive in functionality and cost, and in compliance with our specifications and delivery schedules. If we are unable 

to successfully manage our relationship with these third-party manufacturers, or if such manufacturers experience any significant 

disruption in their supply chain and manufacturing capabilities, or they experience similar economic, political and business issues that 

may impact their ability to fulfill their obligations to us, we may be unable to fulfill customer orders in a timely manner, which would 

have a material adverse effect on our business and financial performance. 

We have occasionally experienced, and may in the future experience, delays in delivery of products and delivery of products of 

inferior quality from component suppliers and third-party manufacturers. Although alternate manufacturers and suppliers are generally 

available to provide our products and product components, the number of manufacturers or suppliers of some of our products and 

components is limited, and qualifying, and transitioning to, a replacement manufacturer or supplier would take a significant amount of 

time. 

The components used in our systems are purchased from outside sources. Certain components, such as processors, wireless 

modules, and the like, are purchased from single suppliers. The failure of any such supplier to meet its commitment on schedule could 

have a material adverse effect on our business, operating results and financial condition. If a sole-source supplier were to go out of 

business or otherwise become unable to meet its supply commitments, the process of locating and qualifying alternate sources could 

take months, during which time our production could be delayed, and may, in some cases, require us to redesign our products and 

systems. Such delays and potential costly redesigns could have a material adverse effect on our business, operating results and 

financial condition. 

- 17 -

In addition, our use of third-party manufacturers reduces our direct control over product quality, manufacturing timing, yields and 

costs. Disruption of the manufacture or supply of our products or components, or a third-party manufacturer’s or supplier’s failure to 

remain competitive in functionality, quality or price, could delay or interrupt our ability to deliver our products to customers on a 

timely basis, which would have a material adverse effect on our business and financial performance. 

As we make the transition to a joint development manufacturing model, we will become increasingly dependent on original 

design manufacturers, contract manufacturers and third party logistics providers to design and manufacture our products and to 

fulfill orders for our products. 

Once we have a joint development manufacturing model in place with one or more original design manufacturers, we will be 

dependent primarily on such manufacturers (each of which is a third party original design manufacturer for numerous companies) to 

co-design and co-develop the hardware platform for our products. As discussed above, we also depend on independent contract 

manufacturers (each of which is a third party manufacturer for numerous companies) to manufacture and fulfill our products. These 

supply chain partners are not committed to design or manufacture our products, or to fulfill orders for our products, on a long-term 

basis in any specific quantity or at any specific price. Also, from time to time, we may be required to add new supply chain partner 

relationships or new manufacturing or fulfillment sites to accommodate growth in orders or the addition of new products. It is time 

consuming and costly to qualify and implement new supply chain partner relationships and new manufacturing or fulfillment sites, 

and such additions increase the complexity of our supply chain management. Our ability to ship products to our customers could be 

delayed if we fail to effectively manage our supply chain partner relationships; if one or more of our future design manufacturers does 

not meet our development schedules; if one or more of our contract manufacturers experiences delays, disruptions or quality control 

problems in manufacturing our products; or if one or more of our third party logistics providers experiences delays or disruptions or 

otherwise fails to meet our fulfillment schedules; or if we are required to add or replace design manufacturers, contract manufacturers, 

third party logistics providers or fulfillment sites. We may not be able to adequately manage costs related to overruns, delays or 

disruptions associated with the design and development of our products utilizing the joint development manufacturing model. In 

addition, these supply chain partners will have access to certain of our critical confidential information and could improperly disclose 

such information. Moreover, all of our manufacturing is performed outside the U.S. and is, therefore, subject to risks associated with 

doing business in foreign countries and in foreign currencies. Each of these factors could adversely affect our business, financial 

condition and results of operations. 

We are subject to a complex system of domestic and foreign taxation and unanticipated changes in our tax rates or exposure to 

additional tax liabilities could affect our financial results. 

We are subject to income and other taxes in both the U.S. and various foreign jurisdictions, and our domestic and international tax 

liabilities are subject to the allocation of expenses in different jurisdictions. Our effective tax rates could be adversely affected by 

changes in the mix of earnings in countries with differing statutory tax rates, in the valuation of deferred tax assets and liabilities or in 

tax laws, or by material audit assessments, which could affect our financial results. In addition, the amount of taxes we pay is subject 

to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our financial results. 

Furthermore, tax law changes in jurisdictions in which we conduct business could materially affect our financial results. 

We are responsible for charging end customers and remitting certain taxes in numerous international jurisdictions. In the ordinary 

course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. In the future, 

we may come under audit, which could result in changes to the estimates of such tax liabilities. We believe that we maintain adequate 

tax reserves to offset potential liabilities that may arise upon audit. Although we believe our tax estimates and associated reserves are 

reasonable, the final determination of tax audits and any related litigation could be materially different than the amounts established 

for tax contingencies. To the extent that such estimates ultimately prove to be inaccurate, the associated reserves would be adjusted 

resulting in our recording a benefit or expense in the period in which a final determination was made. 

Fluctuations in currency exchange rates may adversely affect our financial results. 

A substantial part of our business consists of sales to international customers and as a result the majority of our revenues and 

expenses related to our international operations are denominated in Euros and other non-U.S. Dollar currencies. Adverse currency 

exchange rate fluctuations could have a material impact on our financial results in the future. In addition, our balance sheet reflects 

non-U.S. Dollar denominated assets and liabilities, which can be adversely affected by fluctuations in currency exchange rates. In the 

past, we have entered into foreign currency forward contracts intended to hedge our exposure to adverse fluctuations in exchange 

rates, but these hedging arrangements are not always effective, particularly in the event of imprecise forecasts of non-U.S. Dollar 

denominated assets and liabilities and such attempts to mitigate these risks may be costly. Currently, we do not hedge against our 

entire foreign currency risk as it has become even more costly as a result of recent market developments. Accordingly, an adverse 

movement in exchange rates could have a material adverse effect on our financial results. In the year ended December 31, 2009, we 

incurred foreign currency gain of approximately $0.4 million, net of foreign currency transaction gains or losses. 

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Furthermore, we utilize contract manufacturers in various international locations, including Malaysia, Germany, Brazil, Romania, 

and Tunisia. While the majority of our products are purchased from these manufacturers in U.S. Dollars, we also purchase some 

products in local currencies. Therefore, we may be impacted by fluctuations in foreign currency exchange rates. 

With the continued convergence of the Hypercom and TeT product lines and our transition to a joint development manufacturing 

model for the next generation of our products beginning in 2010, we expect that a larger proportion of our manufacturing costs may be 

denominated in U.S. Dollars. Therefore, our financial results could be impacted by fluctuations in foreign currency exchange rates to a 

greater extent than in prior periods. 

Adverse resolution of litigation may adversely affect our business or financial results. 

We are party to litigation in the normal course of our business. Litigation can be expensive, lengthy and disruptive to normal 

business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a 

particular lawsuit could have a material adverse effect on our business, operating results, or financial condition. See “Item 3 — Legal 

Proceedings” below for more information on our litigation. 

Our future success is substantially dependent on the continued service of our senior management and other key employees. 

The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our 

business and achieve our business goals. The market for highly qualified and talented executives in our industry is very competitive 

and we cannot provide assurance that we will be able to replace these senior management members with equally-qualified executives 

in a timely and cost-effective manner, if at all. 

We also may be unable to retain existing management, sales personnel and development and engineering personnel that are 

critical to our success, which could result in harm to key customer relationships, loss of key information, expertise or know-how, and 

unanticipated recruitment and training costs. 

Shipments of electronic payment systems may be delayed by factors outside of our control, which can harm our relationships 

with our customers. 

The shipment of payment systems requires us or our manufacturers, distributors or other agents to obtain customs or other 

government certifications and approvals, and, on occasion, to submit to physical inspection of our systems in transit. Failure to satisfy 

these requirements, and the process of trying to satisfy them, can lead to lengthy delays in the delivery of our solutions to our 

customers, which may harm our relationships with our customers. 

While we believe we comply with environmental laws and regulations, we are still exposed to potential risks associated with 

them. 

We are subject to environmental, legal and regulatory requirements, including the RoHS Directive and the WEEE Directive. The 

RoHS Directive sets a framework for producers’ obligations in relation to manufacturing (including the amounts of named hazardous 

substances contained in products sold) and the WEEE Directive sets a framework for treatment, labeling, recovery and recycling of 

electronic products in the European Union, which may require us to alter the manufacturing of the physical devices that include our 

solutions and/or require active steps to promote recycling of materials and components. In addition, similar legislation has been 

enacted in China and could be enacted in other jurisdictions, including in the U.S. If we do not comply with the RoHS Directive and 

the WEEE Directive, we may suffer a loss of revenues, be unable to sell in certain markets or countries, be subject to penalties and 

enforced fees and/or suffer a competitive disadvantage. Furthermore, the costs to comply with the RoHS Directive and the WEEE 

Directive, or with current and future environmental and worker health and safety laws, may have a material adverse effect on our 

results of operation, expenses and financial condition. 

Force majeure events, such as threats of terrorism, terrorist attacks, other acts of violence or war, civil, military and 

governmental unrest, health epidemics, fire, floods, and other acts of God may adversely affect the markets in which our common 

stock trades, our ability to operate our business and our financial results. 

Domestic and international threats of terrorism, terrorist attacks, wars, regional conflicts, natural disasters (including natural 

disasters that may increase in frequency as a result of the effects of climate change), and the like may cause instability in the global 

financial markets, and contribute to downward pressure on securities prices of U.S. publicly traded companies, such as us. Future 

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terrorist activities or armed conflicts, epidemics, such as influenza, H1N1 (or swine) flu or bird flu, and pandemics could result in 

economic, political and other uncertainties that could adversely affect our revenues and operating results, and depress securities prices, 

including the price of our common stock. Such events may disrupt the global insurance and reinsurance industries, and adversely 

affect our ability to obtain or renew certain insurance policies, and may result in significantly increased costs of maintaining insurance 

coverage. Further, we may not be able to obtain insurance coverage at historical or acceptable levels for all of our facilities. Future 

terrorist activities, armed conflicts and epidemics could affect our domestic and international sales, disrupt our supply chain and 

impair our ability to produce and deliver our products. Such events could directly impact our physical facilities or those of our 

suppliers (including sole-source suppliers) or customers in the U.S. and elsewhere. Our primary facilities include administrative, sales 

and research and development facilities in the U.S., Australia, Brazil, China, France, Germany, Latvia, Mexico, the Philippines, Spain, 

and the United Kingdom., and our manufacturing partners’ facilities in Malaysia, Germany, Brazil, Romania, and Tunisia. Acts of 

terrorism, wars and epidemics may make transportation of our supplies and products more difficult or cost prohibitive. 

China’s changing economic environment may impact our ability to do business in China. 

In recent years, the Chinese government has been reforming the economic system in China to increase the emphasis placed on 

decentralization and the utilization of market forces in the development of China’s economy. These reforms have resulted in 

significant economic growth. However, any economic reform policies or measures in China may from time to time be modified or 

revised by the Chinese government. While we may be able to benefit from the effects of some of these policies, certain policies and 

other measures taken by the Chinese government to regulate the economy, such as China’s 2001 entry into World Trade Organization 

and the related relaxation of trade restrictions, which has lead to increased foreign investment and increased competition in China’s 

markets from other foreign companies, could also have a significant negative impact on economic conditions in China, which would 

result in an adverse impact on our business. In addition, although China is increasingly affording foreign companies and foreign 

investment enterprises established in China similar rights and privileges as Chinese domestic companies, special laws, administrative 

rules and regulations governing foreign companies and foreign investment enterprises in China may still place foreign companies at a 

disadvantage in relation to Chinese domestic companies and may adversely affect our competitive position. 

Uncertainties with respect to the Chinese legal system may adversely affect us. 

We conduct our business in China primarily through direct or indirect wholly-owned subsidiaries incorporated in China and Hong 

Kong. Our subsidiaries are generally subject to laws and regulations applicable to foreign investment in China. Accordingly, our 

business may be affected by changes in China’s developing legal system. Many new laws and regulations covering general economic 

matters have been promulgated in China in recent years, and government policies and internal rules promulgated by governmental 

agencies may not be published in time, or at all. As a result, we may operate our business in violation of new rules and policies 

without having any knowledge of their existence. In addition, there are uncertainties regarding the interpretation and enforcement of 

laws, rules and policies in China. The Chinese legal system is based on written statutes, and prior court decisions have limited 

precedential value. Because many laws and regulations are relatively new and the Chinese legal system is still evolving, the 

interpretations of many laws, regulations and rules are not always uniform. Moreover, the relative inexperience of China’s judiciary in 

many cases creates additional uncertainty as to the outcome of any litigation, and the interpretation of statutes and regulations may be 

subject to government policies reflecting domestic political concerns. Finally, enforcement of laws or contracts based on existing law 

may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement, or to obtain enforcement of a 

judgment by a court of another jurisdiction. Any litigation in China may be protracted, have unexpected outcomes and result in 

substantial costs and diversion of resources and management’s attention. 

If we are unable to maintain the quality of our internal control over financial reporting, any unremediated material 

weaknesses could materially and adversely affect our ability to provide timely and accurate financial information about our 

business, which could harm our business and stock price. 

Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”) requires that we establish and maintain effective internal controls 

over financial reporting. SOX 404 also requires us to include a management report of internal control over financial reporting in our 

Annual Report on Form 10-K. Based on management’s evaluation of internal control over financial reporting as of December 31, 

2009, we are able to conclude that our internal control over financial reporting is effective. However, we cannot be certain that our 

internal control over financial reporting will remain effective in the future. Any future failure to maintain adequate internal control 

over our financial accounting and reporting could harm our operating results or could cause investors to lose confidence in our 

reported financial results or condition, which could adversely affect our business and the trading price of our common stock. 

Our business may be negatively affected by the current global economic crisis. 

The business and operating results of our products and services businesses have been and will continue to be affected by 

worldwide economic conditions and, in particular, conditions in the banking sector and other major industries we serve. The current 

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economic climate, the credit market crisis, particularly the increased difficulty in securing credit, declining consumer and business 

confidence, fluctuating commodity prices, and other challenges currently affecting the global economy could impact our ability to sell 

and our customers’ ability to make capital expenditures, thereby affecting their ability to purchase our products. Additionally, 

customers in the financial services sector, which has been severely impacted by the credit crisis, have consolidated in response to the 

crisis, which could further impact our business by reducing our customer base. Certain of our retail customers who have seen 

significant dampening of consumer demand, could face increased financial pressures that could impact their capital expenditures. 

Also, although we believe that our cash flows from operations and other sources of liquidity, including borrowings available 

under our revolving credit facility or other financing options, will satisfy our working capital needs, capital expenditures, 

commitments, and other liquidity requirements associated with our operations and our TeT acquisition debt requirement through the 

next 12 months, in the event that we require additional capital to fulfill our future business plans, we may need to obtain additional 

financing from third parties. In light of the current global credit crisis, if we experience such a need for additional financing, we may 

not be able to obtain sufficient financing on advantageous terms or at all, which could materially and adversely affect our business, 

financial condition, results of operations and long-term prospects. 

The extent of the impact of the global economic crisis depends on a number of factors, including whether and when the U.S. 

economy and the global economy generally, will emerge from the severe recession. If the global economic recession continues for a 

significant period or there is significant further deterioration in the global economy, our results of operations, financial position and 

cash flows could be materially adversely affected. 

Our integration of future acquisitions we may make involves numerous risks. We may not be able to address these risks 

without substantial expense, delay or other operational or financial problems. 

We have in the past and may in the future make acquisitions and strategic investments in related businesses, technologies, 

products or services. Acquisitions and investments involve various risks such as the following: 

• the inability to assimilate the technologies, operations and personnel of the acquired business; 

• the potential disruption of our existing business, including the diversion of management attention and the redeployment of 

resources; 

• the loss of customers; 

• the possibility of our entering markets in which we have limited prior experience; 

• the loss of key employees of the acquired business; 

• the necessity to respond to and negotiate with local labor unions or other organized labor associations, which may cause 

delays with and obstacles to our implementation of business initiatives; and 

• the inability to obtain the desired strategic and financial benefits from the acquisition. 

Future acquisitions and investments could also result in substantial cash expenditures, potentially dilutive issuance of our equity 

securities, our incurrence of additional debt and contingent liabilities, and amortization expenses related to intangible assets that could 

adversely affect our business, operating results and financial condition. 

Risks Related To The Industry 

The markets in which we compete are highly competitive, maturing, and subject to price erosion. 

The markets in which we operate are maturing and highly competitive. Increased competition from manufacturers or distributors 

of products similar to or competitive with ours, or from service providers that provide services similar to ours, could result in price 

reductions, extended terms, free services, lower margins and loss of market share. In some markets, we may sell products with 

negative margins to large customers who have existing service contracts that generate contractual services revenues at positive 

margins over a multi-year period. Such transactions may negatively affect our revenues, margins and net income. 

We expect to continue to experience significant and increasing levels of competition in the future. With respect to our products, 

we compete primarily on the basis of security, ease-of-use, product performance, price, features, quality, the availability of application 

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software programs, the number of third-party network host and telecommunication system certifications we have obtained for our 

products and application programs, rapid development, release and delivery of software products, and customer support and 

responsiveness. Software products compete on the basis of security, functionality, scalability, price, quality and support. 

We often face additional competitive factors in foreign countries, including but not limited to preferences for national vendors, 

difficulties in obtaining required certifications, conformity with local government policies and trade practices, and compliance with 

the Foreign Corrupt Practices Act. Some of our competitors and potential competitors are more established, benefit from greater name 

recognition and have significantly greater resources than we do. Moreover, there are limited barriers to entry that could keep our 

competitors from developing products or services and technology similar to ours, or from selling competing products or services in 

our markets. Further, there can be no assurance that we will be able to lower our product or operating costs to effectively compete in 

these markets. 

We are subject to industry and technology changes and are dependent on development and market acceptance of new 

products. If we are unable to adequately respond to these changes and to market demands in a timely manner, our business will 

not be successful. 

The industry in which we operate is characterized by rapid changes in technology and numerous new product introductions. Our 

success depends to a large degree upon our continued ability to offer new products and services, and enhancements to our existing 

products and services, to meet changing market requirements, including conformity with applicable standards. The introduction of 

new products, services and technologies by third parties could have an adverse effect on the sales of our existing products, services 

and technologies. We cannot be certain of our ability to successfully: 

• identify, develop, or manufacture new products, services and technologies in a cost effective manner; 

• market or support these new products, services and technologies on a timely and effective basis; 

• eliminate defects in new products and service offerings; 

• gain market acceptance for new products, services and technologies; or 

• respond to technological changes, new industry standards, and announcements of new products, services and technologies 

by competitors. 

Developing new products, services and technologies is a complex, uncertain process requiring innovation and accurate 

anticipation of technological and market trends. When changes to our products are announced, we will be challenged to manage 

possible shortened life cycles for existing products, continue to sell existing products and prevent customers from returning existing 

products. Our inability to respond effectively to any of these challenges may have a material adverse effect on our business and 

financial results. 

We are subject to extensive industry standards and government regulations. Our failure to properly comply with these 

standards and regulations could adversely affect our production and sales. 

Our product sales are subject to a substantial and complex array of industry driven standards and governmental regulation, both 

domestic and foreign, including, but not limited to: 

• industry standards imposed by EuroPay International, MasterCard International, VISA International, and others; 

• certification standards required for connection to certain public telecommunications networks; 

• U.S. Federal Communications Commission regulations; 

• Underwriters Laboratories’ regulations (or other similar regulations in countries in which we sell our products); 

• the WEEE and RoHS Directives in the European Union; and 

• certification standards set by domestic processors. 

- 22 -

Our failure to properly comply with these standards and regulations could result in lost product sales, significant costs associated 

with required remedial measures or production stoppages, any of which could have a material adverse effect on our business and 

financial results. 

Risks Related To Our Common Stock 

We have incurred significant losses recently and in the past and our results of operations have and may continue to vary from 

quarter to quarter, impacted in particular by business reviews performed by management. If our financial performance is not in 

line with investor expectations, the price of our common stock will suffer and our access to future capital may be impaired. 

We had a net loss of $6.9 million for the year ended December 31, 2009, a net loss of $85.4 million for the year ended December 

31, 2008, and a net loss of $7.5 million for the year ended December 31, 2007. If the results of our continuing efforts to improve 

profitability, increase our cash flow and strengthen our balance sheet do not meet or exceed the expectations of securities analysts or 

investors, the price of our common stock will suffer. 

Further, given the variability in our revenues, our quarterly financial results have fluctuated significantly in the past and are likely 

to do so in the future. Accordingly, we believe that period-to-period comparisons of our results of operations may be misleading and 

not indicative of future performance. If our quarterly financial results fall below the expectations of securities analysts or investors, the 

price of our common stock may suffer. 

Our stock price has been and may continue to be volatile. 

The market price of our common stock has been, and is likely to continue to be, volatile. When we or our competitors announce 

new products, services, or customer orders, change pricing policies, experience quarterly fluctuations in operating results, announce 

strategic relationships, acquisitions or dispositions, change earnings estimates, fail to maintain effective internal controls, restate 

financial results, incur litigation, experience government regulatory actions or suffer from generally adverse economic conditions, our 

stock price is often affected. Recently, companies similar to ours have experienced extreme price fluctuations, often for reasons 

unrelated to their performance. The volatility of our stock price may be accentuated during periods of low volume trading. 

Our publicly-filed reports are reviewed by the SEC from time to time and any significant changes required as a result of such 

review may have a material adverse impact on the trading price of our common stock. 

The reports of publicly-traded companies are subject to review by the SEC from time to time for the purpose of assisting 

companies in complying with applicable disclosure requirements and to enhance the overall effectiveness of companies’ public filings, 

and comprehensive reviews of such reports are now required at least every three years under the Sarbanes-Oxley Act of 2002. SEC 

reviews may be initiated at any time. While we believe that our previously filed SEC reports and all future reports will comply in all 

material respects with the published SEC rules and regulations, we could be required to modify or reformulate information contained 

in prior filings as a result of an SEC review. Any modification or reformulation of information contained in such reports could be 

significant and result in a material adverse impact on the trading price of our common stock. 

We are subject to anti-takeover effects of certain charter and bylaw provisions and Delaware law. 

We have provisions in our certificate of incorporation and bylaws that: 

• make it more difficult for a third party to acquire control of us, and discourage a third party from attempting to acquire 

control of us; 

• may limit the price some investors are willing to pay for our common stock; 

• enable us to issue preferred stock without a vote of our stockholders or other stockholder action; 

• provide for a classified Board of Directors (the “Board”) and regulate nominations for the Board; 

• make it more difficult for stockholders to take certain corporate actions; and 

• may delay or prevent a change of control. 

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These and other provisions of our charter documents, as well as certain provisions of Delaware law, could delay or make more 

difficult certain types of transactions involving a change of control of Hypercom or our management. As a result, the price of our 

common stock may be adversely affected. 

Our stock price could be affected because a substantial number of shares of our common stock will be available for sale in the 

future. 

As of March 9, 2010, we had 54,647,787 shares of our common stock outstanding, all of which have been listed for trading 

according to the rules of the NYSE. We also had outstanding, as of March 9, 2009, options and warrants to acquire an additional 

4,622,361 and 10,544,000 shares, respectively, of our common stock. All of the shares underlying the outstanding options and 

warrants have been registered for resale. Future public sales of our common stock, or the availability of such shares for sale, including 

the shares subject to outstanding options and warrants, could adversely affect the prevailing market price of our common stock and 

impair our ability to raise capital through the sale of additional equity securities. 

The issuance of warrants to purchase common stock as part of the TeT acquisition could result in a lowering of our stock 

price. 

In accordance with the terms of our credit agreement with Francisco Partners II, L.P. (“Francisco Partners”), upon funding of the 

loan and the closing of the TeT acquisition on April 1, 2008, we granted Francisco Partners a five-year warrant to purchase 

approximately 10.5 million shares of our common stock at $5.00 per share. The warrant contains a cashless exercise provision. We 

have also filed a registration statement covering the shares of common stock underlying the warrant. The market price of our common 

stock could decline as a result of sales of a large number of shares of our common stock in the market (or the perception that these 

sales could occur) if the warrant is exercised once our common stock is trading above the warrant exercise price of $5.00 per share. 

Any such sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the 

future at a time and at a price that we deem appropriate. Any issuance of common stock to the warrant holder upon exercise of the 

warrant would dilute the then-current common stockholders’ interests in our company. 

We currently do not intend to pay any dividends on our common stock. 

We currently do not intend to pay any dividends on our common stock. While we may declare dividends at some point in the 

future, we cannot assure you that you will ever receive cash dividends as a result of ownership of our common stock and any gains 

from investment in our common stock may only come from increases in our stock prices, if any. 

Risks Related To Our Indebtedness 

Our credit agreements contain various covenants and restrictions that limit the discretion of management in operating our 

business and could prevent us from engaging in some activities that may be beneficial to us and our stockholders. 

The agreements governing our financing, including our $60.0 million credit agreement to partially fund the TeT acquisition and 

our $25.0 million revolving credit facility, contain various covenants and restrictions that, in certain circumstances, limit our ability 

and the ability of certain subsidiaries to: 

• grant liens on assets; 

• make restricted payments (including paying dividends on capital stock or redeeming or repurchasing capital stock); 

• make investments (including investments in joint ventures); 

• merge, consolidate or transfer all or substantially all of our assets; 

• incur additional debt; or 

• engage in certain transactions with affiliates. 

As a result of these covenants and restrictions, we may be limited in how we conduct our business and may be unable to raise 

additional debt, compete effectively, make investments or pursue available business opportunities. These covenants may adversely 

affect our ability to finance our future operations or capital needs. A breach of any of these covenants could result in a default in 

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espect of the related indebtedness. If a default occurs, the affected lenders could elect to declare the indebtedness, together with 

accrued interest and other fees, to be immediately due and payable. 

We may be required to incur additional debt to meet the future capital requirements of our business. Should we be required to 

incur additional debt, the restrictions imposed by the terms of our current and future debt arrangements could adversely affect our 

financial condition and our ability to respond to changes in our business. 

If we incur additional debt, we may be subject to the following risks: 

• our vulnerability to adverse economic conditions and competitive pressures may be heightened; 

• our flexibility in planning for, or reacting to, changes in our business and industry may be limited; 

• we may be sensitive to fluctuations in interest rates if any of our debt obligations are subject to variable interest rates; and 

• our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general 

corporate purposes or other purposes may be impaired. 

We cannot be assured that our leverage and such restrictions will not materially and adversely affect our ability to finance our 

future operations or capital needs or to engage in other business activities. In addition, we cannot be assured that additional financing 

will be available when required or, if available, will be on terms satisfactory to us. 

The current condition of the credit markets may not allow us to secure financing for potential future activities on satisfactory 

terms, or at all. 

Our existing cash and short-term investments are available for operating requirements, strategic investments, acquisitions of 

companies or products complimentary to our business, the repayment of outstanding indebtedness, repurchases of our outstanding 

securities and other potential large-scale needs. While we believe existing cash and short-term investments, together with funds 

generated from operations, should be sufficient to meet operating requirements for the foreseeable future, we may also consider 

incurring additional indebtedness and issuing additional debt or equity securities in the future to fund potential acquisitions or 

investments, to refinance existing debt or for general corporate purposes. As a result of recent subprime loan losses and write-downs, 

as well as other economic trends in the credit markets, we may not be able to secure additional financing for future activities on 

satisfactory terms, or at all, which may adversely affect our financial condition and results of operations. 

Item 1B. Unresolved Staff Comments 

None. 

Item 2. Properties 

The Americas 

Our current corporate headquarters building is located in Scottsdale, Arizona. The facility is 48,650 square feet, and the lease for 

this facility expires on June 23, 2018; however, we have the right to terminate the lease on June 23, 2015, provided we repay all 

unamortized tenant improvement costs and commission fees for unpaid rent. Our corporate headquarters serves as a shared cost center 

for all four of our geographic business segments. 

In the U.S., we also lease offices in Atlanta, Georgia (currently subleased, which sublease expires in April 2010) and Savannah, 

Georgia, as well as a storage facility in Phoenix, Arizona. Internationally, we lease facilities in Brazil, Chile, Mexico and Puerto Rico 

for sales, support, representation, and research and development activities. 

We also own an approximately 102,000 square foot facility in Brazil that is utilized for administrative, final assembly, warehouse, 

distribution, and sales and support services. We are currently soliciting buyers for this facility with plans to relocate to another site in 

Brazil. 

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NEMEA 

SEMEA 

We lease facilities in Belgium, Germany and Sweden for sales, support, representation, and research and development activities. 

We lease facilities in France, Hungary, Latvia, Russia, Scotland, Spain, the United Arab Emirates, and the United Kingdom for 

sales, support, representation, and research and development activities. 

Asia-Pacific 

We lease facilities in Australia, China, Hong Kong, the Philippines, Singapore and Thailand for sales, support, representation, and 

research and development activities. 

We believe that our facilities are adequate for our current operations and will be sufficient for the foreseeable future. 

Item 3. Legal Proceedings 

We are currently a party to various legal proceedings, including those noted below. While we presently believe that the ultimate 

outcome of these proceedings, individually and in the aggregate, will not have a material adverse affect on our financial position, 

results of operations or cash flows, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable 

ruling could include monetary damages or, in cases where injunctive relief is sought, an injunction. Were an unfavorable ruling to 

occur, it is possible such a ruling could have a material adverse impact on our financial position, results of operations or cash flows in 

the period in which the ruling occurs or in future periods. 

SPA Syspatronic AG v. Hypercom Corporation, et al. (United States District Court for the Eastern District of Texas, 

Marshall Division, Civil Action No. 2:07-CV-416 (LED), filed on September 18, 2007) 

SPA Syspatronic AG (“Syspatronic”) commenced this action against us and others, alleging that certain of our products infringe 

U.S. Patent No. 5,093,862 entitled “Data Carrier – Controlled Terminal in a Data Exchange System” issued on March 3, 1992 (the 

“’862 Patent”) allegedly owned by Syspatronic. The plaintiff is seeking a judgment of infringement, an injunction against further 

infringement, damages, interest and attorneys’ fees. We filed an answer denying liability on the basis of a lack of infringement, 

invalidity of the ‘862 Patent, laches, waiver, equitable estoppel and unclean hands, lack of damages, failure to state a claim, and 

inequitable conduct during the prosecution of the ‘862 Patent. We also counterclaimed seeking a declaratory judgment of noninfringement 

and invalidity of the ‘862 Patent, and seeking attorneys’ fees and costs as an exceptional case due to the plaintiff’s 

inequitable conduct during the prosecution of the ‘862 Patent. In April 2008, the U.S. Patent and Trademark Office (the “Patent 

Office”) granted the request by certain of the defendants for re-examination of the ‘862 Patent. Thereafter, the Court stayed 

proceedings in this case until the Patent Office completed its re-examination. The Patent Office ultimately confirmed the patentability 

of the claims of the '862 Patent based on the construction advanced by Syspatronic of a key term in the only two independent claims 

of the '862 Patent. In light of that construction, we believe that our accused products do not infringe the ’862 Patent. The Court has 

lifted the stay it ordered during the reexamination proceedings. The Markman hearing is set for November 10, 2010, and the case is set 

for trial on May 30, 2011. By agreement, this case will be tried in Tyler, Texas. This action is currently in the discovery stage. 

CardSoft, Inc., et al. v. Hypercom Corporation, et al. (United States District Court for the Eastern District of Texas, Marshall 

Division, Civil Action No. 2:08-CV-00098, filed on March 6, 2008) 

CardSoft, Inc. and CardSoft (Assignment for the Benefit of Creditors), LLC (collectively “CardSoft”) filed this action against us 

and others in March 2008, alleging that certain of our terminal products infringe two patents allegedly owned by CardSoft: U.S. Patent 

No. 6,934,945 (the “‘945 Patent”), entitled “Method and Apparatus for Controlling Communications,” issued on August 23, 2005, and 

U.S. Patent No. 7,302,683 (the “‘683 Patent”), also entitled “Method and Apparatus for Controlling Communications,” issued on 

November 27, 2007, which is a continuation of the ‘945 patent. CardSoft is seeking a judgment of infringement, an injunction against 

further infringement, damages, interest and attorneys’ fees. In June 2008, we filed our answer, denying liability on the basis of a lack 

of infringement, invalidity of the ‘945 Patent and the ‘683 Patent, laches, waiver, equitable estoppel and unclean hands, lack of 

damages and failure to state a claim. We also counterclaimed seeking a declaratory judgment of non-infringement and invalidity of the 

‘945 Patent and the ‘683 Patent. The Markman hearing is scheduled for July 20, 2011 and trial is scheduled for November 7, 2011. 

This action is currently in the discovery stage. 

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Lisa Shipley v. Hypercom Corporation. (United States District Court for the Northern District of Georgia, Civil Action No. 

1:09-CV-0265, filed on January 30, 2009) 

Lisa Shipley (“Shipley”), a former employee, filed this action against us in January 2009, alleging that we violated Title VII of 

the Civil Rights Act by discriminating against her on the basis of her gender, violated the Georgia Wage Payment laws, the Equal Pay 

Act and Georgia law by paying her lower compensation based on her gender. Ms. Shipley is seeking compensatory damages for 

emotional distress, damage to reputation, embarrassment, lost wages, back pay, accrued interest, punitive damages, attorney’s fees and 

expenses, and interest. In February 2009, we filed a motion to dismiss based on improper venue or, in the alternative, to transfer venue 

to the United States District Court for the District of Arizona. In June 2009, the Court denied the motion. In June 2009, we filed our 

answer, generally denying the material allegations of Ms. Shipley’s complaint. In October 2009, Ms. Shipley filed an amended 

complaint adding an allegation that we unlawfully retaliated against her. In November 2009, we filed our answer, denying the material 

allegations of the amended complaint. In February 2010, we filed a Motion for Judgment on the Pleadings as to Ms. Shipley's 

retaliation claim. This action is currently in the discovery stage. 

Item 4. (Removed and Reserved) 

PART II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 

Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “HYC.” The following table sets forth, 

for the fiscal quarters indicated, the high and low sales prices for our common stock as reported on the NYSE. 

RANGE OF SALES PRICES 

High Low 

Year Ended 12/31/09 

First Quarter $ 1.75 $ 0.89 

Second Quarter 1.60 0.99 

Third Quarter 3.32 1.37 

Fourth Quarter 3.47 2.90 

Year Ended 12/31/08 

First Quarter $ 5.12 $ 3.37 

Second Quarter 5.18 4.17 

Third Quarter 5.01 3.70 

Fourth Quarter 3.78 0.57 

Since becoming publicly-traded, we have not paid any cash dividends on our common stock. We currently intend to retain our 

earnings for our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. See “Item 7, 

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for 

more information on retained earnings. 

As of March 9, 2010, we had approximately 102 stockholders of record of our common stock and approximately 4,200 beneficial 

stockholders of our common stock. 

The information under the caption “Equity Compensation Plan Information as of Fiscal Year End” in our 2010 Annual Meeting 

Proxy Statement, which will be filed with the SEC within 120 days following our fiscal year end, is incorporated by reference into this 

Item 5. 

Item 6. Selected Financial Data 

The following table contains selected consolidated financial data for the five years ended December 31, 2009, derived from our 

audited consolidated financial statements. Certain amounts in the prior-year financial statements have been reclassified to conform to 

the current year presentation. The selected financial data should be read in conjunction with our consolidated financial statements, 

related notes and the section of this Annual Report on Form 10-K entitled “Management's Discussion and Analysis of Financial 

Condition and Results of Operations.” Historical consolidated financial data may not be indicative of our future performance. 

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Years Ended December 31, 

2009 2008 2007 2006 2005 

Statements of Operations 

Data: 

Net revenue $ 406,903 $ 434,242 $ 289,527 $ 248,565 $ 245,223 

Costs of revenue 278,469 310,433 214,848 159,540 172,091 

Gross profit 128,434 123,809 74,679 89,025 73,132 

Gross profit percentage 31.6 % 28.5 % 25.8 % 35.8 % 29.8 % 

Research and development 44,486 45,901 28,753 27,706 27,555 

Selling, general and 

administrative 74,681 81,144 59,964 60,105 72,649 

Impairment of goodwill and 

intangible assets — 67,798 (b) — — — 

Amortization of purchased 

intangible assets 6,147 5,678 502 — — 

In-process research and 

development — — — 1,000 (d) — 

Gain on sale of real property — — (3,796 ) (2,953 )(e) — 

Total operating expenses 125,314 200,521 85,423 85,858 100,204 

Income (loss) from 

operations 3,120 (76,712 ) (10,744 ) 3,167 (27,072 ) 

Income (loss) before 

discontinued operations (5,944 ) (84,909 ) (9,100 ) 4,737 (30,243 ) 


discontinued operations (924 ) (494 ) 1,623 2,233 (3,123 )(f) 

Net income (loss) $ (6,868 )(a) $ (85,403 ) $ (7,477 )(c) $ 6,970 $ (33,366 )(g) 

Diluted income (loss) per 

share: 


discontinued operations $ (0.11 ) $ (1.59 ) $ (0.17 ) $ 0.09 $ (0.58 ) 


discontinued operations (0.02 ) (0.01 ) 0.02 0.04 (0.06 ) 

Diluted income (loss) per 

share $ (0.13 ) $ (1.60 ) $ (0.15 ) $ 0.13 $ (0.64 ) 

Weighted average basic 

shares 53,526 53,321 52,927 53,248 52,395 

Weighted average diluted 

shares 53,527 53,321 52,927 53,966 52,395 

Balance Sheet Data at end 

of year: 

Cash and equivalents $ 55,041 $ 35,582 $ 76,925 $ 34,190 $ 35,940 

Short-terms investments — 499 4,988 47,228 57,951 

Working capital 60,675 46,835 119,657 141,923 143,039 

Total assets 306,888 306,300 250,244 236,716 238,914 

Short and long-term debt, 

net of discount 56,076 48,769 — — 8,377 

Total stockholders' equity 90,896 93,788 174,499 178,931 170,774 

(a) For the year ended December 31, 2009, we recorded a net loss of $6.9 million ($0.13) per share. The net loss was principally 

due to our results during the first quarter in which we reported a net loss of $9.9 million. The first quarter was negatively 

impacted by the global economic downturn and the corresponding decrease in available credit to both businesses and 

consumers. 

(b) In December 2008, we recognized asset impairment charges totaling $67.8 million for 2008, primarily related to the write-off 

of goodwill and intangible assets from our acquisition of TeT on April, 1, 2008. See Note 4 to our consolidated financial 

statements. 

(c) In June 2007, we completed the sale of our former headquarters facilities, located in Phoenix, Arizona, for a sale price of 

$16.3 million. We recorded a gain of $3.8 million on the sale in the second quarter of 2007. During the second quarter of 

2007, we initiated a reconfiguration of our global sales and marketing organizations and incurred charges of $2.9 million 

during the year. During the second quarter of 2007, we increased inventory reserves by $6.1 million primary related to non- 

PCI compliant products and components. 

(d) In December 2006, we acquired TPI and incurred a $1.0 million charge for the acquired in-process research and development. 

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(e) In September 2006, we completed the sale of our real property in Hong Kong for $5.2 million. We recorded a gain of 

approximately $3.0 million on the sale in the third quarter of 2006. 

(f) In the fourth quarter of 2005, we sold our U.K. lease portfolio (the “U.K. Lease Business”) as this leasing business did not 

align with our core business. As of December 31, 2005, the U.K. Lease Business’ operating results have been classified as 

discontinued operations in the statements of operations for all periods presented. We recognized a $6.6 million loss on the 

write-down of the U.K. Lease Business to its estimated fair value based on purchase offers received from potential buyers. 

See Note 6 to our consolidated financial statements included herein. 

(g) In 2005, we performed a comprehensive review of our financial performance; market strategy; products; product development 

and life cycle management; and employee, customer and vendor relationships. The objective of the business review was to 

create a plan to improve profitability and customer relations, transition more rapidly to 32-bit technology products, rationalize 

operations and reorganize our corporate structure. As a result of this business review, we recorded charges of $16.3 million to 

costs of revenue and $2.7 million to operating expenses during 2005. 

See Note 24 to our consolidated financial statements included herein for a presentation of certain of the above information on a 

quarterly basis for each of the four quarters in the years ended December 31, 2009 and 2008. 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

The following sets forth a discussion and analysis of our financial condition and results of operations for the three years ended 

December 31, 2009. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing 

elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Our actual results may 

differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such 

differences include, but are not limited to, those discussed in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. 

There are numerous references to the impact of foreign currency translation in the discussion of our results of operations. Over the 

past several years, the exchange rates between the U.S. Dollar and many foreign currencies, especially the Euro, have fluctuated 

significantly. When stronger U.S. Dollar exchange rates of the current year are used to translate the results of operations of the 

subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results as compared with 

the prior period. When the US Dollar weakens, the resulting impact is an increase in U.S. Dollars of reported results as compared with 

the prior period. 

During 2009 we committed to a plan to divest a European leasing and service operation and are currently marketing it for sale. 

The results of this operation have been excluded from all continuing operating results included in our consolidated financial 

statements for all periods presented. 

Critical Accounting Policies and Estimates 

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial 

statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of 

these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues 

and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, 

including those related to bad debts, product returns, long-term contracts, inventories, goodwill and other intangible assets, income 

taxes, financing operations, foreign currency, and contingencies and litigation. We base our estimates on historical experience and on 

various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making 

judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ 

from these estimates under different assumptions or conditions. 

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation 

of our consolidated financial statements. 

- 29 -

Goodwill and Impairment of Long-Lived Assets 

We evaluate our goodwill at least annually and at any other time if an event or change in circumstances indicates that the fair 

value of a reporting unit is below its carrying amount. Our long-lived assets (to be held and used) are reviewed for impairment when 

events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable. 

In evaluating our long-lived assets for recoverability, we use estimates of undiscounted future cash flows of our individual 

reporting units and for goodwill our recoverability is measured by reference to fair value using after-tax discounted cash flows. As 

quoted market prices are unavailable for our individual reporting units, fair value was determined through the use of estimated future 

cash flows. The estimated cash flows used to assess recoverability of our long-lived assets and measure fair value of our reporting 

units were derived from current business plans developed using near-term and long term management projections. Our asset 

impairment evaluations, including our annual goodwill impairment test, required us to make several assumptions in determining 

estimates of future cash flows to determine fair value of our individual reporting units, including near and long term revenue and cost 

assumptions. 

We believe future events that could result in additional impairment of our goodwill and long-lived assets include, but are not 

limited to, declines in the current economic environment or significant losses of our customer base in Europe or in Australia. 

Revenue Recognition 

Revenue is recognized when the following criteria are met: (a) persuasive evidence that an arrangement exists; (b) delivery of the 

products or services has occurred; (c) the selling price is both fixed and determinable; and (d) collectability is reasonably assured. 

We generally recognize products revenues, including sales to distributors and sales under sales-type leases, upon shipment of 

product. We recognize services revenues as services are provided and collection of invoiced amounts is reasonably assured. Routine 

recurring services include terminal repairs, help-desk, on-site technician visits, deployment and the provision of supplies. Amounts 

received in advance of services being rendered are recorded as deferred revenue. Revenues from long-term contracts that require 

substantial performance of customized software and hardware over an extended period are recorded based upon the attainment of 

scheduled substantive performance milestones under the percentage-of-completion method. Operating lease revenue is recognized 

monthly over the lease term. The units leased under operating leases are included in the balance sheet under “Property, plant and 

equipment.” We accrue for warranty costs, sales returns and other allowances at the time revenue is recognized. 

Revenue from contracts with multiple element arrangements are recognized as each element is earned on the relative fair value 

of each element provided the delivered elements have value to customers on a standalone basis. Amounts allocated to each element 

are based on its objectively determined fair value, such as the sales price for the product or service when it is sold separately or based 

on competitor prices for similar product or services. 

We present revenues net of sales taxes and value-added taxes in our consolidated statement of operations. 

Sales-Type Leases 

Certain product sales made under lease arrangement are recorded as sales-type lease. Lease contract receivables represent the 

total lease payments to be received reduced by lease payments already collected. Sales-type lease revenues consist of the initial sale of 

the product shipped and the interest and maintenance elements of the lease payments as they are earned. An allowance for estimated 

uncollectible sales-type lease receivables at an amount sufficient to provide adequate protection against losses in our sales-type lease 

portfolio is recorded. The allowance is determined principally on the basis of historical loss experience and management’s assessment 

of the credit quality of the sales-type lease customer base. If loss rates increase or customer credit conditions deteriorate, the allowance 

for uncollectible sales-type leases may need to be increased. Unearned income includes interest and is the amount by which the 

original sum of the lease contract receivable exceeds the fair value of the equipment sold. Interest element is amortized to lease 

income using the effective interest method. 

Stock-Based Compensation 

We recognize compensation expense over the requisite service period for the fair-value of stock options and related awards. For 

stock options with graded vesting terms, we recognize compensation cost over the requisite service period using the accelerated 

method. The fair value of our stock-based awards is estimated at the date of grant using key assumptions such as future stock price 

volatility, expected terms, risk-free interest rates and the expected dividend yield. In addition, we estimate the expected forfeiture rate 

- 30 -

of our stock grants and only recognize the expense for those shares expected to vest. See Note 14 to our consolidated financial 

statements included herein for a further discussion of stock-based compensation. 

Product Warranty 

We accrue for estimated warranty obligations when revenue is recognized based on an estimate of future warranty costs for 

delivered products and specific known product issues. Such estimates are based on historical experience and expectations of future 

costs. We periodically evaluate and adjust the accrued warranty costs to the extent actual warranty costs vary from the original 

estimates. Our warranty period typically extends from one to five years from the date of shipment. Costs associated with maintenance 

contracts, including extended warranty contracts, are expensed when they are incurred. Actual warranty costs may differ from 

management’s estimates. 

Legal and Other Contingencies 

In the ordinary course of business, we are involved in legal proceedings involving contractual and employment relationships, 

product liability claims, intellectual property rights, and a variety of other matters. We record contingent liabilities resulting from 

asserted and unasserted claims against us, when it is probable that a liability has been incurred and the amount of the loss is estimable. 

Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the potential actions of 

third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. Currently, we do not believe 

any of our pending legal proceedings or claims will have a material impact on our financial position, results of operations or cash 

flows. However, if actual or estimated probable future losses exceed our recorded liability for such claims, we would record additional 

charges as other expense during the period in which the actual loss or change in estimate occurred. 

For components not yet billed to us by our third-party contract manufacturers, contingent liabilities are recorded by component 

based on the likelihood of our ultimate usage of the components. 

Costs Associated with Exit Activities 

We record costs associated with exit activities such as for employee termination benefits that represent a one-time benefit when 

management approves and commits to a plan of termination, and communicates the termination arrangement to the employees, or over 

the future service period, if any. Other costs associated with exit activities may include contract termination costs, including costs 

related to leased facilities to be abandoned or subleased, and facility and employee relocation costs. In addition, a portion of our 

restructuring costs are outside the U.S. related to expected employees terminations. We are required to record a liability for this cost 

when it is probable that we will incur the costs and can reasonably estimate the amount. 

In addition, we account for costs to exit an activity of an acquired company and involuntary employee termination benefits associated 

with acquired businesses in the purchase price allocation of the acquired business if a plan to exit an activity of an acquired company 

exists, and those costs have no future economic benefit to us and will be incurred as a direct result of the exit plan. 

Foreign Currency 

Assets and liabilities of subsidiaries operating outside the U.S. with a functional currency other than U.S. Dollars are translated 

into U.S. Dollars using year-end exchange rates. Revenue, costs and expenses are translated at the average exchange rates in effect 

during the year. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive loss. 

For subsidiaries operating outside the U.S. where the functional currency is U.S. Dollars, monetary assets and liabilities 

denominated in local currency are remeasured at year-end exchange rates whereas non-monetary assets, including inventories and 

property, plant and equipment, are reflected at historical rates. Revenue, costs and expenses are translated at the average exchange 

rates in effect during the year. Any gains or losses from foreign currency remeasurement are included in foreign currency loss on our 

consolidated statements of operation. 

Income Taxes 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial 

statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are 

measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected 

to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax laws (including rates) is recognized in 

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income in the period that includes the enactment date. See Note 17 to the consolidated financial statements regarding the valuation 

reserve against our deferred tax assets. 

We do not provide for federal income taxes on the undistributed earnings of our international subsidiaries because earnings are 

reinvested and, in the opinion of management, will continue to be reinvested indefinitely. 

Impact of Recently Issued Accounting Pronouncements 

See Note 2 to the consolidated financial statements for a discussion of recent accounting pronouncements. 

2009 Overview of Financial Results 

The following overview highlights certain key events and factors impacting our financial performance for the year ended 

December 31, 2009. 

During 2009, our primary objectives were: (i) finalizing the integration of TeT; (ii) continuing our margin expansion through 

operational efficiencies; (iii) strengthening our liquidity; and (iv) expanding our market share through focus on certain geographies 

and specific product lines and services. 

The TeT integration is substantially complete. The information technology infrastructure and administrative functions are 

consolidated and operate under one enterprise resource planning system and we have made significant progress in the convergence of 

our product lines. Although the integration is substantially complete, we expect that our ability to offer common product offerings to 

all of our customers will continue to evolve, and therefore the benefits are not yet fully reflected in the financial results. We expect 

continued improvement in our gross margin in 2010 since these synergies will be in effect for the full year, and due to cost reductions 

from our restructuring of research and development in Europe to other regions. Our integration of TeT has allowed us to maintain our 

market share in European countries. 

Also during 2009, we announced our intention to form a new venture with The McDonnell Group, Phoenix Managed Networks, 

LLC, which equips payment processors, banks and retailers worldwide with highly reliable and cost-effective data communications 

services for transaction-based applications. This transaction was completed in February 2010. We believe that the combination of our 

existing HBNet business and with the expertise provided by the McDonnell Group, will enhance our ability to expand market share 

and deliver strong returns for our investors and business partners. 

During 2009, we committed to a plan to divest a European leasing and service operation and are currently marketing it for sale. 

The results of this operation have been excluded from all continuing operating results included in our consolidated financial 

statements for all periods presented. 

Net revenues for the year ended December 31, 2009 were $406.9 million, a 6.3% decrease over the year ended December 31, 

2008. The primary reasons for the decrease were the following: (i) reduced demand in our countertop and PIN pad products in the 

Americas and Asia-Pacific; (ii) our exit of a marginally profitable service contract with a large customer in Brazil during the third 

quarter of 2009; and (iii) lower foreign currency exchange rates on foreign denominated revenue primarily in Europe. These factors 

were offset by new Brazil products revenues and incremental revenues from the acquisition of TeT, which was not included in our 

results for the first quarter of 2008 since the acquisition occurred on April 1, 2008. 

Gross profit for the year ended December 31, 2009 was $128.4 million or 31.6% of revenue, compared to $123.8 million or 

28.5% of revenue for the year ended December 31, 2008. Gross margin, net of amortization of purchased intangible assets, for the 

year ended December 31, 2009 includes a 35.0% product gross margin and a 23.4% service gross margin, compared to product and 

service gross margins of 31.5% and 22.7%, respectively, for the same period in 2008. The increase in product gross margin was due to 

improved contract manufacturing pricing, a favorable product mix selling higher margin networking and unattended products, as well 

as the lack of transition costs for our move to third party manufacturing during 2009, compared to 2008. The increase in service gross 

margin is a result of primarily higher margin services revenues in Europe from the TeT acquisition and the exit of a marginally 

profitable $18.0 to $20.0 million annual-revenue service contract in Brazil during the third quarter of 2009. 

During 2009, we recorded a net loss of $6.9 million or ($0.13) per share, which was a significant improvement over our 2008 

results where we incurred a net loss of $85.4 million or ($1.60) per share. The 2009 net loss was principally due to our results during 

the first quarter in which we reported a net loss of $9.9 million. The first quarter was negatively impacted by the global economic 

downturn and the corresponding decrease in available credit to both businesses and consumers, as well as a general retail slowdown in 

the Americas. 

- 32 -

In 2009, we incurred employee severance and related charges as a result of the following initiatives: 

• Reorganization of our service businesses in Australia and Brazil; 

• Consolidation of our United Kingdom operations in the Salisbury facility, resulting in the closing of the Woking 

facility; 

• Reorganization of our operations in Asia-Pacific; 

• Reorganization of our management team in our offices in Arizona, Mexico and the Caribbean; and 

• Reorganization of our research and development activities in Europe. 

As a result of these actions, we incurred charges of $3.0 million in 2009. Of the $3.0 million, $1.3 million was recorded in costs 

of revenue and $1.7 million was recorded in operating expenses. 

We expect to pay the remaining $1.0 million associated with the employee severance and benefits related charges in 2010. We 

also expect to incur additional restructuring charges of approximately $1.1 million in 2010 as a result of these initiatives. 

While we believe our results in 2009 are due to the challenging global economic conditions, our results for the last three quarters 

of 2009 demonstrate that we have made progress by expanding our customer base, improving our margins and profitability, and 

generating significant cash flow. We continue to see signs of improvement in the global economy. Although we see competitive 

pressures on a global basis, as we and our major competitors try to maintain and expand our respective market shares, we expect to 

continue to gain market share with our Optimum product line. These pressures will generally serve to decrease average prices for 

certain products within certain geographies for the foreseeable future. We are tightly controlling operating expenses and continuing to 

improve our supply chain, while remaining focused on delivering the highest security and first class quality solutions to our 

customers. As part of our effort to improve gross margin, we intend to move to a joint development manufacturing model where we 

will provide hardware specifications to a third party to design, develop and manufacture certain hardware. We will continue to 

develop our software to the highest level of security and compliance. We will also manage our balance sheet and leverage our working 

capital to help meet the objectives of our key initiatives in light of the current global economic environment. 

- 33 -

Comparison of Years Ended December 31, 2009 and 2008 

2009 % of Revenue 2008 % of Revenue Dollar Change 

(Amounts in thousands, except share and per share 

data) 

Net revenue: 

Products $ 303,999 74.7 % $ 320,692 73.9 % $ (16,693 ) 

Services 102,904 25.3 % 113,550 26.1 % (10,646 ) 

Total net revenue 

Costs of revenue: 

406,903 100.0 % 434,242 100.0 % (27,339 ) 

Products 197,763 48.6 % 219,575 50.6 % (21,812 ) 

Services 77,815 19.1 % 87,783 20.2 % (9,968 ) 

Amortization of purchased intangible assets 2,891 0.7 % 3,075 0.7 % (184 ) 

Total costs of revenue 

Gross profit: 

278,469 68.4 % 310,433 71.5 % (31,964 ) 

Products 106,236 26.1 % 101,117 23.3 % 5,119 

Services 25,089 6.2 % 25,767 5.9 % (678 ) 

Amortization of purchased intangible assets (2,891 ) (0.7 )% (3,075 ) (0.7 )% 184 

Total gross profit 

Operating expenses: 

128,434 31.6 % 123,809 28.5 % 4,625 

Research and development 44,486 10.9 % 45,901 11.3 % (1,415 ) 

Selling, general and administrative 74,681 18.4 % 81,144 19.9 % (6,463 ) 

Impairment of goodwill and intangible assets - 0.0 % 67,798 16.7 % (67,798 ) 

Amortization of purchased intangible assets 6,147 1.5 % 5,678 1.4 % 469 

Total operating expenses 125,314 30.8 % 200,521 49.3 % (75,207 ) 

Income (loss) from operations 3,120 0.8 % (76,712 ) (20.8 )% 79,832 

Interest income 296 0.1 % 1,466 0.4 % (1,170 ) 

Interest expense (10,990 ) (2.7 )% (6,822 ) (1.7 )% (4,168 ) 

Foreign currency gain (loss) 411 0.1 % (1,821 ) (0.4 )% 2,232 

Other income 390 0.1 % 191 0.0 % 199 

Non-operating expense 

Loss before income taxes and 

(9,893 ) (2.4 )% (6,986 ) (1.7 )% (2,907 ) 

discontinued operations (6,773 ) (1.7 )% (83,698 ) (19.3 )% 76,925 

Income tax benefit (provision) 829 0.2 % (1,211 ) (0.3 )% 2,040 

Loss before discontinued operations (5,944 ) (1.5 )% (84,909 ) (19.6 )% 78,965 

Loss from discontinued operations (924 ) (0.2) % (494 ) (0.1 )% (430 ) 

Net loss $ (6,868 ) (1.7 )% $ (85,403 ) (19.7 )% $ 78,535 

Basic and diluted income (loss) per share: 

Income (loss) before discontinued operations $ (0.11 ) $ (1.59 ) 

Income (loss) from discontinued operations (0.02 ) (0.01 ) 

Basic and diluted income per share $ (0.13 ) $ (1.60 ) 

Net Revenues 

Net revenues decreased approximately $27.3 million or 6.3% in 2009 compared to 2008. The decrease was comprised of 

$16.7 million or 5.2% in products revenues, and $10.6 million or 9.4% in net services revenues. 

The $16.7 million decrease in products revenues during 2009 is principally the result of decreases in countertop and PIN pad 

products in the Americas and Asia-Pacific. Countertop revenue in North America decreased $18.1 million as a result of the retail 

slowdown in the U.S. and weak global economic environment. Also, countertop revenue in Asia-Pacific decreased $3.7 million due to 

the global recession. These reductions were partially offset by an increase of $5.7 million of new products revenues related to our 

decision in 2009 to begin selling products into the Brazilian market, and by incremental revenue from the acquisition of TeT, which 

was not included in our results for the first quarter of 2008. 

The $10.6 million decrease in services revenues during 2009 is due primarily to our exit of a marginally profitable service 

contract with a large customer in Brazil during the third quarter of 2009. This reduction was partially offset by incremental revenue 

from the acquisition of TeT, which was not included in our results for the first quarter of 2008. 

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Costs of Revenue and Gross Profit 

Costs of revenue include the costs of raw materials, manufacturing and service labor, overhead and subcontracted manufacturing 

costs, telecommunication cost, and inventory valuation provisions. Costs of revenue also include amortization of certain intangible 

assets. Total gross profit as a percent of revenue increased to 31.6% during 2009 from 28.5% during 2008. 

Products Gross Profit 

Products gross profit excluding amortization was 34.9% in 2009 compared to 31.5% in 2008. The products gross profit increase is 

principally due to higher gross margins on TeT product sales, changes in product mix for countertop, mobile, and multilane products, 

as well as cost reductions gained from our third party contract manufacturers. In addition, gross profit in 2008 was negatively 

impacted by costs associated with the shut down of our China manufacturing plant totaling approximately $2.5 million and additional 

liabilities recorded of approximately $4.2 million primarily related to excess components at our third-party contract manufacturers. 

Services Gross Profit 

Services gross profit excluding amortization was 24.4% in 2009 compared to 22.7% in 2008. The increase in the gross profit 

percentage from 2009 to 2008, is principally due to the decision to exit a marginally profitable service contract with a large customer 

in Brazil during the third quarter of 2009 combined with a $1.0 million extended warranty sale to a third party that met the criteria of 

revenue. This was partially offset by $1.3 million of restructuring charges incurred in Brazil and Australia. 

Operating Expenses 

Research and development — Research and development expenses as a percent of revenue were 10.9% in 2009 compared to 

10.6% in 2008. Research and development expenses consist mainly of software and hardware engineering costs and the cost of 

development personnel. Research and development expenses decreased approximately $1.4 million or 3.1% in 2009 compared to 

2008, primarily due to $2.2 million of lower professional expenses for projects in Germany. This decrease was offset by additional 

expenses from the acquisition of TeT, which was not included in our results for the first quarter of 2008. 

Selling, general and administrative — Selling, general and administrative expenses as a percent of revenue was 18.4% for 2009 

and 18.7% for 2008. Sales and marketing expenses, administrative personnel costs, and facilities operations are the primary 

components of selling, general and administrative expenses. Selling, general and administrative expense decreased approximately $6.5 

million or 8.0% in 2009 compared to 2008. The decrease is primarily due to lower integration costs from the TeT acquisition, 

including reductions of $2.0 million in professional fees and $1.5 million of legal expenses. In addition as part of our continued effort 

to reduce costs there were reductions of $1.5 million of travel and entertainment and $0.7 million in marketing expenses. Stock-based 

compensation expense decreased by $1.5 million primarily due to lower fair value of new grants due to the decrease in our share price. 

Also, due to lower revenue in 2009 when compared to 2008, commission expense decreased by $1.9 million. These were offset by a 

$2.0 million increase in bonus expense and $1.1 million of depreciation expense related to development expenses for internal use 

software as a result of our integration of TeT. 

Impairment of goodwill and intangible assets — We performed our annual goodwill impairment test during the fourth quarter of 

2009 and determined that there was no impairment needed as of December 31, 2009. During the fourth quarter of 2008, we concluded 

that the economic environment and the significant declined in our share price compared to our net book value represented significant 

adverse events, and therefore, we evaluated our goodwill and long-lived assets for impairment as of December 31, 2009. Our 

evaluation of goodwill and long-lived assets resulted in the recognition of asset impairment charges totaling $67.8 million for 2008, 

primarily related to our acquisition of TeT on April, 1, 2008. 

Amortization of purchased intangibles — Amortization of purchased intangibles expense decreased approximately $0.2 million 

or 6.0% in 2009, compared to 2008, primarily related to lower exchange rates. 

Interest income, interest expense, and foreign currency 

We recognized $0.3 million in interest income in 2009 compared to $1.5 million in 2008. This decrease is principally attributable 

to lower average cash, cash equivalent, and short-term investment balances in 2009 compared to 2008 due to the acquisition of TeT. 

We incurred interest expense of $11.0 million in 2009 compared to $6.8 million in 2008. The increase in interest expense is 

primarily due to the acquisition financing of TeT that occurred on April 1, 2008. Interest expense includes amortization of the fair 

value of warrants that were accounted for as a debt discount, resulting in additional interest expense of $6.7 million in 2009 and $4.6 

- 35 -

million in 2008. In December 2009, we made an early repayment of $3.0 million of our debt to Francisco Partners and, as a result, we 

incurred additional non-cash interest expense of $0.5 million in the fourth quarter of 2009. 

Foreign currency income (loss) totaled $0.4 million in 2009 compared with $(1.8) million in 2008. The increase in foreign 

currency income is principally attributable to net favorable movements of currencies. 

Income tax benefit (expense) 

Federal, state and foreign taxes resulted in a benefit of $0.8 million in 2009 compared to an expense of $1.2 million in 2008. 

The income tax benefit for 2009 is primarily related to a $2.7 million reversal of a deferred tax liability in the United Kingdom, offset 

by $1.7 million of income taxes, interest and penalties related to uncertain tax positions in other foreign tax jurisdictions. 

During 2009, we continued to provide a valuation allowance on substantially all of our deferred tax assets. That valuation 

allowance is subject to reversal in future years at such time that the benefits are actually utilized or the operating profits in the 

U.S. become sustainable at a level that meets the recoverability requirements of the accounting standards. Due to our net operating 

loss position and our valuation allowance against our deferred tax assets, the consolidated effective tax rates for 2009 and 2008 are not 

meaningful. 


2008 % of Revenue 2007 % of Revenue Dollar Change 

(Amounts in thousands, except share and per share data) 

Net revenue: 

Products $ 320,692 73.9 % $ 206,360 71.3 % $ 114,332 

Services 113,550 26.1 % 83,167 28.7 % 30,383 



434,242 100.0 % 289,527 100.0 % 144,715 

Products 219,575 50.6 % 149,787 51.7 % 69,788 

Services 87,783 20.2 % 64,734 22.4 % 23,049 

Amortization of purchased intangible assets 3,075 0.7 % 327 0.1 % 2,748 

Total costs of revenue 310,433 71.5 % 214,848 74.2 % 95,585 

Gross profit: 0.0 % 

Products 101,117 23.3 % 56,573 19.5 % 44,544 

Services 25,767 5.9 % 18,433 6.4 % 7,334 

Amortization of purchased intangible assets (3,075 ) (0.7 )% (327 ) (0.1 )% (2,748 ) 

Total gross profit 


123,809 28.5 % 74,679 25.8 % 49,130 

Research and development 45,901 10.6 % 28,753 9.9 % 17,148 

Selling, general and administrative 81,144 18.7 % 59,964 20.7 % 21,180 

Impairment of goodwill and intangible assets 67,798 15.6 % - 0.0 % 67,798 

Amortization of purchased intangible assets 5,678 1.3 % 502 0.2 % 5,176 

Gain on sale of real property - 0.0 % (3,796 ) (1.3 )% 3,796 

Total operating expenses 200,521 46.2 % 85,423 29.5 % 115,098 

Loss from operations (76,712 ) (17.7 )% (10,744 ) (3.7 )% (65,968 ) 

Interest income 1,466 0.3 % 3,954 1.4 % (2,488 ) 

Interest expense (6,822 ) (1.6 )% (122 ) 0.0 % (6,700 ) 

Foreign currency loss (1,821 ) (0.4 )% (1,685 ) (0.6 )% (136 ) 

Other income (expense) 191 0.0 % (25 ) 0.0 % 216 

Non-operating income (expense) 

Loss before income taxes and 

(6,986 ) (1.6 )% 2,122 0.7 % (9,108 ) 

discontinued operations (83,698 ) (19.3 )% (8,622 ) (3.0 )% (75,076 ) 

Income tax provision (1,211 ) (0.3 )% (478 ) (0.2 )% (733 ) 

Loss before discontinued operations (84,909 ) (19.6 )% (9,100 ) (3.1 )% (75,809 ) 

Income (loss) from discontinued operations (494 ) (0.1 )% 1,623 0.6 % (2,117 ) 

Net loss $ (85,403 ) (19.7 )% $ (7,477 ) (2.6 )% $ (77,926 ) 


Loss before discontinued operations $ (1.59 ) $ (0.17 ) 

Income (loss) from discontinued operations (0.01 ) 0.03 

Basic and diluted income per share $ (1.60 ) $ (0.14 ) 

- 36 -

Net Revenues 

Net revenues increased approximately $144.7 million or 50.0% in 2008 compared to 2007. This increase was comprised of an 

increase of $114.3 million or 55.4% in products revenues, and $30.4 million or 36.5% in services revenues. 

Of the $114.3 million increase in products revenues during 2009, $109.5 million is attributable to the acquisition of TeT. 

Excluding the additional TeT products revenues, the increase in products revenues of $4.9 million is a result of increases in unattended 

sales in SEMEA and $3.2 million in Asia-Pacific. Other increases in revenue were due primarily to increases in multi-lane sales in the 

Americas and NEMEA of $5.3 million offset primarily by decreases in mobile sales in the Americas and SEMEA of $4.5 million. 

Of the $30.4 million increase in services revenue during 2008, the majority is attributable to the acquisition of TeT. Other areas of 

changes in the services revenue were due to growth in our service operations due to higher volume type services in Brazil of $6.1 

million offset by a decline of $5.0 million in Mexico as the result of the loss of a significant service contract whereby our customer 

was acquired and changed their outsource strategy. Offsetting this net increase was the billing and collection of past service contract 

fees in Brazil during 2007 of $4.6 million. This collection did not re-occur during 2008. 

Costs of Revenue and Gross Profit 

Costs of revenue include the costs of raw materials, manufacturing and service labor, overhead and subcontracted manufacturing 

costs, telecommunication cost, and inventory valuation provisions. Costs of revenue also include amortization of certain intangible 

assets. Total gross profit as a percent of revenue increased to 28.5% during 2008 from 25.8% during 2007. Amortization expense 

included in costs of revenue increased by $2.7 million or 840.4% in 2008 compared to 2007 due to the acquisition of TeT on April 1, 

2008. 

Products Gross Profit 

Products gross profit excluding amortization was 31.5% in 2008 compared to 27.4% in 2007. The products gross profit increase is 

principally due to higher gross margins on TeT product sales, changes in product mix for countertop, mobile, and multilane products, 

as well as efficiencies gained in 2009 from transitioning to contract manufacturing during the first half of 2008. Offsetting some of 

those gains in margin in 2008 were costs associated with the shut down of our China manufacturing plant totaling approximately $2.5 

million and excess inventory contingencies of approximately $4.2 million related to excess components at our third-party contract 

manufacturers. We expect to see continued efficiencies gained from our move to a contract manufacturing model in the future, 

although actual results may be materially different than our expectations. In addition, gross profit in 2007 was negatively impacted by 

approximately $9.6 million of charges for inventory not in compliance with industry security standards as well as other costs to begin 

the transition to contract manufacturing. 

Services Gross Profit 

Services gross profit excluding amortization was 22.7% in 2008 compared to 22.2% in 2007. Services gross profit during 2007 

was impacted by the collection of service contract fees in Brazil of $4.6 million that had no associated costs, as all costs had been 

written off in 2004 due to uncertainties regarding realization. Excluding this collection at 100% margin, the services gross profit was 

17.6% in 2007. The increase in the gross profit percentage from 2007 to 2008, excluding the service contract fees in Brazil, is 

principally due to the acquisition of TeT and improved cost controls in Brazil during 2008. Offsetting these increases were decreases 

in gross profit in our Mexico and Australian service businesses. 

Operating Expenses 

Research and development — Research and development expenses consist mainly of software and hardware engineering costs 

and the cost of development personnel. Research and development expenses increased approximately $17.2 million or 59.6% in 2008 

compared to 2007, primarily related to the acquisition of TeT. Excluding TeT, research and development expenses decreased $5.5 

million from 2007 to 2008, primarily due to the re-prioritization of projects of $2.6 million, lower consulting fees of $1.1 million and 

lower salaries, bonus and severance of $2.8 million. Research and development expenses as a percent of revenue were 10.6% in 2008 

compared to 9.9% in 2007. The increase as a percentage of revenue is due to the acquisition of TeT and the research and development 

expenditures needed to support the maintenance of two product lines. 

Selling, general and administrative — Sales and marketing expenses, administrative personnel costs, and facilities operations 

make up the selling, general and administrative expenses. Selling, general and administrative expenses increased approximately $22.0 

million or 36.7% in 2008 compared to 2007, primarily related to the acquisition of TeT. Excluding TeT, selling, general and 

- 37 -

administrative expenses would have increased by $1.4 million, primarily due to an increase in professional fees of $1.8 million 

principally from legal expenses, increase in salary of $1.2 million principally from human resources and information technology 

headcount, increase in depreciation of $0.7 million and commissions of $0.8 million. These were offset by decreases in bad debt 

expense of $2.2 million and bonus of $1.1 million. As a percent of revenue, selling, general and administrative expenses was 18.7% 

for 2008 and 20.7% for 2007. This decrease was primarily due to operating expense synergies related to the acquisition of TeT. 

Impairment of goodwill and intangible assets — During the fourth quarter of 2008, we concluded that the current economic 

environment and the significant declines in our share price compared to our net book value represented significant adverse events, and 

therefore, we evaluated our goodwill and long-lived assets for impairment as of December 31, 2008. Our evaluation of goodwill and 

long-lived assets resulted in the recognition of asset impairment charges totaling $67.8 million for 2008, primarily related to our 

acquisition of TeT on April, 1, 2008. 

Amortization of purchased intangibles — Amortization of purchased intangibles expense increased approximately $5.2 million 

or 1031% in 2008 compared to 2007, primarily related to the acquisition of TeT and the amortization of our purchased intangible 

assets. 

Gain on sale of real property — During the second quarter of 2007, we completed the sale of our former headquarters facilities 

located in Phoenix, Arizona, for a sale price of $16.3 million. We recorded a gain of $3.8 million on the sale in the second quarter of 

2007. There were no such sales during 2008. 

Interest income, interest expense, and foreign currency 

We recognized $1.5 million in interest income in 2008 compared to $4.0 million in 2007. This decrease is principally attributable 

to lower average cash, cash equivalent, and short-term investment balances in 2008 compared to 2007 due to the acquisition of TeT. 

We incurred interest expense of $6.8 million in 2008 compared to $0.1 million in 2007. The increase in interest expense is primarily 

due to the acquisition financing of TeT. Approximately $4.6 million of interest expense was converted to principal in accordance with 

the agreement. Foreign currency losses totaled $1.8 million in 2008 compared with $1.7 million in 2007. The increase in foreign 

currency expense is principally attributable to net unfavorable movements of currencies not hedged and a general increase in hedged 

exposure increasing the direct cost of hedging. 

Income tax expense 

Income tax expense for federal, state and foreign taxes was $1.2 million and $0.5 million for the years ended 2008 and 2007, 

respectively. The increase in income tax expense was due to taxable income in NEMEA and SEMEA, and taxable income in Brazil, 

which by law could not be offset against prior net operating loss carryforwards. 

During 2008, we continued to provide a valuation allowance on substantially all of our deferred tax assets. That valuation 

allowance is subject to reversal in future years at such time that the benefits are actually utilized or the operating profits in the 

U.S. become sustainable. Due to our net operating loss position and our valuation allowance against our deferred tax assets, the 

consolidated effective tax rates for 2008 and 2007 are not meaningful. 

Segment and Geographic Information 

During the fourth quarter of 2008, we initiated organizational changes, made enhancements to our internal management reporting, 

and began to report information pertaining to four business segments as follows: (i) the Americas, (ii) NEMEA, (iii) SEMEA and 

(iv) Asia-Pacific. The Americas consist of the U.S., Canada, Mexico, the Caribbean, Central America, and South America. NEMEA 

consists of Germany, Austria, Scandinavia, and the Benelux countries. SEMEA consists of France, Spain, the United Kingdom, 

Ireland, Eastern Europe, Russia, the Middle East, and Africa. Asia-Pacific consists of China, India, Japan, Korea, Southeast Asia, 

Australia, and New Zealand. Prior year segment data has been restated for comparative purposes. 

Our Chief Operating Decision Maker (“CODM”) is our CEO. The CODM has access to discrete financial information for each of 

the above-mentioned business segments regarding revenues, gross margins (using fully burdened manufacturing costs), direct local 

service costs, direct operating expenses consisting of expenses directly associated with the business segment, and indirect operating 

expenses consisting of global shared cost centers, such as global R&D, marketing, corporate general and administrative expenses, and 

stock-based compensation. Our operations are managed by Managing Directors (“MDs”) for each business segment. These MDs 

have responsibility for all business activities and combined operating results of their business segment and these individuals are 

compensated and evaluated based on the performance (Direct Trading Profit) of their overall business segment. 

- 38 -

Our products revenues relate primarily to the sale of terminals, peripheral devices, and transaction networking devices. Our 

services revenues are comprised of asset management services, trusted transaction services and payment solutions, as described in 

Part I to this Annual Report on Form 10-K. No other type of revenue exceeded 10% of our consolidated net revenues in 2009, 2008 or 

2007. 

2009 % of Revenue 2008 % of Revenue 2007 % of Revenue 

Net revenue: 

Americas $ 123,746 30.4 % $ 160,038 39.3 % $ 158,539 36.5 % 

NEMEA 102,492 25.2 % 90,104 22.1 % 16,400 3.8 % 

SEMEA 131,505 32.3 % 133,210 32.7 % 64,984 15.0 % 

Asia-Pacific 49,160 12.1 % 50,890 12.5 % 49,604 11.4 % 

Total net revenue $ 406,903 100.0 % $ 434,242 100.0 % $ 289,527 100.0 % 

Operating income: 

Americas $ 21,130 5.2 % $ 16,278 3.7 % $ 20,312 7.0 % 

NEMEA 19,267 4.7 % (6,060 ) (1.4 )% 5,959 2.1 % 

SEMEA 24,676 6.1 % (8,490 ) (2.0 )% 14,899 5.1 % 

Asia-Pacific 9,049 2.2 % 4,368 1.0 % 11,386 3.9 % 

Shared Cost Centers (71,002 ) (17.4 )% (82,808 ) (19.1 )% (63,300 ) (21.9 )% 

Total operating income (loss) $ 3,120 0.8 % $ (76,712 ) (17.7 )% $ (10,744 ) (3.7 )% 


Net revenues for the Americas were $123.8 million in 2009 compared to $160.0 million in 2008. The $36.3 million reduction in 

net revenues is principally due to decreases of $18.1 in countertop and $3.4 million in PIN pad products in North America as a result 

of the retail slowdown in the U.S. and weak global economic environment. The decrease in the Americas net revenues was also 

attributable to a decrease in services revenues of $17.9 million in Brazil, primarily due to our exit of a marginally profitable service 

contract with a large customer. These decreases were partially offset an increase of $5.7 million of new products revenues related to 

our decision in 2009 to resume the sale of products in Brazil. 

Net revenues for NEMEA were $102.5 million in 2009 compared to $90.1 million in 2008. The $12.4 million increase in net 

revenues is principally due to incremental revenue not included in the first quarter of 2008 related to our TeT acquisition. This 

increase was partially offset by lower exchange rates on our revenue denominated in foreign currencies. 

Net revenues for SEMEA were $131.5 million in 2009 compared to $133.2 million in 2008. The $1.7 million decrease in net 

revenues is principally due to reductions of $3.0 million in countertop products in Central Eastern Europe, $2.1 million in countertop 

products in Hungary and $2.5 million in countertop products in Russia. Also, revenue was negatively impacted by lower exchange 

rates on our revenue denominated in foreign currencies. These reductions were offset by an increase of $5.1 million for mobile 

products in the U.K and by incremental revenue not included in the first quarter of 2008 related to our TeT acquisition. 

Net revenues for Asia-Pacific were $49.2 million in 2009 compared to $50.9 million in 2008. The $1.7 million reduction in net 

revenues is principally due to reductions of $3.1 million of countertop products in Hong Kong and $1.0 million in networking 

products in China. These were partially offset by increases of $1.6 million and $1.0 million of mobile products in Australia and Hong 

Kong, respectively. 

Operating Income 

Operating income for the Americas was $21.1 million in 2009 compared to $16.3 million in 2008. The $4.9 million increase is 

primarily due to a $6.4 million write-down of goodwill and intangible assets in 2008, whereas no write-down was required in 2009. 

This increase was partially offset by a $1.1 million extended warranty sale to a third party that was recognized in 2009. 

Operating income for NEMEA was $19.3 million in 2009 compared to a loss of $6.1 million in 2008. The $25.3 million increase 

is primarily due to a $24.4 million write-down of goodwill and intangible assets in 2008, whereas no write-down was required in 

2009. Also, 2009 benefited from an $8.7 million increase in revenue in 2009 as well as incremental operating income not included in 

the first quarter of 2008 related to our TeT acquisition, partially offset by lower foreign exchange rates. 

Operating income for SEMEA was $24.7 million in 2009 compared to a loss of $8.5 million in 2008. The $33.2 million 

improvement is primarily due to a $32.4 million write-down of goodwill and intangible assets in 2008, whereas no write-down was 

required in 2009. Also, 2009 benefited from incremental operating income not included in the first quarter of 2008 related to our TeT 

acquisition, partially offset by lower foreign exchange rates. 

- 39 -

Operating income for Asia-Pacific was $9.1 million in 2009 compared to $4.4 million in 2008. The $4.7 million increase is 

primarily due to a $4.5 million write-down of goodwill and intangible assets in 2008, whereas no write-down was required in 2009. 

Shared cost center expenses were $71.0 million in 2009 compared to $82.8 million in 2008. The $11.8 million decrease is 

primarily due to lower integration costs from the TeT acquisition, including reductions of $2.0 million in professional fees and $1.5 

million of legal expenses. In addition, as part of our continued effort to reduce costs there were reductions of $0.7 million in global 

marketing expenses and $2.2 million of lower global research and development professional expenses. Stock-based compensation 

expense decreased by $1.5 million, primarily due to lower fair value associated with stock options granted in 2009. 


Net Revenues 

The Americas net revenues increased in 2008 compared to 2007, principally as a result of increases in countertop and multilane 

products in North America and increases in services revenues in Brazil. Offsetting these increases were declines in countertop 

revenue in Brazil, as we discontinued local manufacturing and sales activities in the third quarter of 2007, as well as a collection of 

$4.6 million from a past service contract that had been previously written off during 2007. This did not re-occur in 2008. NEMEA 

and SEMEA net revenues increased due to the acquisition of TeT during the year. 


The Americas operating income increased in 2008 compared to 2007, principally as a result of increased product sales activity in 

North America and services revenues in Brazil. In addition, 2007 was negatively impacted by increased inventory reserves related to 

excess non-compliant PCI inventory. NEMEA and SEMEA operating profit increased in 2008 compared to 2007, principally as a 

result the acquisition of TeT during the year, which was more than offset by the write-down of goodwill and intangible assets within 

these regions. Asia-Pacific operating income decreased in 2008 compared to 2007, principally as a result of the sales mix and 

declines in our Australian service margins. In addition, the operating income decreased due to the write-down of goodwill within this 

region. 

Shared cost center expenses increased in 2008 compared to 2007, principally as a result of an increase in costs incurred for due 

diligence and acquisition related expenses of $8.3 million and global research and development of $4.7 million related to our 

acquisition of TeT, and stock-based compensation of $1.6 million offset by decreases in operations management of $4.6 million as a 

result of our transition to third-party contract manufacturing during 2008. 

Liquidity and Capital Resources 

We have historically financed our operations primarily through cash generated from operations and occasionally from borrowings 

under a line of credit or other debt facilities. During 2009, our primary source of cash was cash generated by our operating activities. 

Our ability to service our long-term debt, to remain in compliance with the various restrictions and covenants contained in our debt 

agreements, and to fund working capital, capital expenditures and business development efforts, will depend on our ability to generate 

cash from operating activities, which in turn is subject to, among other things, future operating performance, as well as general 

economic, financial, competitive, legislative, regulatory and other conditions, some of which may be beyond our control. We have 

available to us, upon compliance with certain conditions, a revolving credit facility, less any letters of credit outstanding under the 

sub-line of the revolving credit facility. Availability under our revolving credit facility for cash and outstanding letters of credit was 

$14.9 million as of December 31, 2009, after deducting outstanding letters of credit of $3.1 million under this revolving line of credit 

at December 31, 2009. 

Cash flows from operating activities 

Cash provided by operating activities is comprised of net income (loss) from continuing operations adjusted for non-cash items 

and changes in operating assets and liabilities. Cash provided by continuing operating activities totaled $30.6 million for 2009, 

compared to cash provided by operating activities of $22.2 million for 2008, a year-over-year increase of $8.3 million. The increase in 

cash provided by operations is principally related to changes in operating assets and liabilities and a reduction in our net loss before 

discontinued operations from $84.9 million in 2009 to $5.9 million in 2008. 

- 40 -

Changes in operating assets and liabilities and the related impact on our operating cash flows consist of the following: 

- 41 - 

2009 2008 Change 

Accounts receivable $ 14,981 $ 5,464 $ 9,517 

Inventories (1,808 ) (7,371 ) 5,563 

Accounts payable (1,874 ) (4,333 ) 2,459 

Other (7,008 ) 5,492 (12,500 ) 

Increase (decrease) in operating assets and liabilities $ 4,291 $ (748 ) $ 5,039 

The net increase in cash was due to improved collection of our accounts receivable, partially offset by a decrease in accounts 

payable and other accrued expenses. 

Cash flows used in investing activities 

Cash flows used in investing activities of $10.0 million consist principally of capital expenditures for property, plant and 

equipment of $8.1 million and a partial payment $2.1 million for the working capital adjustment related to the acquisition of TeT 

during 2008. 

The capital expenditures were principally for upgrades to computer software and hardware related to the TeT acquisition, 

manufacturing tools and equipment related to new product launches and our move to contract manufacturing, and expenditures related 

to outfitting the new corporate headquarters. Depending on the global economic environment, we intend to spend approximately $8.0 

million to $10.0 million over the next 12 months for capital expenditures related to computer software to further integrate the TeT 

product line and for manufacturing tools and equipment for new product launches. 

Cash flows from financing activities 

Cash flows used in financing activities of $3.0 million consist of payments made to Francisco Partners for partial, early 

extinguishment of the debt financing related to the TeT acquisition. 

Projected liquidity and capital resources 

At December 31, 2009, cash and cash equivalents were $55.0 million. The amount of consolidated cash is subject to intra-month 

and seasonal fluctuations and includes balances held by subsidiaries worldwide that are needed to fund their operations. 

On January 15, 2008, we entered into a loan agreement that provides for a revolving credit facility of up to $25.0 million with the 

ability to borrow up to $40 million if certain conditions are met. Available borrowings under the loan agreement are subject to 

borrowing base calculations based on the value of eligible inventory and accounts receivable. The loan agreement includes customary 

covenants and certain negative covenants prohibiting the occurrence of certain types of debt, limiting capital expenditures or disposing 

of assets. The obligations under the revolving credit facility are secured by the inventory and accounts receivable of certain of our 

subsidiaries in the U.S. and the U.K. The remaining balance of our consolidated assets are unencumbered under the loan agreement 

and, if needed, may be used as collateral for additional debt. All amounts outstanding under this agreement are due on January 15, 

2011. 

On February 10, 2010, the Loan Agreement was amended to allow us to enter into a transaction between our former subsidiary, 

HBNet, and The McDonnell Group, as well as making additional changes, including, among others, providing for the outstanding 

amounts under the Loan Agreement to now bear interest, at our option, at either: (i) LIBOR plus 200 or 250 basis points; or (ii) the 

bank’s prime rate plus 50 or 75 basis points depending on certain financial ratios. In addition, the borrowing base was amended to 

eliminate inventory from the borrowing base calculation. All amounts outstanding under the Loan Agreement continue to be due on 

January 15, 2011. The forgoing description of the amendment to the Loan Agreement is qualified in its entirety by reference to the 

complete terms and conditions of the amendment to the Loan Agreement, a copy of which is attached to this Annual Report on Form 

10-K as Exhibit 10.19 and is incorporated by reference herein. 

During the second quarter of 2008, we completed the acquisition of TeT for approximately $150.5 To fund the acquisition, on 

February 13, 2008, we entered into a credit agreement (the “Credit Agreement”) with Francisco Partners. The Credit Agreement 

provided for a loan of up to $60.0 million to partially fund the acquisition at closing. The loan under the Credit Agreement bears 

interest at 10% per annum, provided that, at our election, interest may be capitalized and added to the principal of the loan to be repaid 

at maturity. The loan was funded by an affiliate of Francisco Partners, FP Hypercom Holdco, LLC (the “Lender”). All amounts 

outstanding under the Credit Agreement are due March 31, 2012.

Based on past performance and current expectations, we believe that our cash flows from operations and other sources of 

liquidity, including borrowings available under our revolving credit facility or other financing options, will satisfy our working capital 

needs, capital expenditures, commitments, and other liquidity requirements associated with our operations and our TeT acquisition 

debt requirement through the next year. Should operating results prove unfavorable, we may need to obtain additional capital sources 

to meet our short-term liquidity and capital resource requirements. 

Contractual Obligations 

The following table summarizes our significant contractual obligations at December 31, 2009, and the effect such obligations are 

expected to have on our liquidity and cash flows in future periods (dollars in thousands): 

Less than After 

Total 1 Year 1-3 Years 3-5 Years 5 Years 

Long-term debt $ - $ - $ 85,324 $ - $ - 

Operating leases 16,128 3,986 4,458 2,800 4,884 

Minimum purchase obligations(1) 33,234 33,234 - - - 

Total $ 49,362 $ 37,220 $ 89,782 $ 2,800 $ 4,884 

(1) Minimum purchase obligations include all outstanding obligations to purchase goods or services from our contract 

manufacturers and other suppliers at December 31, 2009 including agreements that are cancelable without penalty and 

agreements that are enforceable and legally binding. We estimate that approximately 98% of the outstanding purchase 

obligations at December 31, 2009 are non-cancelable due to the customized nature of the order and the long lead time 

requirements. 

(2) Our long-term debt obligation includes principal and accrued interest through the maturity of the debt in 2012. 

Off-Balance Sheet Arrangements 

As of December 31, 2009, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC 

Regulation S-K. 

2010 Outlook 

We believe that our 2009 initiatives will improve our financial performance in 2010. We expect revenues to grow while continuing 

to control existing operating expenses. Beginning in the second quarter of 2010, we anticipate releasing our next generation products 

using a joint development manufacturing model and over time we expect to increase product gross margin as revenue from these 

products become meaningful to our overall revenue. We also expect our gross margin to improve as the overall economy improves 

and our markets continue to recover. We are also in the process of restructuring our existing service businesses to increase service 

gross margin and we also intend to expand our software solutions to grow revenue and increase service gross margin. In order to 

increase the software-related resources to support higher software and solutions revenue while also controlling operating expenses, 

beginning in the fourth quarter of 2009, we opened a new low-cost research and development center in the Philippines and we intend 

to employ up to 100 developers there by the end of 2010. 

We expect to continue to see competitive pressures on a global basis as we try to maintain and expand our market share. These 

pressures will generally serve to decrease average selling prices for certain products within certain geographies We will continue to 

manage our balance sheet and leverage our working capital to help achieve of our key initiatives and in response to the global 

economic environment in 2010. 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 

At December 31, 2009, our cash equivalent investments are primarily in money market accounts and certificates of deposit and 

are reflected as cash equivalents because all maturities are within 90 days from date of purchase. Our interest rate risk with respect to 

existing investments is limited due to the short-term duration of these arrangements and the yields earned, which approximate current 

interest rates for similar investments. 

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates in connection 

with our international operations and markets. Nevertheless, the fair value of our investment portfolio or related income would not be 

- 42 -

significantly impacted by a 100 basis point increase or decrease in interest rates, due primarily to the short-term nature of the major 

portion of our investment portfolio. 

A substantial portion of our revenue and capital spending is transacted in either U.S. Dollars or Euros. However, we do at times 

enter into transactions in other currencies, such as the Hong Kong Dollar, Australian Dollar, Brazilian Real, British Pound and other 

Central and South American, Asian and European currencies. In March 2009, we suspended hedging activities due to the cost of 

entering into forward contracts, the possible short term cash requirements for forward contract payables, along with the inability to 

repatriate cash from foreign countries on a short term basis to offset any hedge forward contract payable. We are currently reviewing 

our hedging strategy for 2010. Prior to our decision to suspend hedging in March 2009, we hedged the translation of our net 

investment in foreign subsidiaries in an attempt to neutralize the effect of translation gains or losses in the statement of operations. We 

also entered into hedge contracts to mitigate certain significant transactional exposures. Financial hedging instruments were limited by 

our previous policy regarding foreign currency forward or option contracts and foreign currency debt. At December 31, 2009, we had 

no foreign currency forward contracts. 

We do not purchase or hold any such derivative financial instruments for the purpose of speculation or arbitrage. See “Item 1A, 

Risk Factors — International operations pose additional challenges and risks that if not properly managed could adversely affect our 

financial results ” elsewhere in this Annual Report on Form 10-K. 

At present, all of our long-term debt obligations are at a fixed interest rate over the term of the agreement and there are no 

borrowings under our revolving credit facility at December 31, 2009. 

During the normal course of business, we are routinely subjected to a variety of market risks, examples of which include, but are 

not limited to, interest rate movements and foreign currency fluctuations, as we discuss in this Item 7A, and collectability of accounts 

receivable. We continuously assess these risks and have established policies and procedures to protect against the adverse effects of 

these and other potential exposures. Although we do not anticipate any material losses in these risk areas, no assurance can be made 

that material losses will not be incurred in these areas in the future. 

Item 8. Financial Statements and Supplementary Data 

The financial statements and supplementary data required by Regulation S-X are included in Part IV, Item 15 of this Annual 

Report on Form 10-K. 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

None. 

Item 9A. Controls and Procedures 

Evaluation of Disclosure Controls and Procedures 

We maintain disclosure controls and procedures designed to ensure information required to be disclosed in the reports we file or 

submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and timely 

reported as specified in the SEC’s rules and forms. They are also designed to ensure that such information is accumulated and 

communicated to our management, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as 

appropriate, to allow timely decisions regarding required disclosure. 

Our management, with the participation of our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, 

has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) 

under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer, 

Chief Financial Officer, and Chief Accounting Officer have concluded that, as of the end of such period, our disclosure controls and 

procedures were effectively designed to ensure that information we are required to disclose in reports we file or submit under the 

Exchange Act is (1) recorded, processed, summarized and reported timely as specified in SEC rules and forms and is (2) accumulated 

and communicated to our management, including our certifying officers, as appropriate to allow timely decisions regarding required 

disclosures. 

- 43 -

Changes in Internal Control over Financial Reporting 

There was no change in our internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d- 

15(f), that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially 

affect, our internal control over financial reporting. 

Management’s Report on Internal Control Over Financial Reporting 

Our management is responsible for establishing and maintaining adequate internal control over Hypercom’s financial reporting, 

as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our Chief Executive Officer, Chief Financial 

Officer, and Chief Accounting Officer, and with the participation of other management, Hypercom conducted an evaluation of the 

effectiveness of internal control over financial reporting as of December 31, 2009 based on the framework established by the 

Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) entitled Internal Control — Integrated Framework . 

Based on this evaluation, our management concluded that, as of December 31, 2009, our internal control over financial reporting 

was effective. 

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on management’s 

assessment of our internal control over financial reporting, which follows. 

- 44 -

Report of Independent Registered Public Accounting Firm 

The Board of Directors and Stockholders of Hypercom Corporation 

We have audited Hypercom Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria 

established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway 

Commission (the COSO criteria). Hypercom Corporation’s management is responsible for maintaining effective internal control over 

financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the 

accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the 

company’s internal control over financial reporting based on our audit. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control 

over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over 

financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of 

internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. 

We believe that our audits provide a reasonable basis for our opinion. 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the 

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally 

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) 

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the 

assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial 

statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being 

made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance 

regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a 

material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of 

changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

In our opinion, Hypercom Corporation maintained, in all material respects, effective internal control over financial reporting as of 

December 31, 2009, based on the COSO criteria . 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 

consolidated balance sheets of Hypercom Corporation as of December 31, 2009 and 2008, and the related consolidated statements of 

operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009 of Hypercom 

Corporation, and our report dated March 12, 2010 expressed an unqualified opinion thereon. 

Phoenix, Arizona 

March 12, 2010 

/s/ Ernst & Young LLP 

- 45 -

Item 9B. Other Information 

None. 

PART III 

Item 10. Directors, Executive Officers and Corporate Governance 

Executive Officers of the Registrant 

The following are our executive officers as of March 9, 2010: 

Name Age Title Other Business Experience since 1/1/2005 


52 Chief Executive Officer and Director, Hypercom Corporation (since December 

President (since December 2007) 2007 and April 2006 – January 2007); President and 

Chief Operating Officer, Hypercom Corporation; 

President, Oberthur Card Systems, USA 

Thomas B. Sabol 51 

Henry Gaillard 

Scott Tsujita 

Douglas J. Reich 

49 

46 

66 

Chief Financial Officer (since April 

2009) 

Senior Vice President, Global 

Operations (since April 2008) 

Senior Vice President, Finance, 

Treasury and 

Investor Relations (since October 

2003) 

Senior Vice President, General 

Counsel, Chief Compliance Officer 

and Secretary 

(since November 2001) 

- 46 - 

Chief Financial Officer, Suntron Corporation; Chief 

Financial Officer, Wolverine Tube Corporation 

Chief Operating Officer, Thales e-Transactions, a 

division of the Thales Group; Chief Executive 

Officer, Thales Navigation (Magellan); Chief 

Operating Officer and General Manager of the 

Consumer Business Unit, Thales Navigation 

(Magellan) 

The additional information required by this item regarding our directors, audit committee and compliance with Section 16 of the 

Exchange Act is incorporated by reference from the information contained in our 2010 Annual Meeting Proxy Statement, which will 

be filed with the SEC within 120 days following our fiscal year end. 

We have adopted a code of ethics that applies to all directors, officers and employees of our company, including our Chief 

Executive Officer, Chief Financial Officer, Chief Accounting Officer, or persons performing similar functions. A copy of our Code of 

Ethics is available on our website at www.hypercom.com . We intend to satisfy the disclosure requirements under Item 10 of Form 8-K 

in the event of an amendment to, or a waiver from, a provision of our Code of Ethics that applies to our Chief Executive Officer, Chief 

Financial Officer, Chief Accounting Officer, or persons performing similar functions, by disclosing such information on our website. 

Item 11. Executive Compensation 

Information required in response to this item is incorporated by reference to our 2010 Annual Meeting Proxy Statement, which 

will be filed with the SEC within 120 days following our fiscal year end. 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 

Information required in response to this item is incorporated by reference from our 2010 Annual Meeting Proxy Statement, which 

will be filed with the SEC within 120 days following our fiscal year end.

Item 13. Certain Relationships and Related Transactions, and Director Independence 



Item 14. Principal Accountant Fees and Services 



Item 15. Exhibits and Financial Statement Schedules 

PART IV 

a. The following documents are filed as part of this Annual Report on Form 10-K: 

(1)Audited Consolidated Financial Statements 

Reports of Independent Registered Public Accounting Firm 

Consolidated Balance Sheets at December 31, 2009 and 2008 

Consolidated Statements of Operations for the years ended December 31, 2009, 2008, and 2007 

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009, 2008, and 2007 

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007 

Notes to Consolidated Financial Statements 

(2) Financial Statement Schedules 

Financial statement schedules are omitted because of the absence of the conditions under which they are required or because the 

required information is included in the Consolidated Financial Statements or the notes thereto. The financial statements of 

unconsolidated subsidiaries are omitted because, considered in the aggregate, they would not constitute a significant subsidiary. 

(3) Exhibits 

See Exhibit Index beginning on page 100 of this Annual Report on Form 10-K. 

b. See Item 15(a)(3) above. 

c. See Item 15(a)(2) above. 

- 47 -

SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this 

Annual Report to be signed on our behalf by the undersigned, thereunto duly authorized. 

HYPERCOM CORPORATION Date: March 12, 2010 

By: /s/ Philippe Tartavull 



Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following 

persons on behalf of the Registrant and in the capacities indicated on March 12, 2010. 

Signature Title 

Principal Executive, Financial and 

Accounting Officers: 

/s/ Philippe Tartavull Chief Executive Officer, President and 

Philippe Tartavull Director 

Directors: 

/s/ Thomas B. Sabol Chief Financial Officer 

Thomas B. Sabol 

/s/ Shawn Rathje Chief Accounting Officer and Corporate 

Shawn Rathje Controller 

* Director 

Daniel Diethelm 

* Director 

Johann J. Dreyer 

* Director 

Keith B. Geeslin 

* Director 

Ian K. Marsh 

* Director 

Phillip J. Riese 

* Chairman and Director 

Norman Stout 

Philippe Tartavull, by signing his name hereto, does sign and execute this Annual Report on Form 10-K on behalf of such of the 

above named directors of the registrant on this 12 th day of March, 2010, pursuant to the power of attorney executed by each of such 

directors filed as Exhibit 24.1 to this Annual Report on Form 10-K. 

*By: /s/ Philippe Tartavull 

Attorney-in-Fact 

- 48 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

The Board of Directors and Stockholders of Hypercom Corporation 

We have audited the accompanying consolidated balance sheets of Hypercom Corporation as of December 31, 2009 and 2008, 

and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period 

ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to 

express an opinion on these financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are 

free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 

financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, 

as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our 

opinion. 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position 

of Hypercom Corporation at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for 

each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), 

Hypercom Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal 

Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report 

dated March 12, 2010 expressed an unqualified opinion thereon. 

Phoenix, Arizona 

March 12, 2010 

/s/ Ernst & Young LLP 

- 49 -

HYPERCOM CORPORATION 

CONSOLIDATED BALANCE SHEETS 

2009 

December 31, 

2008 

(Dollars in thousands, except share data) 

ASSETS 

Current assets: 

Cash and cash equivalents $ 55,041 $ 35,582 

Short-term investments 

Accounts receivable, net of allowance for doubtful 

— 499 

accounts of $3,240 and $4,469, respectively 86,031 96,498 

Current portion of net investment in sales-type leases 5,235 8,574 

Inventories 29,363 31,290 

Prepaid expenses and other current assets 8,855 7,106 

Deferred income taxes 1,311 1,320 

Current portion of assets held for sale 5,241 2,616 

Total current assets 191,077 183,485 

Property, plant and equipment, net 24,304 24,911 

Net investment in sales-type leases 5,046 4,802 

Intangible assets, net 49,579 57,311 

Goodwill 28,536 26,715 

Assets held for sale — 3,262 

Other long-term assets 8,346 5,814 

Total assets $ 306,888 $ 306,300 

LIABILITIES AND STOCKHOLDERS' EQUITY 

Current liabilities: 

Accounts payable $ 52,355 $ 50,545 

Accrued payroll and related expenses 16,152 16,596 

Accrued sales and other taxes 8,116 7,706 

Product warranty liabilities 5,444 6,597 

Restructuring liabilities 8,265 7,724 

Accrued other liabilities 20,677 22,866 

Deferred revenue 11,559 12,177 

Deferred tax liabilities 22 4,828 

Income taxes payable 6,568 5,201 

Current portion of liabilities held for sale 1,244 2,410 

Total current liabilities 130,402 136,650 

Deferred tax liabilities 14,902 15,999 

Long term debt, net of discount 56,076 48,769 

Other liabilities 14,612 11,094 

Total liabilities 215,992 212,512 

Commitments and contingencies 

Stockholders' equity: 

Common stock, $.001 par value; 100,000,000 shares 

authorized; 54,622,360 and 53,442,799 shares outstanding 

at December 31, 2009 and 2008, respectively 58 57 

Additional paid-in capital 275,001 272,869 

Accumulated deficit (146,113 ) (139,245 ) 

Treasury stock, 3,162,248 shares (at cost) at 

December 31, 2009 and 2008. (22,749 ) (22,749 ) 

Accumulated other comprehensive loss (15,301 ) (17,144 ) 

Total stockholders' equity 90,896 93,788 

Total liabilities and stockholders' equity $ 306,888 $ 306,300 

The accompanying notes are an integral part of these consolidated financial statements. 

- 50 -


CONSOLIDATED STATEMENTS OF OPERATIONS 

Year Ended December 31, 

2009 2008 2007 

(Dollars in thousands, except per share data) 

Net revenue: 

Products $ 303,999 $ 320,692 $ 206,360 

Services 102,904 113,550 83,167 



406,903 434,242 289,527 

Products 197,763 219,575 149,787 

Services 77,815 87,783 64,734 

Amortization of purchased intangible assets 2,891 3,075 327 

Total costs of revenue 278,469 310,433 214,848 

Gross profit 


128,434 123,809 74,679 

Research and development 44,486 45,901 28,753 

Selling, general and administrative 74,681 81,144 59,964 

Amortization of purchased intangible assets 6,147 5,678 502 

Impairment of goodwill and intangible assets — 67,798 — 

Gain on sale of real property — — (3,796 ) 

Total operating expenses 125,314 200,521 85,423 

Income (loss) from operations 3,120 (76,712 ) (10,744 ) 

Interest income 296 1,466 3,954 

Interest expense (10,990 ) (6,822 ) (122 ) 

Foreign currency income (loss) 411 (1,821 ) (1,685 ) 

Other income (expense) 

Loss before income taxes and discontinued 

390 191 (25 ) 

operations (6,773 ) (83,698 ) (8,622 ) 

Benefit (provision) for income taxes 829 (1,211 ) (478 ) 

Loss before discontinued operations (5,944 ) (84,909 ) (9,100 ) 

Income (loss) from discontinued operations (924 ) (494 ) 1,623 

Net loss $ (6,868 ) $ (85,403 ) $ (7,477 ) 


Loss before discontinued operations $ (0.11 ) $ (1.59 ) $ (0.17 ) 

Income (loss) from discontinued operations (0.02 ) (0.01 ) 0.03 

Basic and diluted loss per share $ (0.13 ) $ (1.60 ) $ (0.14 ) 

Shares used in computing net income (loss) per 

common share: 

Basic and diluted 53,526,493 53,321,154 52,927,296 


- 51 -


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

AND COMPREHENSIVE INCOME (LOSS) 

Accumulated Total 

Additional 

Other 

Common Stock Paid-in Accumulated Treasury Comprehensive Stockholders' 

Shares Balance Capital Deficit Stock Income (Loss) Equity 

(Dollars in thousands) 

Balance as of December 31, 2006 53,127,205 $ 56 $ 247,989 $ (46,365 ) $ (22,749 ) $ — $ 178,931 

Issuance of common stock 247,163 — 934 — — — 934 

Restricted common stock issued 

for compensation 93,334 — — — — — - 

Restricted common stock 

forfeitures (300,000 ) — (1,582 ) — — — (1,582 ) 

Share-based compensation — — 3,693 — — — 3,693 

Net loss — — — (7,477 ) — — (7,477 ) 

Balance as of December 31, 2007 53,167,702 56 251,034 (53,842 ) (22,749 ) — 174,499 

Issuance of common stock 200,097 1 666 — — — 667 


for compensation 75,000 — — — — — - 


Issuance of warrants 17,756 17,756 

Comprehensive loss: 

Net loss — — — (85,403 ) — — (85,403 ) 

Other comprehensive loss: 

Foreign currency translation 

adjustments — — — — — (17,418 ) (17,418 ) 

Unfunded portion of pension 

plan obligation — — — — — 274 274 

Total comprehensive loss (102,547 ) 

Balance as of December 31, 2008 53,442,799 $ 57 $ 272,869 $ (139,245 ) $ (22,749 ) $ (17,144 ) $ 93,788 

Issuance of common stock 159,561 1 190 — — — 191 


for compensation 1,149,000 — — — — — - 

Restricted common stock 

forfeitures (129,000 ) — — — — — - 


Comprehensive loss: 

Net loss — — — (6,868 ) — — (6,868 ) 

Other comprehensive income: 

Foreign currency translation 

adjustments — — — — — 1,638 1,638 

Unfunded portion of pension 

plan obligation — — — — — 205 205 

Total comprehensive loss (5,025 ) 

Balance as of December 31, 2009 54,622,360 $ 58 $ 275,001 $ (146,113 ) $ (22,749 ) $ (15,301 ) $ 90,896 


- 52 -


CONSOLIDATED STATEMENTS OF CASH FLOWS 


2009 2008 2007 


Cash flows from continuing operations: 

Loss before discontinued operations 

Adjustments to reconcile loss 

before discontinued operations to net cash provided by 

operating activities: 

$ (5,944 ) $ (84,909 ) $ (9,100 ) 

Depreciation and amortization 10,182 9,887 8,204 

Amortization of purchased intangibles 9,038 8,753 829 

Interest conversion to debt 6,708 4,613 — 

Amortization of debt issuance costs 128 96 — 

Impairment of goodwill and intangible assets — 67,798 — 

Amortization of discount on notes payable 3,786 1,726 — 

Amortization of discount on short-term investments — (61 ) (844 ) 

Provision (reversal) for doubtful accounts (416 ) (369 ) 2,115 

Provision for excess and obsolete inventory 4,157 4,147 8,074 

Provision for warranty and other product charges 4,116 2,266 2,328 

Foreign currency (gains) losses (2,529 ) 3,426 (2,317 ) 

Gain on sale of real property — — (3,796 ) 

Non-cash stock-based compensation 1,942 3,484 1,919 

Non-cash write-off of intangibles and other assets 1,002 458 509 

Deferred income tax provision (benefit) (5,895 ) 1,673 434 

Changes in operating assets and liabilities, net 4,291 (748 ) 4,809 

Net cash provided by operating activities 30,566 22,240 13,164 

Cash flows from investing activities: 

Purchase of property, plant and equipment (8,115 ) (9,313 ) (7,481 ) 

Proceeds from the sale of real property — — 16,250 

Cash paid for acquisitions, net of cash acquired (2,094 ) (115,168 ) (13,075 ) 

Cash deposit for acquisition — — (10,000 ) 

Software development costs capitalized (250 ) (57 ) (1,392 ) 

Purchase of short-term investments (1,376 ) (37,375 ) (141,006 ) 

Proceeds from the sale or maturity of short-term investments 1,875 41,925 184,090 

Net cash provided by (used in) investing activities (9,960 ) (119,988 ) 27,386 

Cash flows from financing activities: 

Borrowings on revolving line of credit 7,800 6,400 — 

Repayment of bank notes payable (7,985 ) (6,835 ) (6 ) 

Repayment of long tem debt (3,000 ) — — 

Debt issuance cost — (687 ) (100 ) 

Proceeds from issuance of long term debt and warrants — 60,000 — 

Proceeds from issuance of common stock 190 666 933 

Net cash provided by (used in) financing activities (2,995 ) 59,544 827 

Effect of exchange rate changes on cash and cash equivalents 1,975 (3,246 ) 716 

Net increase (decrease) in cash flow from continuing 

operations 19,586 (41,450 ) 42,093 

Net cash provided by (used in) operating activities from 

discontinued operations (127 ) 107 642 

Cash and cash equivalents, beginning of year 35,582 76,925 34,190 

Cash and cash equivalents, end of year $ 55,041 $ 35,582 $ 76,925 


- 53 -

1. Description of Business 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

DECEMBER 31, 2009 

Hypercom Corporation (“Hypercom”) is one of the largest global providers of complete electronic payment and transaction 

solutions and value-added services at the point-of-transaction. Hypercom designs and sells electronic transaction terminals, peripheral 

devices, transaction networking devices, transaction management systems, application software, and information delivery services. 

Additionally, Hypercom provides directly, or through qualified contractors, support and related services that complement and enhance 

its hardware and software products. Hypercom’s customers include large domestic and international financial institutions, electronic 

payment processors, large retailers, independent sales organizations (“ISOs”) and distributors as well as companies in the 

transportation, healthcare, pre-paid card and quick service restaurant (“QSR”) industries. Hypercom operates in one business market— 

electronic payment products and services. 

Hypercom is headquartered in Scottsdale, Arizona, where its operations include corporate administration, product development, 

sales and marketing, distribution, repairs management and customer service. Hypercom has sales and support offices in Australia, 

Brazil, Belgium, Chile, China, France, Germany, Hong Kong, Hungary, Latvia, Mexico, the Philippines, Puerto Rico, Russia, 

Scotland, Singapore, Spain, Sweden, Thailand, the United Arab Emirates and the United Kingdom (“U.K.”). These sales and support 

offices perform sales, marketing, distribution, customer service and custom development functions. Hypercom’s primary 

manufacturing is performed by third party contract manufacturing operations located in Malaysia, Germany, Brazil, Romania, and 

Tunisia. Hypercom has global product development facilities primarily in the U.S., Germany, France, Philippines and Latvia. 

2. Significant Accounting Policies 

Principles of Consolidation 

The consolidated financial statements include the accounts of Hypercom and its wholly-owned subsidiaries (collectively, the 

“Company” or “Hypercom”). The Company, directly or indirectly, owns 100% of the outstanding stock of all of its subsidiaries with 

the exception of one subsidiary in Thailand. The Company owns a controlling interest in the Thailand subsidiary and certain nominee 

shareholders own the remaining nominal shares. All of the Company’s subsidiaries are included in the consolidated financial 

statements, and all significant intercompany accounts and transactions have been eliminated in consolidation. 

Use of Estimates 

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles 

requires management to make numerous estimates and assumptions that affect the accounting, recognition and disclosure of assets, 

liabilities, stockholders’ equity, revenue and expenses. The accounting estimates that require management’s most significant, difficult 

and subjective judgments include collectability of accounts receivable; determination of inventory obsolescence; recoverability of 

long-lived assets and goodwill; expected product warranty costs; recognition and measurement of current and deferred income tax 

assets and liabilities; legal and tax contingency accruals; the recognition and measurement of contingent liabilities to the Company’s 

third-party contract manufacturers, for component parts that the Company may not ultimately use, and restructuring reserves. The 

actual results experienced by the Company may differ from management’s estimates. 

Cash and Cash Equivalents 

The Company considers all financial instruments, including money market accounts and certificates of deposits, with a 

remaining maturity of three months or less when purchased, to be cash equivalents. 

Fair Value of Financial Instruments 

The carrying amounts of cash and cash equivalents approximate fair value due to the short maturity of those instruments. The 

fair value of marketable securities is determined based on quoted market prices, which approximate fair value. The fair value of salestype 

leases and long-term obligations is estimated by discounting the future cash flows required under the terms of each respective 

lease or debt agreement by current market rates for the same or similar issues of leases or debt with similar remaining maturities. The 

fair value of financial hedge instruments are based on quotes from brokers using market prices for those or similar instruments. 

- 54 -

Allowance for Doubtful Accounts 

Payment terms for product and services trade receivables generally range from 30 to 90 days depending on the circumstances of 

each order or service contract. Any payments not received within the agreed upon due date are considered past due. 

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to 

make required payments. Such allowance is computed based upon a specific customer account review of larger customers and 

balances past due as well as a general reserve against individually smaller accounts receivable balances. The Company’s assessment 

of its customers’ ability to pay generally includes direct contact with the customer, investigation into customers’ financial status, as 

well as consideration of customers’ payment history with the Company. If the Company determines, based on its assessment, that the 

Company’s customers will be unable to pay, the Company will charge off the account receivables to the allowance for doubtful 

accounts. A rollforward of the activity in the allowance for doubtful accounts for the years ended December 31, 2009, 2008 and 2007 

is as follows: 

Balance at 

Beginning of 

Period 

Assumed in 

Acquisitions 

Provision 

(reversal) for 

doubtful accounts 

- 55 - 

Foreign 

Currency 

Impact 

Write-offs of 

uncollectible 

amounts 

Balance at 

End of Period 


Year Ended December 

31, 2009: 

Allowance for doubtful 

) 

) 

accounts 


31, 2008: 

$ 4,469 $ — $ (416 ) $ 280 $ (1,093 ) $ 3,240 


) 

) 

) 

accounts 


31, 2007: 

$ 4,034 $ 5,046 $ (369 ) $ (852 ) $ (3,390 ) $ 4,469 


) 

accounts $ 1,934 $ — $ 2,115 $ — $ (15 ) $ 4,034 


Certain product sales made under lease arrangement are recorded as sales-type lease. Lease contract receivables represent the 

total lease payments to be received reduced by lease payments already collected. Sales-type lease revenues consist of the initial sale of 

the product shipped and the interest and maintenance elements of the lease payments as they are earned. An allowance for estimated 

uncollectible sales-type lease receivables at an amount sufficient to provide adequate protection against losses in the Company’s salestype 

lease portfolio is recorded. The allowance is determined principally on the basis of historical loss experience and management’s 

assessment of the credit quality of the sales-type lease customer base. If loss rates increase or customer credit conditions deteriorate, 

the allowance for uncollectible sales-type leases may need to be increased. Unearned income includes interest and is the amount by 

which the original sum of the lease contract receivable exceeds the fair value of the equipment sold. The interest element is amortized 

to lease income using the effective interest method. 

Inventories 

Inventories are stated at the lower of cost or market. Cost is computed using standard cost, on a first-in, first-out basis. Writedowns 

for estimated excess and obsolete inventory are recorded on a product or part level basis based upon historical usage and future 

demand and establish a new cost basis for the respective item. 

Property, Plant and Equipment 

Property, plant and equipment are stated at cost. Expenditures for major additions and improvements to facilities are 

capitalized, while maintenance and repairs are charged to expense as incurred. When property is retired or otherwise disposed of, the 

related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated 

statements of operations.

The Company revised the estimated useful lives of property, plant and equipment acquired through business acquisitions to 

conform with its policies regarding property, plant and equipment. Depreciation is provided over the estimated useful lives of the 

assets using the straight-line method. The estimated useful lives of the Company’s property and equipment are as follows: 

Building 30 years 

Computer equipment and software 1 - 5 years 

Machinery and equipment 2 - 7 years 

Equipment leased to customers 2 - 5 years 

Furniture and fixtures 2 - 7 years 

Leasehold improvements are amortized over the shorter of the lease term or the life of the asset. 

Capitalized Software Development Costs 

The Company capitalizes certain internal and external expenses related to developing computer software used in the products it 

sells. Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. The 

Company considers technological feasibility to have been established for a product when all of the following conditions have been 

met: (a) the detail program design has been completed and it has been determined that the necessary skills, hardware, and software 

technology are available to produce the product; (b) the detail program design has been traced to product specifications; and (c) all 

high-risk development issues have been resolved through coding and testing. Upon general release to customers of the product in 

which the software is included, capitalization ceases, and such costs are amortized using the straight-line method over an estimated 

life of one to three years. The amounts capitalized in the years ended December 31, 2009, 2008 and 2007, were $1.1 million, 

$0.1 million and $1.4 million, respectively. 

Impairment of Long-Lived Assets 

The Company assesses the potential impairment of long-lived assets when events or changes in circumstances indicate that the 

carrying value of the assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment 

review include significant under-performance of a product line in relation to expectations, significant negative industry or economic 

trends, and significant changes or planned changes in the Company’s use of the assets. Recoverability of assets that will continue to be 

used in the Company’s operations is measured by comparing the carrying amount of the asset grouping to the Company’s estimate of 

the related total future net cash flows. If an asset carrying value is not recoverable through the related cash flows, the asset is 

considered to be impaired. The impairment is measured by the difference between the asset grouping’s carrying amount and its fair 

value, based on the best information available, including market prices or discounted cash flow analysis. If the assets determined to be 

impaired are to be held and used, the Company recognizes an impairment loss through a charge to operating results to the extent the 

present value of anticipated net cash flows attributable to the asset are less than the asset’s carrying value. When it is determined that 

the useful lives of assets are shorter than originally estimated, and there are sufficient cash flows to support the carrying value of the 

assets, the Company will accelerate the rate of amortization charges in order to fully amortize the assets over their new shorter useful 

lives. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions 

change in the future, the Company may be required to record impairment charges for these assets. For the years ended December 31, 

2009, 2008 and 2007, long lived asset impairment charges totaled zero, $8.8 million and zero, respectively. There can be no assurance 

that future long-lived asset impairment tests will not result in a charge to earnings. 

Goodwill 

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified 

tangible and intangible assets acquired. The Company is required to perform an impairment assessment at least annually on December 

31, and more frequently under certain circumstances. If the Company determines through the impairment process that goodwill has 

been impaired, the Company will record the impairment charge in the statement of operations. For the years ended December 31, 

2009, 2008 and 2007, goodwill impairment charges totaled zero, $59.0 million and zero, respectively. There can be no assurance that 

future goodwill impairment tests will not result in a charge to earnings. 

Discontinued Operations 

The Company analyzes its operations that have been divested or classified as held-for-sale in order to determine if they qualify 

for discontinued operations accounting. Only operations that qualify as a component of an entity can be included in discontinued 

operations. In addition, only components where the Company does not have significant continuing involvement with the divested 

operations would qualify as a discontinued operation. Continuing involvement would include the Company continuing to exert 

significant influence or continue to have contractually obligated run-off operations related to the operations it is divesting. See Note 6 

and Note 11 for further discussion. 

- 56 -

Revenue Recognition 

Revenue is recognized when the following criteria are met: (a) persuasive evidence that an arrangement exists; (b) delivery of 

the products or services has occurred; (c) the selling price is both fixed and determinable; and (d) collectability is reasonably assured. 

The Company generally recognizes products revenues, including sales to distributors and sales under sales-type leases, upon 

shipment of product. The Company recognizes services revenues when the services have been provided and collection is reasonably 

assured. Routine recurring services include terminal repairs, help-desk, on-site technician visits, deployment and the provision of 

supplies. Amounts received in advance of services being rendered are recorded as deferred revenue. Revenues from long-term 

contracts that require substantial performance of customized software and hardware over an extended period are recorded based upon 

the attainment of substantive scheduled performance milestones under the percentage-of-completion method. Operating lease revenue 

is recognized monthly over the lease term. The units leased under operating leases are included in the balance sheet under “Property, 

plant and equipment.” The Company accrues for warranty costs, sales returns and other allowances at the time of shipment. 

Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables (items) can be divided into 

more than one unit of accounting. An item can generally be considered a separate unit of accounting if all of the following criteria are 

met: 

• The delivered item(s) has value to the customer on a standalone basis; 

• There is objective and reliable evidence of the fair value of the undelivered item(s); and 

• If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the 

undelivered item(s) is considered probable and substantially in the control of the Company. 

Items that do not meet these criteria are combined into a single unit of accounting. If there is objective and reliable evidence of 

fair value for all units of accounting, the arrangement consideration is allocated to the separate units of accounting based on their 

relative fair values. In cases where there is objective and reliable evidence of the fair value(s) of the undelivered item(s) in an 

arrangement but no such evidence for one or more of the delivered item(s), the residual method is used to allocate the arrangement 

consideration. In cases in which there is not objective and reliable evidence of the fair value(s) of the undelivered item(s) but a portion 

of the arrangement is considered to be a lease, the Company recognizes where it has sufficient evidence to make an estimate of the 

relative fair values of the delivered elements. 

The Company presents revenues net of sales taxes and value-added taxes in its consolidated statements of operations. 

Shipping and Handling Costs 

Shipping costs include charges associated with delivery of goods from the Company’s facilities to its customers and are 

reflected in cost of product. Shipping costs paid to the Company by its customers are classified as revenue. 

Product Warranty 

The Company accrues for estimated warranty obligations when revenue is recognized based on an estimate of future warranty 

costs for delivered products and specific known product issues. Such estimates are based on historical experience and expectations of 

future costs. The Company periodically evaluates and adjusts the accrued warranty costs to the extent actual warranty costs vary from 

the original estimates. The Company’s warranty period typically extends from one to five years from the date of shipment. Costs 

associated with maintenance contracts, including extended warranty contracts, are expensed when they are incurred. Actual warranty 

costs may differ from management’s estimates. 

Legal and Other Contingencies 

In the ordinary course of business, the Company is involved in legal proceedings involving contractual and employment 

relationships, product liability claims, intellectual property rights, and a variety of other matters. The Company records contingent 

liabilities resulting from asserted and unasserted claims against it, when it is probable that a liability has been incurred and the amount 

of the loss is estimable. Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the 

potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. Currently, 

the Company does not believe any of its pending legal proceedings or claims will have a material impact on its financial position, 

- 57 -

esults of operations or cash flows. However, if actual or estimated probable future losses exceed the Company’s recorded liability for 

such claims, it would record additional charges as other expense during the period in which the actual loss or change in estimate 

occurred. 

For components not yet billed to the Company by its third-party contract manufacturers, contingent liabilities are recorded by 

component based on the likelihood of the Company’s ultimate usage of the components. The Company recorded a reserve for such 

potential billings of $4.6 million and $4.8 million as of December 31, 2009 and 2008, respectively and is included in accrued other 

liabilities in the Company’s consolidated balance sheets at December 31, 2009 and 2008. 

Costs Associated with Exit Activities 

The Company records costs associated with exit activities such as for employee termination benefits that represent a one-time 

benefit when management approves and commits to a plan of termination, and communicates the termination arrangement to the 

employees, or over the future service period, if any. Other costs associated with exit activities may include contract termination costs, 

including costs related to leased facilities to be abandoned or subleased, and facility and employee relocation costs. In addition, a 

portion of the Company’s restructuring costs are outside the U.S. related to expected employees terminations. The Company is 

required to record a liability for this cost when it is probable that it will incur the costs and can reasonably estimate the amount. 

In addition, for acquisitions prior to January 1, 2009, the Company accounts for costs to exit an activity of an acquired company 

and involuntary employee termination benefits associated with acquired businesses in the purchase price allocation of the acquired 

business if a plan to exit an activity of an acquired company exists, and those costs have no future economic benefit to the Company 

and will be incurred as a direct result of the exit plan. 

Advertising Costs 

Advertising costs are expensed as incurred and totaled $0.1 million, $0.3 million and $0.3 million for the years ended 

December 31, 2009, 2008 and 2007, respectively. 

Stock-Based Compensation 

The Company recognizes compensation expense over the requisite service period for the fair-value of stock options and related 

awards. For stock options with graded vesting terms, the Company recognizes compensation cost over the requisite service period 

using the accelerated method. The fair value of stock-based awards are estimated at the date of grant using key assumptions such as 

future stock price volatility, expected terms, risk-free interest rates and the expected dividend yield. In addition, the Company 

estimates the expected forfeiture rate of the Company’s stock grants and only recognizes the expense for those shares expected to vest. 

Foreign Currency 

Assets and liabilities of subsidiaries operating outside the U.S. with a functional currency other than the U.S. Dollar are 

translated into U.S. Dollars using year-end exchange rates. Revenue, costs and expenses are translated at the average exchange rates in 

effect during the year. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive 

loss. 

For subsidiaries operating outside the U.S. where the functional currency is the U.S. Dollar, monetary assets and liabilities 

denominated in local currency are remeasured at year-end exchange rates whereas non-monetary assets, including inventories and 

property, plant and equipment, are reflected at historical rates. Revenue, costs and expenses are translated at the monthly average 

exchange rates in effect during the year. Any gains or losses from foreign currency remeasurement are included in foreign currency 

loss in the consolidated statements of operations. 

Income Taxes 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the 

financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities 

are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are 

expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws (including rates) is 

recognized in income in the period that includes the enactment date. See Note 17 regarding the valuation reserve against the 

Company’s deferred tax assets. 

- 58 -

The Company does not provide for federal income taxes on the undistributed earnings of its international subsidiaries because 

earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely. 

Income (Loss) Per Share 

Basic income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares 

outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if the income were 

divided by the weighted-average number of common shares outstanding and potentially dilutive common shares from outstanding 

stock options and warrants. Potentially dilutive common shares are calculated using the treasury stock method and represent 

incremental shares issuable upon exercise of the Company’s outstanding options and warrants. Due to losses in 2009, 2008 and 2007, 

potentially dilutive securities are not included in the calculation of dilutive loss per share as their impact would be anti-dilutive. 

Due to losses in 2009, 2008 and 2007, options and warrants that could potentially dilute loss per share in the future were not 

included in the computation of basic loss per share because they were anti-dilutive. In those years, excluded options and warrants 

amounted to 15,108,861, 14,988,718 and 2,974,536, respectively. 

Derivative Financial Instruments 

The Company does not acquire, hold or issue derivative financial instruments for trading purposes. Derivative financial 

instruments are used to manage foreign exchange and interest rate risks that arise out of the Company’s core business activities. 

Derivative financial instruments used to manage foreign exchange risk were designated as hedging instruments for hedges of 

foreign currency exposure of the Company’s net investment in foreign operations. The primary objective of the Company’s hedging 

strategy is to protect its net investments in foreign subsidiaries and certain accounts receivable that are exposed to volatility in foreign 

currency exchange rates. In March 2009, the Company suspended hedging activities due to the cost of entering into forward contracts, 

the possible short term cash requirements for forward contract payables, along with the inability to repatriate cash from foreign 

countries on a short term basis to offset any hedge forward contract payable. Prior to the decision to suspend hedging in March 2009, 

the Company hedged the translation of its net investment in foreign subsidiaries in an attempt to neutralize the effect of translation 

gains or losses in the statement of operations. During 2008 and 2007, the Company had forward contracts in place to hedge its foreign 

currency denominated net monetary assets in various foreign countries, including Brazil, the U.K., Chile, Australia, Thailand and 

Sweden. The U.S. Dollar amount of the contracts at December 31, 2008 was $13.0 million. The total payable recorded under the 

contracts is reflected in accrued liabilities and was $0.1 million as of December 31, 2008. 

Comprehensive Income (Loss) 

Comprehensive income (loss) represents net income (loss) for the year adjusted for changes in stockholders’ equity from nonstockholder 

sources. Accumulated comprehensive income (loss) items typically include currency translation and the impact of the 

Company’s pension liability adjustment, net of tax. 

Reclassification 

Certain amounts in the prior-year financial statements have been reclassified to conform to the current year presentation. 

Impact of Recently Issued Accounting Pronouncements 

In December 2008, Financial Accounting Standards Board (“FASB”) issued guidance on an employer’s disclosures about plan 

assets of a defined benefit pension or other postretirement plan. The standard is effective for fiscal years ending after December 15, 

2009. The implementation of this guidance did not have a material impact on the Company’s disclosures or its consolidated financial 

position, results of operations or cash flows. 

On January 1, 2009, the Company adopted a new accounting standard regarding the factors that should be considered in 

developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The implementation 

of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. 

On January 1, 2009, the Company adopted a new accounting standard that requires additional disclosures about transfers of 

financial assets and involvement with variable interest entities. The implementation of this standard did not have a material impact on 

the Company’s consolidated financial position, results of operations or cash flows. 

- 59 -

On January 1, 2009, the Company adopted a new accounting standard regarding business combinations that apply to all 

transactions and other events in which one entity obtains control over one or more other businesses. The standard requires the fair 

value of the purchase price, including the issuance of equity securities, to be determined on the acquisition date. The standard requires 

an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interests in the acquiree at the acquisition 

date measured at their fair values as of that date with limited exceptions specified in the standard. This standard also requires 

acquisition costs to be expensed as incurred and restructuring costs to be expensed in periods after the acquisition date. Earn-outs and 

other forms of contingent consideration are to be recorded at fair value on the acquisition date. Changes in accounting for deferred tax 

asset valuation allowances and acquired income tax uncertainties after the measurement period will be recognized in earnings rather 

than as an adjustment to the cost of the acquisition. This standard generally applies prospectively to business combinations for which 

the acquisition date is on or after January 1, 2009. See Note 17 for the impact on the Company’s consolidated financial position and 

results of operations. 

On January 1, 2009, the Company adopted a new standard that requires non-controlling interests or minority interests to be 

treated as a separate component of equity, not as a liability or other item outside of permanent equity. Upon a loss of control, the 

interest sold, as well as any interest retained, is required to be measured at fair value, with any gain or loss recognized in earnings. 

Assets and liabilities will not change for subsequent purchase or sale transactions with non-controlling interests as long as control is 

maintained. Differences between the fair value of consideration paid or received and the carrying value of non-controlling interests are 

to be recognized as an adjustment to the parent interest’s equity. The implementation of this standard did not have a material impact 

on the Company’s consolidated financial position, results of operations or cash flows. 

In September 2006, FASB issued guidance that defines fair value, establishes a framework for measuring fair value in GAAP 

and expands disclosures about fair value measurements. This standard is generally effective for years beginning after December 15, 

2007. The Company adopted this standard on January 1, 2008 with respect to the Company’s financial assets and liabilities, which did 

not have a material impact on its consolidated financial position, results of operations or cash flows. The Company adopted this 

standard with respect to its non-financial assets and liabilities effective January 1, 2009. The implementation of this standard did not 

have a material impact on the Company’s consolidated financial position, results of operations or cash flows. 

In April 2009, FASB issued guidance that requires fair value disclosures in interim and annual financial statements to provide 

for more timely information about the effects of current market conditions on financial instruments. This standard is effective for 

interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the 

Company’s consolidated financial position, results of operations or cash flows. All the required disclosures are included in Note 8. 

In June 2009, the FASB Accounting Standards Codification (the “Codification”) was issued. The Codification is the 

authoritative source of GAAP recognized by the FASB applied by nongovernmental entities. The Codification is effective for 

financial statements issued for interim and annual periods ending after September 15, 2009. The Codification did not have a material 

impact on the Company’s consolidated financial position, results of operations or cash flows. 

In October 2009, the FASB issued amendments to the accounting and disclosure for revenue recognition. These amendments, 

effective for fiscal years beginning on or after June 15, 2010 (early adoption is permitted), modify the criteria for recognizing revenue 

in multiple element arrangements and the scope of what constitutes a non-software deliverable. The Company is currently assessing 

the impact on the Company’s consolidated financial position, results of operations or cash flows. 

3. Business Acquisitions and Others 

Thales e-Transactions 

On April 1, 2008, the Company acquired the TeT business line to expand the Company’s geographic reach in Europe and 

increase the Company’s size and scale, with the expectation of accelerating product cost reductions given the convergence towards a 

single, combined product family. 

The consideration paid to acquire TeT was $150.5 million in cash. To fund a portion of the acquisition price, the Company 

entered into a credit agreement with Francisco Partners, which provided funding of $60.0 million. See Note 13 for additional 

information related to this credit agreement. 

- 60 -

The purchase price consisted of the following (dollars in thousands): 

Cash paid to purchase TeT shares $ 120,000 

Cash paid for working capital and assumed debt 23,611 

Transaction costs and expenses 3,827 

Working capital adjustment 3,086 

Total purchase price $ 150,524 

On December 18, 2009, the Company agreed to settle amounts owed under the TeT acquisition agreement for a cash payment 

of approximately $4.1 million. The Company included $3.1 million as part of the purchase price and $1.0 million of professional fees 

for accounting and tax services provided to Thales had been expensed as incurred in 2008. On December 28, 2009, the Company paid 

$2.1 million of the settlement amount and the remaining $2.0 million was paid on January 8, 2010. 

The acquisition was accounted for as a purchase business combination and accordingly, the results of TeT’s operations are 

included in the Company’s consolidated results from the date of the acquisition. 

Under the purchase method of accounting, the total estimated purchase price as shown in the table above is allocated to TeT’s 

tangible and intangible assets acquired and liabilities assumed. The excess of the purchase price over the net tangible and intangible 

assets is recorded as goodwill, which will not be deductible for tax purposes. 

The purchase price allocation is as followed (dollars in thousands): 

Cash $ 21,865 

Accounts receivable 39,072 

Inventory 9,023 

Property, plant and equipment 5,679 

Other assets 13,191 

Amortizable intangible assets: 

Customer relationships 66,350 

Unpatented technology 5,688 

Trademarks, trade names 2,127 

Total assets 162,995 

Deferred revenue (6,904 ) 

Other current liabilities (66,047 ) 

Net deferred tax liabilities (20,634 ) 

Non current liabilities (2,916 ) 

Total liabilities (96,501 ) 

Fair value of tangible and intangible assets acquired, net of liabilities assumed 66,494 

Goodwill 84,030 

Total purchase price $ 150,524 

Intangible Assets. TeT’s customer relationships are represented through a distribution network of banks, distributors and 

retailers through which TeT sells the majority of its products and services. The Company expects to amortize the fair value of these 

assets over an average estimated life of five to ten years. 

Supplier relationships represent third party manufacturing relationships through which the majority of TeT products are 

produced. The Company expects to amortize the fair value of these assets over an average estimated life of four years. 

Product technology includes TeT products, principally the Artema product line. TeT technology and products are designed for 

hardware, software, solutions and services, serving the European markets. The Company expects to amortize the developed and core 

technology and patents over an average estimated life of two years. 

The fair value of intangible assets was determined using an income approach, based on discussions with TeT management and 

a review of certain transaction-related documents and forecasts prepared by the Company and TeT management. The rate utilized to 

discount net cash flows to their present values is 19%. This discount rate was determined after consideration of the Company’s 

weighted average cost of capital specific to this transaction and the assets being purchased. 

Estimated useful lives for the intangible assets were based on historical experience with technology life cycles, product 

roadmaps, branding strategy, historical and projected maintenance renewal rates, historical treatment of the Company’s acquisition- 

- 61 -

elated intangible assets and the Company’s intended future use of the intangible assets. Deferred tax liabilities in the amount of $20.6 

million were recorded based upon conclusions regarding the tax positions that were taken. 

Of the total $74.2 million of intangible assets, $62.7 million is reported in NEMEA and $11.5 million in SEMEA. Intangible 

assets in these business segments are subject to translation adjustment for currency changes. 

Goodwill. Of the total purchase price, approximately $84.0 million was allocated to goodwill. Goodwill represents the excess 

of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is not 

amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event 

that the management of the combined company determines that the value of goodwill has become impaired, the combined company 

will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made. 

See Note 4 for a discussion of impairment charges related to the Company’s goodwill and intangible assets. 

The following represents the pro forma results of operations for the year ended December 31, 2009, 2008 and 2007 and gives 

effect to the acquisition of TeT as if the acquisition was consummated at the beginning of fiscal year 2007. The unaudited pro forma 

results of operations are not necessarily indicative of what would have occurred had the acquisition been made as of the beginning of 

the period or of the results that may occur in the future. Net loss includes additional interest expense of $2.4 million and amortization 

of intangible assets related to the acquisition of $2.8 million for the first quarter of 2008. The unaudited pro forma information is as 

follows (dollars in thousands, except for per share data): 

2009 2008 2007 

Total net revenue $ 406,903 $ 477,386 $ 482,093 

Net loss $ (6,868 ) $ (94,063 ) $ (20,158 ) 

Net loss per share — basic and diluted $ (0.13 ) $ (1.76 ) $ (0.38 ) 

4. Intangible Assets and Goodwill 

Intangible assets consist of the following at December 31, 2009 and 2008 (dollars in thousands): 

Gross Carrying 

Amount 

December 31, 2009 December 31, 2008 

Accumulated 

Amortization Net 

- 62 - 

Gross Carrying 

Amount 

Accumulated 

Amortization Net 

Capitalized software $ 3,327 $ (1,874 ) $ 1,453 $ 4,699 $ (3,597 ) $ 1,102 

Customer and supplier 

relationships 56,692 (11,875 ) 44,817 55,517 (4,266 ) 51,251 

Unpatented technology 3,078 (2,694 ) 384 3,039 (1,851 ) 1,188 

Trademarks, trade names 3,636 (1,687 ) 1,949 3,562 (930 ) 2,632 

Service know-how 1,330 (388 ) 942 1,330 (255 ) 1,075 

Other 150 (116 ) 34 149 (86 ) 63 

$ 68,213 $ (18,634 ) $ 49,579 $ 68,296 $ (10,985 ) $ 57,311 

Amortization of these intangibles is provided on the straight-line method over their estimated useful lives: 

Capitalized software 8 months - 3 years 

Customer relationships 4 - 10 years 

Unpatented technology 2 - 10 years 

Trademarks, trade names 2 - 10 years 

Service know-how 10 years 

Other Other 

In 2008, the Company determined that $8.8 million of intangible assets were impaired. Of the total write-down, $2.4 million is 

related to the Company’s 2006 acquisition of TPI and $6.4 million from its 2008 acquisition of TeT. The Company performed the 

impairment test for these assets primarily due to the decline in its stock price that caused its book value to exceed its market 

capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges 

relates to economic conditions and ongoing operations, which has caused the Company to reduce its estimates of projected cash flows. 

Amortization expense related to intangible assets used in continuing operations was $9.7 million, $9.9 million and $2.3 million 

for the years ended December 31, 2009, 2008 and 2007, respectively. Based on the intangible assets recorded at December 31, 2009,

and assuming no subsequent impairment of the underlying assets, the annual amortization expense for each period, is expected to be as 

follows: $7.0 million for 2010, $6.5 million for 2011, $6.5 million for 2012, $5.6 million for 2013 and $5.6 million for 2014. 

Activity related to goodwill consisted of the following at December 31, 2009 and December 31, 2008 (dollars in thousands): 

- 63 - 

December 31, 

2009 

December 31, 

2008 

Balance, beginning of year $ 26,715 $ 10,224 

Additions related to acquisitions 1,108 82,944 

Resolution of tax contingencies and adjustments to 

tax reserves, valuation allowances and performance holdback 

established in purchase accounting — 2,184 

Goodwill impairment — (59,006 ) 

Currency translation adjustment 713 (9,631 ) 

Balance, end of year $ 28,536 $ 26,715 

The Company completed its annual goodwill impairment test as of December 31, 2009 and concluded no impairment charge 

was required. 

During the fourth quarter of 2008, the Company concluded that the current economic environment and the significant declines 

in its market capitalization compared to its net book value represented significant adverse events, and therefore, management 

evaluated goodwill and long-lived assets for impairment as of December 31, 2008. In evaluating goodwill and long-lived assets for 

recoverability, estimates of after-tax undiscounted future cash flows of the Company’s individual reporting units were compared to the 

carrying value of the reporting units. As quoted market prices are unavailable for individual reporting units, fair value was determined 

by discounting estimated future cash flows. The estimated cash flows used to assess recoverability of long-lived assets and measure 

fair value of reporting units were derived from current business plans developed using near-term and long term management 

projections. The asset impairment evaluations, including the annual goodwill impairment test, required management to make several 

assumptions in determining estimates of future cash flows to determine fair value of the individual reporting units, including near and 

long-term revenue and cost assumptions. 

The evaluation of goodwill resulted in the recognition of asset impairment charges totaling $59.0 million for 2008, primarily 

related to the assets acquired in the TeT acquisition on April 1, 2008. Of the total amount, $4.0 million related to the 2006 acquisition 

of TPI, $4.5 million related the 2007 acquisition of ACG and, $50.5 million related to the 2008 acquisition of TeT. The primary 

reason for these impairment charges relates to the ongoing recession, which has caused the Company to reduce its estimates for 

projected cash flows, has reduced overall industry valuations, and caused an increase in discount rates in the credit and equity markets. 

Of the total $67.8 million impairment of goodwill and intangible assets, $6.4 million is reported in the Americas, $4.5 million 

in Asia-Pacific, $24.4 million in NEMEA, and $32.5 million in SEMEA. 

5. Restructuring and Other Charges 

2009 Restructuring 

In 2009, the Company incurred employee severance and benefits-related charges as a result of the following initiatives: 

• Reorganization of the Company’s service businesses in Australia and Brazil; 

• Consolidation of the Company’s United Kingdom operations in the Salisbury facility, resulting in the closing of the 

Woking facility; 

• Reorganization of the Company’s operations in Asia-Pacific; 

• Reorganization of the Company’s management team in its offices in Arizona, Mexico and the Caribbean; and 

• Reorganization of the Company’s research and development activities in Europe. 

As a result of these actions, the Company incurred charges of $3.0 million in 2009. Of the $3.0 million, $1.3 million was 

recorded in costs of revenue and $1.7 million was recorded in operating expenses. Of the $3.0 million, $1.2 million was recorded in 

the Americas, $0.4 million in SEMEA, $0.1 million in NEMEA, $0.2 million in Asia-Pacific, and $1.1 million in Shared Cost Centers.

The following table summarizes these charges and activities during the year ended December 31, 2009 (dollars in thousands): 

Balance at December 31, 2008 $ — 

Additions 3,000 

Cash payments (2,045 ) 

Currency translation adjustment 55 

Balance at December 31, 2009 $ 1,010 

The Company expects to pay the accrued severance and benefits related charges in 2010. The Company also expects to incur 

additional restructuring charges of approximately $1.1 million. The amounts recorded and the additional restructuring charges the 

Company expects to incur are subject to change based on the negotiation of severance with employees and related work groups. 

Thales e-Transactions Restructuring 

On April 1, 2008, the Company completed the acquisition of TeT and began formulating a restructuring plan. At the 

acquisition date, the Company accrued into the purchase price allocation restructuring costs related to reduction in workforce and 

future facilities lease obligations of approximately $9.1 million. The balance at December 31, 2009 is $7.3 million. 

Activities of the restructuring balance related to the TeT acquisition are as follows (dollars in thousands): 

Facilities Severance Total 

Balance at December 31, 2007 $ — — — 

Additions 409 8,677 9,086 

Cash Payments (383 ) — (383 ) 

Currency translation adjustment (26 ) (953 ) (979 ) 

Balance at December 31, 2008 $ — $ 7,724 $ 7,724 

Additions — 124 124 

Cash Payments — (845 ) (845 ) 

Currency translation adjustment — 252 252 

Balance at December 31, 2009 $ — $ 7,255 $ 7,255 

Based on the Company’s current negotiations with workers councils in Europe, the Company expects the remaining amounts 

accrued to be paid in 2010. The amounts recorded are subject to change based on further negotiation of severance amounts to be paid. 

2007 and 2008 Business Restructuring 

During the second quarter of 2007, the Company initiated a reconfiguration of its global sales and marketing organizations. In 

addition, the Company announced its intention to outsource its manufacturing and consolidate its software, repair and maintenance 

functions globally. Pursuant to this restructuring plan, the Company undertook the following initiatives: 

• Outsourced the Company’s entire manufacturing requirements to third-party contract manufacturers, including supply chain, 

production, assembly, and testing performed in Shenzhen, China and Atibaia, Brazil. Transition of the Company’s manufacturing 

operations commenced in 2007 and was completed in 2008; 

• Shut down of manufacturing operations in Atibaia, Brazil in accordance with the Company’s plans to cease negative margin 

terminal sales. This activity was completed during 2007; 

• Consolidated global software development activities to Singapore, Latvia, and India, and reduced similar activities performed 

in the U.S. and Sweden. The consolidation of global development activities was completed in 2007; 

• Relocated the U.S. service and repair operations from Phoenix, Arizona to Hermosillo, Mexico. This activity was completed in 

2007; and 

• Reorganized and reduced the manufacturing and operations management team in Phoenix, Arizona consistent with the move to 

third-party contract manufacturing, which commenced in 2007 and was completed in 2008. 

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Of the $2.9 million of costs incurred during 2007, $1.6 million was recorded in costs of revenue and $1.3 million was recorded 

in operating expenses. Of the $2.9 million, $0.6 million was reported in the Americas, $0.4 million in SEMEA, $0.8 million in Asia- 

Pacific, and $1.1 million in Shared cost centers. 

During the second quarter of 2008, the Company accrued the remaining lease termination and severance costs related to the exit 

out of its manufacturing facility in China. The total costs of the lease termination and severance costs of $0.5 million were recorded in 

costs of revenue in Asia-Pacific. The Company paid the cost during the third quarter of 2008. 

The following table summarizes these charges and activities during 2008 and 2007 (dollars in thousands): 

Severance 

2008 2007 

Transition to Contract 

Manufacturing Total Severance 

- 65 - 

Transition to 

Contract 

Manufacturing Total 

Beginning Balance 

Accrual $ 1,100 $ — $ 1,100 $ — $ — $ — 

Charges 500 — 500 1,737 1,183 2,920 

Amounts utilized (1,600 ) — (1,600 ) (637 ) (1,183 ) (1,820 ) 

Ending Balance Accrual $ — $ — $ — $ 1,100 $ — $ 1,100 

6. Discontinued Operations and Assets Held for Sale 

European Lease and Service Operation 

During the fourth quarter of 2009, the Company made the decision to sell a European lease and service operation, which 

qualifies as discontinued operations. Accordingly, the lease and service business operating results have been classified as discontinued 

operations in the statements of operations and cash flows for all periods presented. General corporate overhead costs have not been 

allocated to discontinued operations. A summary of the operating results for the years ended December 31, 2009 and 2008 included in 

discontinued operations in the accompanying consolidated statements of operations is as follows (dollars in thousands): 

2009 2008 

European lease and service operation 

Net revenue $ 4,644 $ 3,068 

Costs of revenue 4,294 2,065 

Gross profit 350 1,003 

Selling, general and administrative expenses (1,439 ) (1,016 ) 

Loss from discontinued operations $ (1,089 ) $ (13 ) 

A summary of the assets and liabilities held for sale related to this European lease and service operation is as follows (dollars in 

thousands): 

December 31, December 31, 

2009 2008 

ASSETS 

Cash and cash equivalents $ 56 $ 396 

Accounts receivable, net 688 488 

Net investment in sales-type leases 2,298 2,644 

Inventories 326 391 

Prepaid expenses and other current assets 5 — 

Total assets $ 3,373 $ 3,919 

LIABILITIES 

Accounts payable $ 1,172 $ 2,384 

Accrued payroll and related expenses 72 26 

Total liabilities $ 1,244 $ 2,410

Brazilian building 

In 2009, the Company began soliciting buyers for its Brazilian building, the net book value of which, at December 31, 2009 and 

December 31, 2008, was $1.9 million and $2.0 million, respectively. The net book value is classified as current portion of assets held 

for sale as of December 31, 2009 and as assets held for sale as of December 31, 2008. See Note 11 for further information. 

Australian Courier Business 

On March 1, 2009, the Company sold its small courier business in Australia (“Australian Courier Business”) that was acquired 

in 2007. The Australian Courier Business qualified as discontinued operations and accordingly, the income (loss) from discontinued 

operations includes direct revenues and direct expenses of this operation. General corporate overhead costs have not been allocated to 

discontinued operations. A summary of the operating results included in discontinued operations in the accompanying consolidated 

statements of operations is as follows (dollars in thousands): 

2009 2008 2007 

Australian Courier Business: 

Net revenue $ 558 $ 4,381 $ 4,275 

Costs of revenue 481 3,703 3,506 

Gross profit 77 678 769 

Selling, general and administrative expenses (14 ) (323 ) (244 ) 

Impairment of goodwill and intangible assets — (718 ) — 

Gain on sale 65 — — 

Income (loss) from discontinued operations $ 128 $ (363 ) $ 525 

Effective March 1, 2009, the Company sold the Australian Courier Business for $0.3 million. The sale agreement includes all 

related rights and obligations of the Australian Courier Business. The sale agreement contains general warranty and indemnification 

provisions, which could result in additional liabilities to the Company if certain events occur or fail to occur in the future. 

U.K. Lease Portfolio 

During the fourth quarter of 2005, the Company made the decision to sell its United Kingdom leasing business (the “U.K. 

Lease Business”). As of December 31, 2005, the U.K. Lease Business qualified as discontinued operations. The U.K. Lease Business 

operating results have been classified as discontinued operations in the statements of operations and cash flows for all periods 

presented. 

Effective May 31, 2006, the Company sold the U.K. Lease Business for $12.1 million (the “U.K. Lease Sale”). The U.K. Lease 

Sale includes the lease arrangements with merchants and all related obligations and rights to payment under such agreements. The 

U.K. Lease Sale agreement contains covenants and indemnification provisions, which could result in additional liabilities to the 

Company if certain events occur or fail to occur in the future. 

The income (loss) from the Company’s discontinued operations for the years ended December 31, 2009, 2008 and 2007 include 

the following (dollars in thousands): 

2009 2008 2007 

U.K. Lease Portfolio: 

Costs of revenues (reversals of commissions) $ (37 ) $ 118 $ (1,098 ) 

Gross profit (a) 37 (118 ) 1,098 

Income (loss) from discontinued operations $ 37 $ (118 ) $ 1,098 

(a) During the year ended December 31, 2007, the Company received a rebate of previously paid lease originations related to 

commission payments. 

- 66 -

7. Leases 


The Company’s net investments in sales-type leases consist of the following at December 31, 2009 and 2008 (dollars in 

thousands): 

- 67 - 

2009 2008 

Lease contracts receivable $ 13,523 $ 17,171 

Unearned income (2,360 ) (2,899 ) 

Allowance for bad debt (882 ) (896 ) 

Net investment in sales-type leases $ 10,281 $ 13,376 

Future minimum payments to be received under sales-type leases are as follows (dollars in thousands): 

Years Ending December 31, 

2010 6,430 

2011 3,706 

2012 2,547 

2013 840 

2014 — 

Thereafter — 

$ 13,523 

8. Fair Value Measurements 

The Company adopted an accounting standard that provides a fair value hierarchy that prioritizes the inputs to valuation 

techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for 

identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three 

levels of the fair value hierarchy are described below: 

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that 

the Company has the ability to access. 

Level 2: Inputs to the valuation methodology include: 

• Quoted prices for similar assets or liabilities in active markets; 

• Quoted prices for identical or similar assets or liabilities in inactive markets; 

• Inputs other than quoted prices that are observable for the asset or liability; and 

• Inputs that are derived principally from or corroborated by observable market data by correlation or other means. 

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input 

that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and 

minimize the use of unobservable inputs.

The Company’s cash and cash equivalents were measured at fair value consist of the following at December 31, 2009 (dollars 

in thousands): 

Level 1 Level 2 Level 3 Total 

Money market funds $ 19,208 $ — $ — $ 19,208 

Cash 35,833 — — 35,833 

$ 55,041 $ — $ — $ 55,041 

9. Short-term Investments 

The Company’s short-term investments consist entirely of U.S. government and agency debt securities and are classified as 

available-for-sale and recorded at fair value. As of December 31, 2009 and 2008, amortized cost of the Company’s short-term 

investments equaled fair value. Accordingly, there were no unrealized gains and losses as of December 31, 2009 and 2008. 

10. Inventories 

Inventories consist of the following at December 31, 2009 and 2008 (dollars in thousands): 

2009 2008 

Purchased parts $ 8,850 $ 4,039 

Work in progress 292 353 

Finished goods 20,221 26,898 

$ 29,363 $ 31,290 

11. Property, Plant and Equipment, net 

Property, plant and equipment consist of the following at December 31, 2009 and 2008 (dollars in thousands): 

2009 2008 

Computer equipment and software $ 39,349 $ 31,738 

Machinery and equipment 33,941 33,241 

Equipment leased to customers 271 2,872 

Furniture and fixtures 4,752 5,683 

Leasehold improvements 6,421 5,506 

Construction in process 830 4,081 

85,564 83,121 

Less accumulated depreciation (61,260 ) (58,210 ) 

$ 24,304 $ 24,911 

Depreciation expense from continuing operations, which includes depreciation for assets under capital lease, was $9.4 million, 

$8.8 million and $6.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. 

Accumulated depreciation for equipment leased to customers amounted to $0.1 million and $1.1 million for the years ended 

December 31, 2009 and 2008, respectively. 

In 2009, the Company began soliciting buyers for its Brazilian building and will seek to lease facilities at a new site in Brazil 

during 2010. The net book value of the building at December 31, 2009 and 2008 was $1.9 million and $2.0 million, respectively. The 

net book value is classified as current portion of assets held for sale as of December 31, 2009 and as assets held for sale as of 

December 31, 2008. The net book value is included in total assets of the Americas in the segment and geographic information as 

disclosed in Note 22. 

- 68 -

12. Product Warranty Liability 

The following table reconciles the changes to the product warranty liability for the years ended December 31, 2009 and 2008 

(dollars in thousands): 

2009 2008 

Balance at beginning of period $ 6,597 $ 1,754 

Warranty liability assumed on acquisitions — 6,457 

Warranty charges to normal operations 4,116 2,266 

Utilization of warranty liability (5,654 ) (3,880 ) 

Currency translation adjustment 385 — 

Balance at end of period $ 5,444 $ 6,597 

Deferred revenue associated with the Company’s extended warranty programs was $3.5 million and $3.3 million at 

December 31, 2009 and 2008, respectively. 

13. Long-term Debt 

Revolving Credit Facilities 

On January 15, 2008, the Company and certain of its subsidiaries (the “Borrowers”) entered into a Loan and Security 

Agreement (the “Loan Agreement”) with a bank and other financial institutions party to the Loan Agreement. The bank also serves as 

agent for the lenders under the Loan Agreement (the “Agent”). The Loan Agreement provides for a revolving credit facility of up to 

$25.0 million. Under the Loan Agreement, if certain conditions are met, the Company may request an increase in the credit facility to 

an aggregate total of up to $40.0 million. Amounts borrowed under the Loan Agreement and repaid or prepaid during the term may be 

reborrowed. Outstanding amounts under the Loan Agreement will bear interest, at the Company’s option, at either: (i) LIBOR plus 

175 basis points; or (ii) the bank’s prime rate. All amounts outstanding under the Loan Agreement are due on January 15, 2011. 

Availability of borrowings and the issuance of letters of credit under the Loan Agreement are subject to a borrowing base 

calculation based upon a valuation of the Company’s eligible inventories (including raw materials, finished and semi-finished goods, 

and certain in-transit inventory) and eligible accounts receivable, each multiplied by an applicable advance rate. 

On February 10, 2010, the Loan Agreement was amended to allow us to enter into a transaction between our former subsidiary, 

HBNet, and The McDonnell Group, as well as making additional changes, including, among others, providing for the outstanding 

amounts under the Loan Agreement to now bear interest, at our option, at either: (i) LIBOR plus 200 or 250 basis points; or (ii) the 

bank’s prime rate plus 50 or 75 basis points depending on certain financial ratios. In addition, the borrowing base was amended to 

eliminate inventory from the borrowing base calculation. All amounts outstanding under the Loan Agreement continue to be due on 

January 15, 2011. 

No amounts were borrowed against the line of credit as of December 31, 2009. The Company had availability of $14.9 million 

as of December 31, 2009, which was decreased by outstanding letters of credit totaling $3.1 million at December 31, 2009. 

In addition to representations and warranties, covenants, conditions and other terms customary for instruments of this type, the 

Loan Agreement includes negative covenants that prohibit the Company from, among other things, incurring certain types of 

indebtedness (excluding indebtedness secured by certain assets of the Company and its subsidiaries in an aggregate amount not to 

exceed $50.0 million for working capital purposes), making annual capital expenditures in excess of proscribed amounts, or disposing 

of certain assets. The Loan Agreement provides for customary events of default, including failure to pay any principal or interest when 

due, failure to comply with covenants, any representation made by the Company that is incorrect in any material respect, certain 

defaults relating to other material indebtedness, certain insolvency and receivership events affecting the Company, judgments in 

excess of $2.5 million in the aggregate being rendered against the Company, and the incurrence of certain liabilities under the 

Employee Retirement Income Security Act (“ERISA”) in excess of $1.0 million in the aggregate. 

In the event of a default by the Borrowers, the Agent may, at the direction of the lenders, terminate the lenders’ commitments to 

make loans under the Loan Agreement, declare the obligations under the Loan Agreement immediately due and payable and enforce 

any and all rights of the lenders or Agent under the Loan Agreement and related documents. For certain events of default related to 

insolvency and receivership, the commitments of the lenders are automatically terminated and all outstanding obligations become 

immediately due and payable. The obligations of the Company under the Loan Agreement are secured by its inventory and accounts 

receivable of certain of the Company’s subsidiaries in the U.S. and the U.K. The remaining balance of the Company’s consolidated 

assets, including the subsidiaries acquired in connection with the TeT acquisition, is unencumbered under the Loan Agreement and, if 

- 69 -

needed, may be used as collateral for additional debt. The Company’s obligations as guarantor under the Loan Agreement are 

unsecured. 

Acquisition Financing 

In February 2008, in connection with the acquisition of TeT, the Company entered into a credit agreement (the “Credit 

Agreement”) with Francisco Partners pursuant to a commitment letter dated December 20, 2007 between the Company and Francisco 

Partners. See Note 2 for additional information related to the TeT acquisition. The Credit Agreement provided for a loan of up to 

$60.0 million to partially fund the acquisition at closing. The loan under the Credit Agreement bears interest at 10% per annum, 

provided that, at the election of the Company, interest may be capitalized and added to the principal of the loan to be repaid at 

maturity. The loan was funded on April 1, 2008 by an affiliate of Francisco Partners, FP Hypercom Holdco, LLC. All amounts 

outstanding under the Credit Agreement are due four years from the funding date. On funding of the loan under the Credit Agreement 

and the closing of the acquisition, the lender was granted a five-year warrant to purchase approximately 10.5 million shares (the 

“Warrant”) of the Company’s common stock at $5.00 per share. The Warrant contains a cashless exercise provision that can be 

utilized by the lender at its sole option. The cashless exercise provision permits the lender, in lieu of making the cash payment 

otherwise contemplated to be made to the Company upon exercise of the Warrant in whole or in part, to receive upon such exercise 

the “net number” of shares of the Company’s common stock determined according to the agreement. In the event the lender elects a 

cashless exercise of the Warrant, the Company will not receive any cash payment for the shares delivered to the lender pursuant to 

such cashless exercise. 

The estimated fair value of the Warrant at the date issued was $1.68 per share using a Black-Scholes option pricing model. The 

valuation date for the Warrant was February 14, 2008, when all relevant terms and conditions of the debt agreement had been reached. 

The total fair value of the Warrant of $17.8 million was recorded as a discount to the acquisition financing and has been recognized 

in equity as additional paid in capital. The loan discount is being amortized as interest expense over the life of the loan and amounted 

to $3.8 and $1.7 million for the years ended December 31, 2009 and 2008. 

In accordance with the loan agreement, the Company added to the loan balance interest of $6.7 million and $4.6 million during 

2009 and 2008. 

In addition to representations and warranties, covenants, conditions and other terms customary for instruments of this type, the 

Credit Agreement includes negative covenants that prohibit the Company from, among other things, incurring certain types of 

indebtedness, granting liens on assets, engaging in transactions with affiliates and disposing of certain assets. The Credit Agreement 

provides for customary events of default, including failure to pay any principal or interest when due, failure to comply with covenants, 

any representation made by the Company that is incorrect in any material respect, certain defaults relating to other material 

indebtedness, certain insolvency and receivership events affecting the Company, judgments in excess of $3.0 million in the aggregate 

being rendered against the Company, and the incurrence of certain ERISA liabilities in excess of $5.0 million in the aggregate. 

In the event of a default by the Company, the Lender may declare the obligations under the Credit Agreement immediately due 

and payable and enforce any and all of its rights under the Credit Agreement and related documents. 

The Company’s long term debts are classified within a fair value hierarchy that prioritizes the inputs to valuation techniques 

used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or 

liabilities (Level 1), then to significant observable inputs (Level 2) and the lowest priority to significant unobservable inputs (Level 3). 

See Note 8 for further discussion of the different levels of the fair value hierarchy. 

The Company’s fair value of long-term debt at December 31, 2009 is as follows (dollars in thousands): 


FP II Credit Agreement $ — $ 56,075 $ — $ 56,075 

Other — 1 — 1 

$ — $ 56,076 $ — $ 56,076 

- 70 -

Long-term debt, which approximates its fair value, consisted of the following at December 31, 2009 and 2008 (dollars in 

thousands): 

2009 2008 

Original principal balance $ 60,000 $ 60,000 

Interest conversion to debt 11,321 4,613 

Repayment of debt (3,000 ) — 

Debt assumed on acquisitions — 185 

Other 1 3 

$ 68,322 $ 64,801 

Discount for warrants issued to FP II, net (12,246 ) (16,032 ) 

Long-term debt, net of discount $ 56,076 $ 48,769 

14. Stock-Based Compensation 

The following table summarizes stock-based compensation expense included in the consolidated statements of operations for 

December 31, 2009, 2008 and 2007: 

2009 2008 2007 

Costs of revenue $ 199 $ 119 $ 111 

Research and development 52 132 (104 ) 

Selling, general and administrative 1,691 3,233 1,912 

Total $ 1,942 $ 3,484 $ 1,919 

Stock-based compensation expense included zero, $0.1 million and $0.2 million of payroll tax paid on behalf of employees that 

received stock awards during the years ended December 31, 2009, 2008 and 2007, respectively. 

As of December 31, 2009, total unrecognized compensation cost, net of forfeiture, related to stock-based options and awards 

was $1.8 million and the related weighted-average period over which it is expected to be recognized is approximately 1.3 years. 

Stock Options 

At December 31, 2009, the Company had three active stock-based employee compensation plans. Stock option awards granted 

from these plans are granted at the fair market value on the date of grant, and vest over a period determined at the time the options are 

granted, generally ranging from one to five years, and generally have a maximum term of ten years. For stock options with graded 

vesting terms, the Company recognizes compensation cost over the requisite service period on the accelerated method. 

A summary of stock option activity within the Company’s stock-based compensation plans and changes for the year ended 

December 31, 2009 is as follows: 

Number of 

Options 

- 71 - 

Weighted 

Average Exercise 

Price 

Weighted Average 

Remaining 

Contractual Term 

Aggregate 

Intrinsic Value (In 

Thousands) 

Outstanding at December 31, 2009 4,564,861 $ 4.99 7.28 $ 1,361 

Vested and expected to vest at December 31, 2009 4,403,898 $ 5.06 7.19 $ 1,210 

Exercisable at December 31, 2009 3,245,491 $ 5.85 6.29 $ 121 

The aggregate intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 was $0.0 million, 

$0.2 million and $0.3 million, respectively.

The key assumptions used in the Black-Scholes valuation model to calculate the fair value are as follows: 

2009 2008 2007 

Weighted average risk free interest rate 1.9 % 5.4 % 4.5 % 

Expected life of the options (in years) 5.25 4.75 5.41 

Expected stock price volatility 72 % 49 % 56 % 

Expected dividend yield — — — 

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no 

vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, 

including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value 

estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its 

employee stock options. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The 

expected lives of options and stock price volatility are based on historical data of the Company. The weighted average fair value of 

options granted in the years ended December 31, 2009, 2008 and 2007 was $0.97, $1.81 and $2.91, respectively. 

Restricted Stock Awards 

The Company grants restricted stock awards to certain employees. Restricted stock awards are valued at the closing market 

value of the Company’s common stock on the date of grant, and the total value of the award is expensed ratably over the service 

period of the employees receiving the grants. Share-based compensation expense (reversal) related to all restricted stock awards 

outstanding in 2009, 2008, and 2007 was approximately $0.2 million, $0.4 million and ($0.5 million), respectively. As of 

December 31, 2009, the total amount of unrecognized compensation cost, net of forfeitures, related to nonvested restricted stock 

awards was approximately $1.0 million, which is expected to be recognized over a weighted-average period of one year. 

Compensation expense with respect to the grants could be reduced or reversed to the extent employees receiving the grants leave the 

Company prior to vesting in the award. 

A summary of nonvested restricted stock activity for the years ended December 31, 2009, 2008 and 2007 is as follows: 

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Nonvested Shares 

Outstanding 

Weighted Average 

Grant Date Fair 

Value per Share 

Balance at December 31, 2006 342,432 6.92 

Shares granted in 2007 93,334 5.76 

Shares vested in 2007 (60,766 ) 6.14 

Shares forfeited in 2007 (300,000 ) 6.89 

Balance at December 31, 2007 

75,000 6.24 

Shares granted in 2008 

75,000 3.99 



Shares granted in 2009 

1,149,000 1.24 


Shares forfeited in 2009 (129,000 ) 1.17 


The total fair value of restricted shares vested during the years ended December 31, 2009, 2008 and 2007 was $0.3 million, 

$0.5 and $0.4 million, respectively. 

15. Stockholders' Equity 

In 1997, the Company’s Board of Directors (the “Board”) adopted and the stockholders of the Company approved the 

Hypercom Corporation Long-Term Incentive Plan, which was amended in 2001 (the “1997 Plan”), to allocate a total of 

6,000,000 shares of common stock for issuance at the Company’s discretion. The 1997 Plan authorizes issuance of “incentive stock 

options” (as defined by the Internal Revenue Code of 1986), non-qualified stock options, stock appreciation rights, restricted stock 

awards, performance share awards, dividend equivalent awards and other stock-based awards. Stock options issued under the 1997 

Plan become exercisable over a period determined by the Board (generally over two to five years) and expire after a period determined 

by the Board (generally ten years after the date of grant). 

In 2000, the Board approved the Hypercom Corporation 2000 Broad-Based Stock Incentive Plan, which was amended in 2002 

(the “2000 Plan”), to allocate 7,000,000 shares of common stock for issuance at the Company’s discretion. The 2000 Plan authorizes

the issuance of non-qualified stock options and restricted stock awards, the majority of which must be issued to employees of the 

Company who are not officers or directors. Non-qualified stock options issued under the 2000 Plan become exercisable over a period 

determined by the Board (generally over two to five years), and expire after a period determined by the Board (generally ten years 

after the date of grant). 

Stock Options 

A summary of the Company’s stock option activity, including stock options issued under the Directors Plan, defined below, and 

related information for the years ended December 31, 2009, 2008 and 2007 is as follows: 

2009 2008 2007 

Weighted Weighted Weighted 

Shares Average Shares Average Shares Average 

Under Exercise Under Exercise Under Exercise 

Option Price Option Price Option Price 

Beginning balance 

outstanding 4,444,718 $ 5.74 2,974,536 $ 7.33 3,726,642 $ 8.07 

Granted 635,000 1.56 2,215,000 4.09 649,070 5.29 

Exercised — — (140,100 ) 3.78 (201,024 ) 3.61 

Cancellations (514,857 ) 7.27 (604,718 ) 7.98 (1,200,152 ) 9.04 

Ending balance outstanding 4,564,861 $ 4.99 4,444,718 $ 5.74 2,974,536 $ 7.33 

Exercisable at end of year 3,245,491 $ 5.85 2,103,857 $ 7.25 1,919,734 $ 7.71 

The following table summarizes additional information about the Company's stock options outstanding as of December 31, 

2009: 

Options Outstanding Options Exercisable 

Weighted Weighted Weighted 

Shares Average Average Shares Average 

Under Remaining Exercise Under Exercise 

Range of 

Exercise Prices Option Contractual Life Price Option Price 

$ 0.96 - 3.50 921,800 9.50 $ 1.77 188,320 $ 2.75 

$ 3.52 - 5.28 2,411,004 7.67 4.45 1,860,700 4.44 

$ 5.41 - 6.25 284,570 5.91 6.05 251,236 6.07 

$ 6.28 - 9.29 484,250 5.98 7.43 484,250 7.43 

$ 9.31 - 9.38 135,000 0.58 9.38 135,000 9.38 

$ 9.40 - 9.63 18,450 2.12 9.56 17,505 9.56 

$ 10.38 - 14.44 309,787 4.24 11.79 308,480 11.79 

4,564,861 3,245,491 

Stock Warrants 

In connection with the funding of the Acquisition Financing, the Company granted the lender a warrant to purchase 

approximately 10.5 million shares of the Company’s common stock at $5.00 per share. See further discussion in Note 13. The warrant 

expires on April 1, 2013. 

Employee Stock Purchase Plan 

In 1997, the Board adopted and the stockholders of the Company approved the Employee Stock Purchase Plan (the “Purchase 

Plan”). The Purchase Plan was subsequently amended and restated in its entirety in 2008 upon adoption by the Board and approval by 

the Company’s stockholders. The Purchase Plan allows eligible employees of the Company to purchase shares of the Company’s 

common stock through periodic payroll deductions every three months. At the end of each offering period, payroll deductions for the 

offering period are used to purchase shares of common stock for each participant’s account at a price equal to 85% of the fair market 

value of the common stock on either the first or last day of the offering period, whichever is less. Payroll deductions under the 

Purchase Plan are limited to 10% of each eligible employee’s earnings during the offering period, and no single participant will be 

granted an option to purchase shares with a value in excess of $25,000 for each calendar year. The Board has reserved 625,000 shares 

of common stock for issuance under the Purchase Plan, subject to adjustment in the event of a stock split, reverse stock split, stock 

dividend or similar event. Under the Purchase Plan, for the years ended December 31, 2009, 2008, and 2007 the Company sold 

159,561, 59,997, and 46,139 shares to employees at weighted average prices of $1.19, $2.30, and $4.47, respectively. At the end of 

December 31, 2009, the Company had a balance of 144,267 shares of common stock available for issuance under the Purchase Plan. 

- 73 -

The Company’s 1997 Purchase Plan is considered compensatory. During the years ended December 31, 2009, 2008 and 2007, 

the Company recorded compensation expense of $61,938, $59,000, and $55,000, respectively, related to the Purchase Plan. 

Directors' Stock Plan 

In 1997, the Board adopted and the stockholders of the Company approved the Hypercom Corporation Nonemployee Directors’ 

Stock Option Plan, which was amended in 2002 and 2006 (the “Directors Plan”). The Directors Plan is administered by a committee 

appointed by the Board and provides for an initial grant to each Nonemployee Director of an option to purchase 15,000 shares of 

Common Stock; thereafter, each Nonemployee Director will receive an annual grant of an option to purchase 15,000 shares of 

Common Stock. The aggregate number of shares of Common Stock subject to the Directors Plan may not exceed 600,000, subject to 

adjustment in the event of a stock split, reverse stock split, stock dividend or similar event. Options granted under the Directors Plan 

are fully vested and become fully exercisable on the first anniversary of the date of grant and have a term of ten years. The exercise 

price per share under the Director Plan is equal to the fair market value of such shares upon the date of grant. In general, options may 

be exercised by payment in cash or a cash equivalent, and/or previously acquired shares having a fair market value at the time of 

exercise equal to the total option exercise price. 

Stock Repurchase 

In August 2003, the Board authorized a stock repurchase program to allow the purchase of up to $10.0 million of the 

Company’s common stock. In November 2005, the Board authorized a stock repurchase program to purchase up to $20.0 million of 

the Company’s common stock. When treasury shares are issued, the Company uses a first-in, first-out method and any excess of 

repurchase costs over the reissue price is treated as a reduction of paid in capital. Any excess of reissue price over repurchase cost is 

treated as an increase to paid-in capital. 

During 2006, the Company purchased 1,346,628 shares of its common stock for $10.7 million. There have been no treasury 

stock repurchases since 2006. The repurchased shares were recorded as treasury stock and resulted in a reduction to stockholder’s 

equity. The timing and amount of any future repurchases will depend on market conditions and corporate considerations. 

Preferred Stock 

The Company is authorized to issue 10,000,000 shares of $0.001 par value preferred stock. As of December 31, 2009 and 2008, 

there were no preferred shares outstanding. 

16. Brazilian Health Ministry Contract 

The Company has been involved in a long-term contract with the Brazilian Health Ministry requiring substantial delivery of 

customized software and hardware. Revenue and a resulting margin under this contract were recorded based on the achievement of 

contract milestones approved by the Brazilian Health Ministry. The margin for the entire contract was estimated to be 9%. Inherent in 

this margin was an expectation of realizing all amounts owed under the terms of the original contract and recovering claims for 

additional contract revenue, due to changes in the scope of the contract and additional currency exchange variation adjustments. Scope 

changes involved expanding the overall design specifications requiring additional hours and administration costs. The currency 

adjustments represented the inflation of cost on imported equipment caused by currency movements. At the end of 2003, the Company 

formally presented a claim to the Brazilian Health Ministry detailing the amount and nature of the scope changes and currency 

variation impact. The Company did not recognize revenues above the original contract amount, and contract costs associated with the 

scope changes and currency adjustments amounting to $11.3 million were deferred in anticipation of recognizing contract revenue. 

Due to the lack of timely acknowledgement and acceptance of the pending claim, the Company recorded a charge to operations for the 

deferred costs during the year ended December 31, 2004. 

Since 2004, the Company has actively pursued discussions with the Brazilian Health Ministry regarding both the collection of 

the contract costs as well as renewal of the maintenance element of the contract; however, there is no certainty as to how much will 

ultimately be collected, whether revenue for work previously done will be recorded or if the maintenance element of the contract will 

ultimately be extended. The Company collected $4.6 million and $0.9 million in 2007 and 2006, respectively. These collections were 

recorded as services revenues during the years ended December 31, 2007 and 2006. There were no amounts collected from the 

Brazilian Health Ministry during 2009 and 2008. 

- 74 -

17. Income Taxes 

Loss before income taxes and discontinued operations consisted of the following for the years ended December 31, 2009, 2008 

and 2007 (dollars in thousands): 

2009 2008 2007 

Income (loss) before income taxes and discontinued operations: 

United States $ 319 $ (24,276 ) $ (15,760 ) 

Foreign (7,092 ) (59,422 ) 7,138 

$ (6,773 ) $ (83,698 ) $ (8,622 ) 

The (provision) benefit for income taxes for the years ended December 31, 2009, 2008 and 2007 consisted of the following 


Current: 

State $ 41 $ (3 ) $ 4 

Federal — — (8 ) 

Foreign (5,107 ) 465 (40 ) 

(5,066 ) 462 (44 ) 

Deferred — Foreign 5,895 (1,673 ) (434 ) 

Total $ 829 $ (1,211 ) $ (478 ) 

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the years ended December 

31, 2009, 2008 and 2007 is as follows: 

2009 2008 2007 

Tax expense at the federal statutory rate 35 % 35 % 35 % 

Foreign taxes (22.8 ) (5.2 ) 27.5 

Impairment charges - (21.3 ) — 

Change in valuation allowance 0.6 (8.0 ) (67.4 ) 

Transaction costs — (1.8 ) — 

Other (0.6 ) (0.2 ) (1.0 ) 

Effective tax rate 12.2 % (1.5 %) (5.9 %) 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities 

for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax 

assets and liabilities at December 31, 2009 and 2008 are as follows (dollars in thousands): 

2009 2008 

Deferred tax assets (liabilities), current: 

Inventory valuation $ 2,780 $ 2,657 

Compensation accruals 1,059 1,059 

Allowance for doubtful accounts 127 441 

Foreign, net 2,213 (3,015 ) 

Valuation allowance (4,890 ) (4,650 ) 

Net deferred tax assets (liabilities), current $ 1,289 $ (3,508 ) 

Deferred tax assets (liabilities), non-current: 

Tax loss carry forwards — United States $ 35,256 $ 34,957 

Tax loss carry forwards — Foreign 20,363 22,404 

Intangibles 

(14,979 ) 

(16,714 ) 

Property, plant and equipment 

(999 ) 

(1,097 ) 

Foreign 116 3,918 

Other 5,345 5,827 

Valuation allowance 

(60,004 ) 

(65,294 ) 

Net deferred tax liabilities, non-current $ (14,902 ) $ (15,999 ) 

For the year ended December 31, 2009, the Company’s valuation allowance decreased by $5.0 million, primarily related to the 

application of foreign tax loss carryforwards and transfer pricing adjustments. The Company does not expect to realize its deferred 

tax assets through expected future taxable profits and has recorded a valuation allowance for all U.S. federal and state deferred tax 

- 75 - 

2009 

2008 

2007

assets and the majority of its foreign deferred tax assets. The valuation allowance is subject to reversal in future years at such time as 

the benefits are actually utilized or the operating profits become sustainable. 

At December 31, 2009, the Company has a gross deferred tax asset of $35.3 million associated with its U.S. federal and state 

tax net operating loss carryforwards of $100.7 million. The U.S. federal and state net operating loss carryforwards will begin to expire 

in 2020 through 2028 if not previously utilized. The Company’s ability to utilize its net operating losses may be restricted due to 

statutory “ownership changes” (as defined for purposes of Section 382 of the Internal Revenue Code). 

As of December 31, 2009, the Company has a gross deferred tax asset of $20.4 million associated with foreign net operating 

loss carryforwards of $66.0 million. The foreign net operating loss carryforwards begin to expire in various periods if not previously 

utilized. 

At December 31, 2009, the Company had a liability for uncertain tax positions of $4.7 million that, if recognized, would 

favorably affect the Company’s tax position, and $35.4 million of unrecognized tax benefits, the realization of which would be offset 

by an increase in the valuation allowance. The Company does not expect there will be any material changes in its unrecognized tax 

positions over the next year. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended 

December 31, 2009 and 2008 is as follows (dollars in thousands): 

- 76 - 

2009 2008 

Gross unrecognized tax benefits at beginning of the year $ 39,407 $ 40,015 

Decrease in tax positions resulting from 

expiration of statute of limitations (511 ) (608 ) 

Increase in tax positions for current year 1,200 — 

Gross unrecognized tax benefits at the end of the year $ 40,096 $ 39,407 

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign 

jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax 

examinations by tax authorities for years prior to 2000. The Company’s policy is to recognize interest and penalties related to 

unrecognized tax benefits as part of the tax provision. Accrued interest and penalties are $1.4 million and $0.1 million respectively at 

December 31, 2009. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax 

returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past 

experience and interpretations of tax law applied to the facts of each matter. 

It is reasonably possible that the amount of unrecognized tax exposures for the Company will decrease within the next year by 

$1.5 million relating to income tax exposure in various foreign jurisdictions as the statute of limitations will expire. The anticipated 

reduction is based on the Company’s ongoing assessment of the administrative practices and precedents of the taxing authorities in the 

respective foreign jurisdictions. 

Undistributed earnings of the Company’s foreign subsidiaries total $27.1 million at December 31, 2009 and management 

considers these earnings to be permanently reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign 

withholding taxes has been provided. Determination of the potential amount of unrecognized deferred federal and state income tax 

liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; 

however, unrecognized foreign tax credits would be available to reduce some portion of the federal liability. 

18. Benefit Plans 

Defined Benefit Plan 

In conjunction with the acquisition of TeT, the Company assumed pension plans for eligible employees in Germany and 

France. Benefits are based primarily on a benefits multiplier and years of service. The Company had no defined benefit plan or 

pension expenses prior to the acquisition of TeT. 

The expected long-term rate of return on plan assets is updated annually taking into consideration the related asset allocation, 

historical returns on the types of assets held in the plan, and the current economic environment. Based on these factors, the Company 

expects its plan assets to earn a long-term rate of return of 4.5%. Actual year-by-year returns can deviate substantially from the longterm 

expected return assumption. However, over time it is expected that the amount of over performance will equal the amount of 

underperformance. Changes in the mix of plan assets could impact the amount of recorded pension income or expense, the funded 

status of the plan and the need for future cash contributions. The discount rates used to calculate the expected present value of future

enefit obligations as of December 31, 2009 ranged from 5.0% to 5.5%. The Company periodically reviews the plan asset mix, 

benchmark discount rate, expected rate of return and other actuarial assumptions and adjusts them as deemed necessary. 

The Company recognizes the funded status of a defined benefit postretirement plan as an asset or liability in its balance sheet 

and the changes in that funded status is recognized in other comprehensive income in the year in which the changes occur. The funded 

status of a defined benefit pension plan is measured as the difference between plan assets at fair value and the plan’s projected benefit 

obligation. 

The following table shows a reconciliation of changes in the plan’s benefit obligation and plan assets for the year ended 

December 31, 2009 and 2008 and a reconciliation of the funded status with amounts recognized in the consolidated balance sheets as 

of December 31, 2009 and 2008 (dollars in thousands): 

2009 2008 

Change in Benefit Obligation 

Benefit obligation at beginning of the year $ 3,853 $ 4,961 

Service cost 173 254 

Interest cost 222 274 

Deferred amounts 

(43 ) 

(633 ) 

Benefits paid 

(23 ) 

(490 ) 

Foreign currency translation adjustment 135 

(513 ) 

Benefit obligation at end of year $ 4,317 $ 3,853 

Change in Plan Assets 

Fair value of plan assets at beginning of the year $ 2,738 $ 3,395 

Actual return on plan assets 158 111 

Deferred amounts 189 20 

Foreign currency translation adjustment 94 

(356 ) 

Benefits paid 

(177 ) 

(432 ) 

Fair value of plan assets at end of year $ 3,002 $ 2,738 

Funded Status $ 1,315 $ 1,115 

Net balance sheet liability $ 1,315 $ 1,115 

Non current asset 2,756 2,481 

Noncurrent liabilities 4,071 3,596 

Amounts Recognized in the Consolidated Balance Sheets $ 1,315 $ 1,115 

Amounts Recognized in Accumulated Other Comprehensive Loss 

Comprehensive loss 205 274 

- 77 -

The components of net periodic benefit cost and other amounts recognized in other accumulated comprehensive loss at 

December 31, 2009 and 2008 are as follows (dollars in thousands): 

- 78 - 

2009 2008 

Net periodic benefit cost 

Service cost $ (173 ) $ (254 ) 

Interest cost 

(222 ) 

(274 ) 

Expected return on plan assets 158 111 

Amortization of deferred amounts and asset ceiling impact 197 161 

$ (40 ) $ (256 ) 

As of December 31, 2009, the average expected future working lifetime for each participant of the plans ranges from 12 to 22 

years. 

The Company’s weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 

2009 and 2008 are as follows: 

Discount rate 

5.0% to 5.5 % 5.8 % 

Expected return on plan assets 4.5 % 4.5 % 

The Company changes important assumptions when changing conditions warrant. The discount rate is typically changed at least 

annually and the expected long-term rate of return on plan assets will typically be revised every three to five years. Other material 

assumptions include the rates of employee termination and rates of participant mortality. 

The discount rate was determined by projecting the plans expected future benefit payments as defined for the projected benefit 

obligation, discounting those expected payments using a theoretical zero-coupon spot yield curve derived from a universe of highquality 

bonds as of the measurement date, and solving for the single equivalent discount rate that resulted in the same projected benefit 

obligation. 

The expected return on plan assets was determined based on historical and expected future returns of the various asset classes, 

using the target allocations described below. 

The expected long-term rate of return on pension assets is selected by taking into account the expected duration of the Projected 

Benefit Obligation (“PBO”) for the plan, and the asset mix of the plan. The rate of return is earned over the period until the benefits 

represented by the current PBO are paid. The expected return on plan assets is based on the Company’s expectation of historical longterm 

average rates of return on the different asset classes held in the pension fund. This is reflective of the current and projected asset 

mix of the funds and considers the historical returns earned on the Company’s asset allocation and the duration of the plan liabilities. 

Thus, the Company has taken a historical approach to the development of the expected return on asset assumption. The Company 

believes that fundamental changes in the markets cannot be predicted over the long-term. Rather, historical returns, realized across 

numerous economic cycles, should be representative of the market return expectations applicable to the funding of a long-term benefit 

obligation. 

The Company’s plan assets are classified within a fair value hierarchy that prioritizes the inputs to valuation techniques used to 

measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or 

liabilities (Level 1), then to significant observable inputs (Level 2) and the lowest priority to significant unobservable inputs (Level 3). 

See Note 8 for further discussion of the different levels of the fair value hierarchy. 

The Company’s fair value of pension plan assets at December 31, 2009 is as follows (dollars in thousands): 

2009 

2008 


Cash $ 120 $ — $ — $ 120 

Equities 330 — — 330 

Bonds 2,342 — — 2,342 

Other 210 — — 210 

$ 3,002 $ — $ — $ 3,002

In determining the asset allocation, the investment manager recognizes the Company’s desire for funding and expense stability, 

the long-term nature of the pension obligation and current and projected cash needs for retiree benefit payments. The pension fund is 

actively managed within the target asset allocation ranges. 

The plan invests in a variety of asset classes to diversify its assets. The plan’s assets are currently invested in a variety of funds 

representing most standard equity and debt security classes. While no significant changes in the asset allocation are expected during 

the upcoming year, the Company may make changes at any time. 

As of December 31, 2009, the Company’s pension plan assets did not hold any direct investment in the Company’s common 

stock. 

The following estimated future benefit payments, including future benefit accrual, which reflect expected future service, as 

appropriate, are expected to be paid (dollars in thousands): 

2010 $ 238 

2011 $ 138 

2012 $ 126 

2013 $ 205 

2014 $ 268 

2015 - beyond $ 1,365 

Funding requirements for subsequent years are uncertain and will significantly depend on whether the plan’s actuary changes 

any assumptions used to calculate plan funding levels, the actual return on plan assets, changes in the employee groups covered by the 

plan, and any legislative or regulatory changes affecting plan funding requirements. While the current market conditions could have an 

adverse effect on the plan investments, any additional required contribution is not expected to have a material effect on the 

consolidated financial statements. The Company expects to fund additional contributions from its cash balances and operating cash 

flows. For tax planning, financial planning, cash flow management or cost reduction purposes, the Company may increase, accelerate, 

decrease or delay contributions to the plan to the extent permitted by law. 

19. Profit Sharing Plan 

The Company has a 401(k) profit sharing plan (the “401(k) Plan”), which commenced in fiscal 1998, covering all eligible fulltime 

employees of the Company. Contributions to the 401(k) Plan are made by the participants to their individual accounts through 

payroll withholding. Additionally, the 401(k) Plan provides for the Company to make profit sharing contributions in amounts at the 

discretion of management. The employer contribution was $0.1 million for the years ended December 31, 2009, 2008 and 2007. 

20. Commitments and Contingencies 

Lease Commitments 

The Company leases office and warehouse space, equipment and vehicles under non-cancelable operating leases. The office 

space leases provide for annual rent payments, plus a share of taxes, insurance and maintenance on the properties. 

Future minimum payments under operating leases are as follows (dollars in thousands): 

Years Ending December 31, 

2010 3,986 

2011 2,569 

2012 1,889 

2013 1,435 

2014 1,365 

Thereafter 4,884 

$ 16,128 

Rental expense from continuing operations amounted to $5.6 million, $6.7 million and $4.2 million for the years ended 

December 31, 2009, 2008, and 2007, respectively. 

- 79 -

Litigation 

The Company is currently a party to various legal proceedings, including those noted below. While the Company presently 

believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse affect on 

the Company’s financial position, results of operations or cash flows, litigation is subject to inherent uncertainties, and unfavorable 

rulings could occur. An unfavorable ruling could include monetary damages or, in cases where injunctive relief is sought, an 

injunction. Were an unfavorable ruling to occur, it is possible such a ruling could have a material adverse impact on the Company’s 

consolidated results of operations or financial position in the period in which the ruling occurs or in future periods. 

SPA Syspatronic AG v. Hypercom Corporation, et al . (United States District Court for the Eastern District of Texas, Marshall 

Division, Civil Action No. 2:07-CV-416 (LED), filed on September 18, 2007) . SPA Syspatronic AG (“Syspatronic”) commenced this 

action against the Company and others, alleging that certain of the Company’s products infringe U.S. Patent No. 5,093,862 entitled 

“Data Carrier – Controlled Terminal in a Data Exchange System” issued on March 3, 1992 (the “‘862 Patent”) allegedly owned by 

Syspatronic. The plaintiff is seeking a judgment of infringement, an injunction against further infringement, damages, interest and 

attorneys’ fees. The Company filed an answer denying liability on the basis of a lack of infringement, invalidity of the ‘862 Patent, 

laches, waiver, equitable estoppel and unclean hands, lack of damages, failure to state a claim, and inequitable conduct during the 

prosecution of the ‘862 Patent. The Company also counterclaimed seeking a declaratory judgment of non-infringement and invalidity 

of the ‘862 Patent, and seeking attorneys’ fees and costs as an exceptional case due to the plaintiff’s inequitable conduct during the 

prosecution of the ‘862 Patent. In April 2008, the U.S. Patent and Trademark Office (the “Patent Office”) granted the request by 

certain of the defendants for re-examination of the ‘862 Patent. Thereafter, the Court stayed proceedings in this case until the Patent 

Office completed its re-examination. The Patent Office ultimately confirmed the patentability of the claims of the ‘862 Patent based 

on the construction advanced by Syspatronic of a key term in the only two independent claims of the ‘862 Patent. In light of that 

construction, the Company believes that its accused products do not infringe the ‘862 Patent. The Court has lifted the stay it ordered 

during the reexamination proceedings. The Markman hearing is set for November 10, 2010, and the case is set for trial on May 30, 

2011. By agreement, this case will be tried in Tyler, Texas. This action is currently in the discovery stage. 

CardSoft, Inc., et al. v. Hypercom Corporation, et al. (United States District Court for the Eastern District of Texas, Marshall 

Division, Civil Action No. 2:08-CV-00098, filed on March 6, 2008) . CardSoft, Inc. and CardSoft (Assignment for the Benefit of 

Creditors), LLC (collectively “CardSoft”) filed this action against the Company and others in March 2008, alleging that certain of the 

Company’s terminal products infringe two patents allegedly owned by CardSoft: U.S. Patent No. 6,934,945 (the “‘945 Patent”), 

entitled “Method and Apparatus for Controlling Communications,” issued on August 23, 2005, and U.S. Patent No. 7,302,683 (the 

“‘683 Patent”), also entitled “Method and Apparatus for Controlling Communications,” issued on November 27, 2007, which is a 

continuation of the ‘945 patent. CardSoft is seeking a judgment of infringement, an injunction against further infringement, damages, 

interest and attorneys’ fees. In June 2008, the Company filed its answer, denying liability on the basis of a lack of infringement, 

invalidity of the ‘945 Patent and the ‘683 Patent, laches, waiver, equitable estoppel and unclean hands, lack of damages and failure to 

state a claim. The Company also counterclaimed seeking a declaratory judgment of non-infringement and invalidity of the ‘945 Patent 

and the ‘683 Patent. The Markman hearing is scheduled for July 20, 2011 and trial is scheduled for November 7, 2011. This action is 

currently in the discovery stage. 

Lisa Shipley v. Hypercom Corporation . (United States District Court for the Northern District of Georgia, Civil Action No. 

1:09-CV-0265, filed on January 30, 2009) . Lisa Shipley (“Shipley”), a former employee, filed this action against the Company in 

January 2009, alleging that the Company violated Title VII of the Civil Rights Act by discriminating against her on the basis of her 

gender, violated the Georgia Wage Payment laws, the Equal Pay Act and Georgia law by paying her lower compensation based on her 

gender. Ms. Shipley is seeking compensatory damages for emotional distress, damage to reputation, embarrassment, lost wages, back 

pay, accrued interest, punitive damages, attorney’s fees and expenses, and interest. In February 2009, the Company filed a motion to 

dismiss based on improper venue or, in the alternative, to transfer venue to the United States District Court for the District of Arizona. 

In June 2009, the Court denied the motion. In June 2009, the Company filed its answer, generally denying the material allegations of 

Ms. Shipley’s complaint. In October 2009, Ms. Shipley filed an amended complaint adding an allegation that the Company unlawfully 

retaliated against her. In November 2009, the Company filed its answer, denying the material allegations of the amended complaint. In 

February 2010, the Company filed a Motion for Judgment on the Pleadings as to Ms. Shipley's retaliation claim. This action is 

currently in the discovery stage. 

21. Concentrations of Credit and Other Risks 

Financial Instruments 

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash 

equivalents, accounts receivable and short-term investments. 

- 80 -

The Company’s cash and cash equivalents and short-term investments are maintained with major, high-quality international 

banks and financial institutions. Generally, these securities are traded in a highly liquid market, may be redeemed upon demand and 

bear minimal risk. Management regularly monitors the composition and maturities of these investments and the Company has not 

experienced any material loss on its investments. Cash and cash equivalents at times may exceed the FDIC limits. The Company 

believes that no significant concentration of credit risk exists with respect to these cash investments. 

The Company’s accounts receivable result primarily from credit sales to a broad customer base, both nationally and 

internationally, with a concentration generally existing among five to ten customers. The Company’s top five customers amounted to 

19.0%, 22.1% and 21.3% of the Company’s total revenues for the years ended December 31, 2009, 2008 and 2007, respectively. 

These same five customers accounted for 14.2% and 17.4% of the Company’s net accounts receivable balance at December 31, 2009 

and 2008, respectively. Sales to the Company’s largest customer totaled 5.2%, 6.2% and 5.3% of total revenues in 2009, 2008 and 

2007, respectively. 

The Company routinely assesses the financial strength of its customers, requiring letters of credit from certain foreign 

customers, and provides an allowance for doubtful accounts as necessary. 

Inventories 

The Company’s entire inventory is purchased from third party manufacturers that are considered to be outside sources. The 

failure of any such third party manufacturer to meet its commitment on schedule could have a material adverse effect on the 

Company’s business, operating results and financial condition. If a sole-source supplier were to go out of business or otherwise 

become unable to meet its supply commitments, the process of locating and qualifying alternate sources could require up to several 

months, during which time the Company’s production could be delayed. Such delays could have a material adverse effect on the 

Company’s business, operating results and financial condition. 

All of the Company’s third party manufacturers are located in foreign jurisdictions and are subject to certain risks, including the 

imposition of tariffs and import and export controls, together with changes in governmental policies. The occurrence of any of these 

events could have a material adverse effect on the Company’s business, operating results and financial condition. 

The Company estimates inventory provisions for potentially excess and obsolete inventory on a part level basis based on 

forecasted demand and historical usage. Actual demand may differ from such anticipated demand and may have a material adverse 

effect on inventory valuation. 

International Operations 

The Company’s international business is an important contributor to the Company’s net revenues and operating results. 

However, a substantial portion of the Company’s international sales are denominated in the U.S. Dollar, and an increase in the value 

of the U.S. Dollar relative to foreign currencies could make products sold internationally less competitive. The operating expenses of 

the Company’s overseas offices are paid in local currencies and are subject to the effects of fluctuations in foreign currency exchange 

rates. The Company maintained significant accounts receivable balances outside of the U.S. comprising 78.3% and 72.0%, 

respectively, of the Company’s net accounts receivable balance at December 31, 2009 and 2008. These balances are subject to the 

economic risks inherent to those regions. 

22. Segment, Geographic, and Customer Information 

During the fourth quarter of 2008, the Company initiated organizational changes and made enhancements to its internal 

management reporting and began to report information pertaining to its four business segments in 2009 as follows: (i) the Americas, 

(ii) NEMEA, (iii) SEMEA and (iv) Asia-Pacific. The Americas consist of the U.S., Canada, Mexico, the Caribbean, Central America, 

and South America. NEMEA consists of Germany, Austria, Scandinavia, and the Benelux countries. SEMEA consists of France, 

Spain, the United Kingdom, Ireland, Eastern Europe, Russia, the Middle East, and Africa. Asia-Pacific consists of China, India, Japan, 

Korea, Southeast Asia, Australia, and New Zealand. Prior year segment data has been restated for comparative purposes. 

The Company’s Chief Operating Decision Maker (“CODM”) is its CEO. The CODM has access to discrete financial 

information for each of its business segments regarding revenues, gross margins (using fully burdened manufacturing costs), direct 

local service costs, direct operating expenses consisting of expenses directly associated with the business segment, and indirect 

operating expenses consisting of global shared cost centers such as global R&D, marketing, corporate general and administrative 

- 81 -

expenses, and stock-based compensation. The Company operations are managed by the MDs for each business segment that report 

directly to the CEO and have responsibility for all business activities and combined operating results of their respective business 

segments. These individuals are compensated and evaluated based on the performance (Direct Trading Profit) of their business 

segment. 


2009 2008 2007 

Net Revenue 

Americas $ 123,746 $ 160,038 $ 158,539 

NEMEA 102,492 90,104 16,400 

SEMEA 131,505 133,210 64,984 

Asia-Pacific 49,160 50,890 49,604 

$ 406,903 $ 434,242 $ 289,527 


2009 2008 2007 


Americas $ 21,130 $ 16,278 $ 20,312 

NEMEA 19,267 (6,060 ) 5,959 

SEMEA 24,676 (8,490 ) 14,899 

Asia-Pacific 9,049 4,368 11,386 

Shared cost centers (71,002 ) (82,808 ) (63,300 ) 

Total segment profit (loss) $ 3,120 $ (76,712 ) $ (10,744 ) 

Interest income 296 1,466 3,954 

Interest expense (10,990 ) (6,822 ) (122 ) 

Foreign currency loss 411 (1,821 ) (1,685 ) 

Other expense 390 191 (25 ) 

Income (loss) before income taxes 

and discontinued operations $ (6,773 ) $ (83,698 ) $ (8,622 ) 


2009 2008 

Total Assets 

Americas $ 55,858 $ 61,813 

NEMEA 110,670 105,035 

SEMEA 83,957 81,773 

Asia-Pacific 26,597 35,840 

Shared cost centers 29,806 21,839 

$ 306,888 $ 306,300 

The Company’s goodwill by business segment is as follows (dollars in thousands): 

- 82 - 


2009 2008 

NEMEA $ 17,715 $ 16,255 

SEMEA 6,995 6,634 


$ 28,536 $ 26,715 

The Company’s intangible assets by business segment are as follows (dollars in thousands): 


2009 2008 

Americas $ 1,453 $ 1,102 

NEMEA 44,021 50,181 

SEMEA 955 1,945 


$ 49,579 $ 57,311

The Company’s depreciation and amortization of property, plant, and equipment and acquired intangible assets are as follows 



2009 2008 2007 

Americas $ 6,790 $ 7,452 $ 6,415 

NEMEA 9,166 6,793 318 

SEMEA 2,376 2,732 171 

Asia-Pacific 888 1,663 2,129 

$ 19,220 $ 18,640 $ 9,033 

The Company’s impairment of goodwill and intangible assets is as follows (dollars in thousands): 


2009 2008 2007 

Americas $ — $ 6,432 $ — 

NEMEA — 24,400 — 

SEMEA — 32,426 — 

Asia-Pacific — 4,540 — 

$ — $ 67,798 $ — 

23. Supplemental Cash Flow Information (in thousands) 

Supplemental cash flow information for the years ended December 31, 2009, 2008 and 2007 is as follows (dollars in 

thousands): 

2009 2008 2007 

Changes in operating assets and liabilities: 

Accounts receivable $ 14,981 $ 5,464 $ (19,084 ) 

Inventories (1,808 ) (7,371 ) 20,683 

Income tax receivable 568 761 (1,354 ) 

Prepaid expenses and other current assets 4,719 (207 ) (4,959 ) 

Other assets (2,486 ) 5,660 (4,175 ) 

Accounts payable (1,874 ) (4,333 ) 7,623 

Accrued payroll and related expenses (1,559 ) (3,863 ) 3,466 

Accrued sales and other tax (1,902 ) 117 (759 ) 

Accrued liabilities (7,369 ) (4,318 ) 2,465 

Deferred revenue (2,256 ) 1,626 3,287 

Income taxes payable 696 (817 ) (1,903 ) 

Other liabilities 2,581 6,533 (481 ) 

Net increase (decrease) in operating assets and liabilities $ 4,291 $ (748 ) $ 4,809 

Cash paid (received) during the year by continuing 

operations: 

Interest $ 123 $ 144 $ (74 ) 

Income taxes $ 2,866 $ 664 $ (2,128 ) 

Noncash investing activities: 

Changes in accounts payable related to the 

purchase of property, plant and equipment $ 639 $ 765 $ 70 

Changes in accounts payable related to the 

software development costs capitalized $ 800 $ — $ — 

Changes in accrued liabilities related to 

acquisitions $ 1,030 $ — $ — 

Discontinued Operations: 

Year 2009. The net cash provided by operating activities primarily relates to a European lease and service operation and is due 

to its operating activities for the year. 

Year 2008. The net cash provided by operating activities relates to the Company’s Australian Courier Business and a European 

lease and service operation and is due to its operating activities for the year. 

- 83 -

Year 2007. The net cash provided by operating activities for the year ended December 31, 2007 relates to the U.K. Lease 

Business and is primarily due to reimbursements of previously paid commissions paid to the Company in the first quarter of 2007 for 

those leases not reaching full lease term. The net cash provided by operating activities also relates to the Company’s Australian 

Courier Business and is due to its operating activities for the year. 

24. Interim Financial Results (Unaudited) 

The following tables set forth certain unaudited consolidated financial information for each of the four quarters in the years 

ended December 31, 2009 and 2008. In management's opinion, this unaudited quarterly information has been prepared on the same 

basis as the audited consolidated financial statements and includes all necessary adjustments, consisting only of normal recurring 

adjustments that management considers necessary for a fair presentation of the unaudited quarterly results when read in conjunction 

with the Consolidated Financial Statements and Notes. The results for each of the quarters have been adjusted to reflect the European 

lease and service operation as a discontinued operation. See Note 6 for additional discussion. The Company believes that quarter-toquarter 

comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of future 

performance (dollars in thousands, except per share data). 

First Second Third Fourth Fiscal 

Quarter Quarter (A) Quarter Quarter Year 

2009: 

Net revenue $ 82,794 $ 105,575 $ 101,161 $ 117,373 $ 406,903 

Gross profit 


$ 24,241 $ 34,214 $ 33,218 $ 36,761 $ 128,434 

discontinued operations 


$ (9,854 ) $ 2,003 $ 761 $ 1,146 $ (5,944 ) 

discontinued operations (71 ) (748 ) 417 (522 ) (924 ) 

Net income (loss) $ (9,925 ) $ 1,255 $ 1,178 $ 624 $ (6,868 ) 

Basic income (loss) 

per share: 

Continuing operations $ (0.18 ) $ 0.04 $ 0.01 $ 0.02 $ (0.11 ) 

Discontinued operations (0.01 ) (0.02 ) 0.01 (0.01 ) (0.02 ) 

Net income (loss) $ (0.19 ) $ 0.02 $ 0.02 $ 0.01 $ (0.13 ) 

Diluted income (loss) 

per share: 

Continuing operations $ (0.18 ) $ 0.04 $ 0.01 $ 0.02 $ (0.11 ) 

Discontinued operations (0.01 ) (0.02 ) 0.01 (0.01 ) (0.02 ) 

Net income (loss) $ (0.19 ) $ 0.02 $ 0.02 $ 0.01 $ (0.13 ) 

- 84 -


Quarter Quarter (B) Quarter Quarter (C) Year 

2008: 

Net revenue $ 70,505 $ 123,168 $ 120,056 $ 120,513 $ 434,242 

Gross profit 


$ 19,560 $ 33,560 $ 38,456 $ 32,233 $ 123,809 



$ (607 ) $ (10,824 ) $ 632 $ (74,110 ) $ (84,909 ) 

discontinued operations 275 (71 ) (7 ) (691 ) (494 ) 

Net income (loss) $ (332 ) $ (10,895 ) $ 625 $ (74,801 ) $ (85,403 ) 


per share: 

Continuing operations $ (0.01 ) $ (0.20 ) $ 0.01 $ (1.39 ) $ (1.59 ) 

Discontinued operations — — — (0.01 ) (0.01 ) 

Net income (loss) $ (0.01 ) $ (0.20 ) $ 0.01 $ (1.40 ) $ (1.60 ) 


per share: 

Continuing operations $ (0.01 ) $ (0.20 ) $ 0.01 $ (1.39 ) $ (1.59 ) 

Discontinued operations — — — (0.01 ) (0.01 ) 

Net income (loss) $ (0.01 ) $ (0.20 ) $ 0.01 $ (1.40 ) $ (1.60 ) 


Quarter Quarter (C) Quarter Quarter Year 

2007: 

Net revenue $ 64,205 $ 66,269 $ 69,552 $ 89,501 $ 289,527 

Gross profit 


$ 20,614 $ 8,467 $ 21,029 $ 24,569 $ 74,679 



$ (3,290 ) $ (5,884 ) $ 254 $ (180 ) $ (9,100 ) 

discontinued operations 765 141 275 442 1,623 

Net income (loss) $ (2,525 ) $ (5,743 ) $ 529 $ 262 $ (7,477 ) 


per share: 

Continuing operations $ (0.06 ) $ (0.11 ) $ 0.01 $ — $ (0.17 ) 

Discontinued operations 0.01 — — — 0.03 

Net income (loss) $ (0.05 ) $ (0.11 ) $ 0.01 $ — $ (0.14 ) 


per share: 

Continuing operations $ (0.06 ) $ (0.11 ) $ 0.01 $ — $ (0.17 ) 

Discontinued operations 0.01 — — — 0.03 

Net income (loss) $ (0.05 ) $ (0.11 ) $ 0.01 $ — $ (0.14 ) 

- 85 -


Quarter Quarter (B) Quarter Quarter (C) Year 

2006: 

Net revenue $ 60,969 $ 66,144 $ 56,669 $ 64,783 $ 248,565 

Gross profit 


$ 23,519 $ 27,394 $ 18,922 $ 19,190 $ 89,025 



$ 2,789 $ 4,210 $ 473 $ (2,735 ) $ 4,737 

discontinued operations 349 2,018 (127 ) (7 ) 2,233 

Net income (loss) $ 3,138 $ 6,228 $ 346 $ (2,742 ) $ 6,970 


per share: 

Continuing operations $ 0.05 $ 0.08 $ 0.01 $ (0.05 ) $ 0.09 

Discontinued operations 0.01 0.04 0.01 — 0.04 

Net income (loss) $ 0.06 $ 0.12 $ 0.01 $ (0.05 ) $ 0.13 


per share: 

Continuing operations $ 0.05 $ 0.08 $ 0.01 $ (0.05 ) $ 0.09 

Discontinued operations 0.01 0.03 0.01 — 0.04 

Net income (loss) $ 0.06 $ 0.11 $ 0.02 $ (0.05 ) $ 0.13 

(A) The first quarter was negatively impacted by a global economic downturn and the corresponding decrease in available credit 

to both businesses and consumers. 

(B) On April 1, 2008, the Company acquired all the outstanding shares in Thales e-Transaction. Revenue from the acquired 

entities was $49.1 million for the second quarter of 2008. 

(C) During the fourth quarter of 2008, the Company recorded $67.8 million non-cash write-downs of goodwill and intangible 

assets related to the various acquisitions. 

- 86 -

EXHIBIT INDEX 

Exhibit 

Number Description of Exhibit and Method of Filing 

3.1 — Amended and Restated Certificate of Incorporation of Hypercom Corporation (incorporated by reference to Exhibit 

3.1 to Hypercom Corporation’s Registration Statement on Form S-1 (Registration No. 333-35461) filed on September 

12, 1997) 

3.2 — Second Amended and Restated Bylaws of Hypercom Corporation (incorporated by reference to Exhibit 3.1 to 

Hypercom Corporation’s Current Report on Form 8-K filed on November 6, 2006) 

4.1 — Amended and Restated Certificate of Incorporation of Hypercom Corporation (incorporated by reference to Exhibit 

3.1 to Hypercom Corporation’s Registration Statement on Form S-1 (Registration No. 333-35461) filed on September 

12, 1997) 

10.1 — Hypercom Corporation Long-Term Incentive Plan (incorporated by reference to Exhibit 4.3 to Hypercom 

Corporation’s Registration Statement on Form S-8 (Registration No. 333-67440) filed on August 14, 2001)*** 

10.2 — Amended and Restated Hypercom Corporation 1997 Employee Stock Purchase Plan (incorporated by reference to 

Exhibit 10.1 to Hypercom Corporation’s Quarterly Report on Form 10-Q filed on May 10, 2004)*** 

10.3 — Hypercom Corporation 2000 Broad-Based Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to 

Hypercom Corporation’s Registration Statement on Form S-8 (Registration No. 333-97181) filed on July 26, 2002)*** 

10.4 — Hypercom Corporation Nonemployee Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.1 to 

Hypercom Corporation’s Registration Statement on Form S-8 (Registration No. 333-97179) filed on July 26, 2002)*** 

10.5 — Amendment to the Hypercom Corporation Nonemployee Directors’ Stock Option Plan (Incorporated by reference to 

Appendix I of the Company’s Definitive Proxy Statement on Schedule 14A filed on April 17, 2006)*** 

10.6 — Hypercom Corporation 2008 Employee Stock Purchase Plan (incorporated by reference to Appendix A to Hypercom 

Corporation’s Definitive Proxy Statement on Schedule 14A filed on April 30, 2008)*** 

10.7 — First Amendment to the Hypercom Corporation Long-Term Incentive Plan (effective January 1, 2009) (incorporated 

by reference to Exhibit 10.7 to Hypercom Corporation’s Annual Report on Form 10-K filed on March 16, 2009)*** 

10.8 — First Amendment to the Hypercom Corporation 2000 Broad-Based Stock Incentive Plan (effective January 1, 2009) 

(incorporated by reference to Exhibit 10.8 to Hypercom Corporation’s Annual Report on Form 10-K filed on March 

16, 2009)*** 

10.9 — Second Amendment to the Hypercom Corporation Nonemployee Directors’ Stock Option Plan (effective January 1, 

2009) (incorporated by reference to Exhibit 10.9 to Hypercom Corporation’s Annual Report on Form 10-K filed on 

March 16, 2009)*** 

10.10 — Credit Agreement dated January 31, 2005, by and between Hypercom Corporation and Wells Fargo N.A. 

(incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on February 

3, 2005) 

10.11 — First Amendment dated February 15, 2005, to the Credit Agreement dated January 31, 2005, by and between 

Hypercom Corporation and Wells Fargo N.A. (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s 

Quarterly Report on Form 10-Q filed on August 9, 2005) 

10.12 — Second Amendment dated March 15, 2006, to the Credit Agreement dated January 31, 2005, by and between 

Hypercom Corporation and Wells Fargo N.A. (incorporated by reference to Exhibit 10.12 to Hypercom Corporation’s 

Annual Report on Form 10-K filed on March 16, 2006) 

10.13 — Employment Agreement, effective January 16, 2007, between Philippe Tartavull and Hypercom Corporation 

(incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on January 

17, 2007)*** 

- 87 -

Exhibit 


10.14 — Amendment to Employment Agreement, dated July 11, 2007, by and between Hypercom Corporation and Philippe 

Tartavull (incorporated by reference to Exhibit 10.3 to Hypercom Corporation’s Current Report on Form 8-K filed on 

July 13, 2007)*** 

10.15 — Contract Manufacturing Agreement, dated as of December 7, 2007, between Hypercom Manufacturing Resources, 

Inc. and Venture Corporation (Singapore) LTD (incorporated by reference to Exhibit 10.20 to Hypercom 

Corporation’s Annual Report on Form 10-K filed on March 14, 2008)† 

10.16 — Amendment to Employment Agreement, dated December 20, 2007, by and between Hypercom Corporation and 

Philippe Tartavull (incorporated by reference to Exhibit 10.4 to Hypercom Corporation’s Current Report on Form 8- 

K filed on December 20, 2007)*** 

10.17 — Employment Agreement, dated December 26, 2007, by and between Norman Stout and Hypercom Corporation 

(incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on 

December 31, 2007)*** 

10.18 — Loan and Security Agreement, dated as of January 15, 2008, among Hypercom U.S.A., Inc. and Hypercom 

Manufacturing Resources, Inc., as Borrowers, Certain Financial Institutions, as Lenders, and Bank of America, N.A., 

as Agent (incorporated by reference to Exhibit 10.2 to Hypercom Corporation’s Current Report on Form 8-K/A filed 

on January 22, 2008) 

10.19 — First Amendment to Loan and Security Agreement and Limited Consent, dated as of February 10, 2010, among 

Hypercom U.S.A., Inc. and Hypercom Manufacturing Resources, Inc., as Borrowers, Certain Financial Institutions, 

as Lenders, and Bank of America, N.A., as Agent* 

10.20 — Share Purchase Agreement, dated as of February 13, 2008, by and among Thales SA, Thales Holding GmbH, Thales 

UK Limited, and Hypercom Corporation (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s 

Current Report on Form 8-K filed on February 14, 2008) 

10.21 — Indemnification Agreement, dated as of February 13, 2008, by and between Francisco Partners II, L.P. and Hypercom 

Corporation (incorporated by reference to Exhibit 10.2 to Hypercom Corporation’s Current Report on Form 8-K filed 

on February 14, 2008) 

10.22 — Credit Agreement, dated as of February 13, 2008, by and between Hypercom Corporation and Francisco Partners II, 

L.P. (incorporated by reference to Exhibit 10.3 to Hypercom Corporation’s Current Report on Form 8-K filed on 

February 14, 2008) 

10.23 — Amendment to the Share Purchase Agreement (Amendment Nº1), dated as of April 1, 2008, by and between Thales 

SA, Thales Holding GmbH, Thales UK Limited, and Hypercom Corporation (incorporated by reference to Exhibit 

10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on April 2, 2008, as amended by the Current 

Report on Form 8-K/A filed on June 16, 2008) 

10.24 — Employment Contract, dated March 31, 2008, by and between Thales e-Transactions SA and Henry Gaillard 

(incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on July 11, 

2008)*** 

10.25 — Amendment to Employment Agreement, dated October 23, 2008, by and between Hypercom Corporation and 

Philippe Tartavull (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8- 

K filed on October 28, 2008)*** 


Norman Stout (incorporated by reference to Exhibit 10.25 to Hypercom Corporation’s Annual Report on Form 10-K 

filed on March 16, 2009)*** 


Philippe Tartavull (incorporated by reference to Exhibit 10.26 to Hypercom Corporation’s Annual Report on Form 

10-K filed on March 16, 2009)*** 

- 88 -

Exhibit 


10.28 — Offer Letter dated March 24, 2009 by and between Hypercom Corporation and Thomas B. Sabol (incorporated by 

reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K filed on March 30, 2009)*** 

10.29 — Amendment No. 2 to Employment Agreement, dated April 29, 2009, by and between Hypercom Corporation and 

Norman Stout (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K 

filed on April 30, 2009)*** 

10.30 — Separation Agreement and General Release, dated May 19, 2009, by and between Hypercom Corporation and Robert 

M. Vreeland (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current Report on Form 8-K 

filed on May 22, 2009)*** 

10.31 — Employment Contract, dated July 2, 2009, by and between Hypercom France SARL and Henry Gaillard 

(incorporated by reference to Exhibit 10.3 to Hypercom Corporation’s Current Report on Form 10-Q filed on August 

7, 2009)*** 

10.32 — Change of Control Agreement, dated August 6, 2009, by and between Hypercom Corporation and Shawn Rathje 

(incorporated by reference to Exhibit 10.4 to Hypercom Corporation’s Current Report on Form 10-Q filed on August 

7, 2009)*** 

10.33 — Amended and Restated Employment Agreement, dated as of December 30, 2009, by and between Hypercom 

Corporation and Philippe Tartavull (incorporated by reference to Exhibit 10.1 to Hypercom Corporation’s Current 

Report on Form 8-K filed on January 5, 2010)*** 

21.1 — List of Subsidiaries (incorporated by reference to Exhibit 21.1 to Hypercom Corporation’s Annual Report on Form 10- 

K filed on March 16, 2009) 

23.1 — Consent of Independent Registered Public Accounting Firm* 

24.1 — Powers of Attorney* 

31.1 — Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 

31.2 — Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 

32 — Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 

pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** 

* Filed herewith. 

** Furnished herewith. 

*** Management or compensatory plan or agreement. 

† Certain Confidential Information contained in this Exhibit was omitted by means of redacting a portion of the text and 

replacing it with an asterisk. This Exhibit has been filed separately with the Secretary of the Securities and Exchange 

Commission without the redaction pursuant to Confidential Treatment Request under Rule 24b-2 of the Securities Exchange 

Act of 1934, as amended. 

- 89 -

I, Philippe Tartavull, certify that: 

CERTIFICATION 

1. I have reviewed this annual report on Form 10-K of Hypercom Corporation; 

EXHIBIT 31.1 

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 

statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 

condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 

Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant 

and we have: 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to 

ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those 

entities, particularly during the period in which this report is being prepared; 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 

supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external 

purposes in accordance with generally accepted accounting principles; 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the 

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent 

fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 

registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably 

likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control 

over financial reporting. 

Date: March 12, 2010 

/s/ Philippe Tartavull 


Chief Executive Officer and President

I, Thomas B. Sabol, certify that: 

CERTIFICATION 

1. I have reviewed this annual report on Form 10-K of Hypercom Corporation; 

EXHIBIT 31.2 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 

statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 

condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 

Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant 

and we have: 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to 

ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those 

entities, particularly during the period in which this report is being prepared; 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 

supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external 

purposes in accordance with generally accepted accounting principles; 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the 

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent 

fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 

registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably 

likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control 

over financial reporting. 

Date: March 12, 2010 

/s/ Thomas B. Sabol 


Chief Financial Officer

Certification Pursuant to 

18 U.S.C. Section 1350, 

as Adopted Pursuant to 

Section 906 of the Sarbanes-Oxley Act of 2002 

EXHIBIT 32 

This certification is not deemed filed pursuant to the Securities Exchange Act of 1934, as amended, and does not constitute a part of 

the Annual Report of Hypercom Corporation (the “Company”) on Form 10-K for the period ending December 31, 2009, as filed with 

the Securities and Exchange Commission on the date hereof (the “Report”). 

In connection with the Report, we, Philippe Tartavull, as Chief Executive Officer of the Company, and Thomas B. Sabol, as Chief 

Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley 

Act of 2002, to the best of his knowledge, respectively, that: 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of 

the Company. 

Dated: March 12, 2010 By: /s/ Philippe Tartavull 


Chief Executive Officer 

Dated: March 12, 2010 By: /s/ Thomas B. Sabol 


Chief Financial Officer

(This Page Left Blank Intentionally)

NOTES 

ANNUAL REPORT 2009

NOTES 

HYPERCOM CORPORATION

NOTES 

ANNUAL REPORT 2009

Xi. 

StoCk perFormanCe Chart 

The following graph illustrates a comparison of the cumulative total stockholder return (change in stock price plus reinvested dividends) of (i) our common 

stock, (ii) the Nasdaq Stock Market (U.S. & Foreign), and (iii) a selected peer group index, from December 31, 2004 through December 31, 2009 (the last 

trading day of the end of our fiscal year). The peer group was selected on an industry basis and includes: 


• Diebold, Incorporated • Ingenico SA 

• Micros Systems, Inc. • NCR Corporation 

• Radiant Systems, Inc. • VeriFone Holdings, Inc. 

The graph assumes that $100 was invested on December 31, 2004, in our common stock and in each of the comparison indices, and assumes all dividends 

paid were reinvested. The comparisons in the graph are required by the SEC and are not intended to forecast or be indicative of possible future performance 

of our common stock. This stock performance graph does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference 

into any other Hypercom filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that 

Hypercom specifically incorporates it by reference therein.

oard oF direCtorS 

Norman Stout 

Chairman of the Board, Hypercom Corporation 

Daniel D. Diethelm, Lead Director 

President of 4Group, LLC, and Managing Partner of 

Sudan Funding, LLC 

Chair, Hypercom Audit Committee 

Hypercom Nominating & Corporate Governance Committee 

Johann J. Dreyer 

President and Chief Executive Officer, S1 Corporation 

Hypercom Compensation Committee 

Keith B. Geeslin 

Partner, Francisco Partners 

Ian K. Marsh 

Director of Fexco Holdings Ltd. and Chairman of 

The Gilman Group 

Hypercom Audit Committee 

Chair, Hypercom Compensation Committee 

Phillip J. Riese 

President, Riese & Others 

Hypercom Audit Committee 

Hypercom Compensation Committee 

Chair, Hypercom Nominating & Corporate 

Governance Committee 


Chief Executive Officer and President, Hypercom Corporation 

CertiFiCationS 

We have filed the required certifications under Section 302 of the 

Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 to our annual 

report on Form 10-K for the fiscal year ended December 31, 2009. 

After our 2010 Annual Meeting of Stockholders, we intend to file 

with the New York Stock Exchange (NYSE) the CEO certification regarding 

our compliance with the NYSE’s corporate governance listing 

standards as required by NYSE rule 303A.12. Last year, we filed this 

certification with the NYSE in July 2009. 

Xii. 

Company inFormation 

annuaL meeting 

The Annual Meeting of Stockholders will be held on 

June 10, 2010 beginning at 9:00 a.m., Scottsdale time, at: 

hypercom Corporation headquarters: 

8888 East Raintree Drive, Suite 300, Scottsdale, AZ 85260, USA 

tel: +1.480.642.5000, Fax: +1.480.642.4655 

StoCkhoLder inFormation 

For additional investor information, please direct your request to: 

Scott m. tsujita, Senior Vice President of Finance, 

Treasury and Investor Relations 

8888 East Raintree Drive, Suite 300, Scottsdale, AZ 85260, USA 

email: stsujita@hypercom.com 

tel: +1.480.642.5000, Fax: +1.480.642.4655 

tranSFer agent and regiStrar 

Transfer Agent and Registrar 

Computershare Investor Services, LLC 

350 Indiana St., Suite 800, Golden, CO 80401, USA 

tel: +1.303.262.0600 

independent auditorS 

Ernst & Young LLP 

One Renaissance Sq., Suite 2300, 

Two North Central Ave., Phoenix, AZ 85004, USA 

tel: +1.602.322.3000 

outSide LegaL CounSeL 

DLA Piper LLP (US) 

2525 East Camelback Road, Suite 1000, Phoenix, AZ 

85016-4232, USA 

tel: +1.480.606.5100 

SeCuritieS LiSting 

Hypercom Corporation’s Common Stock is traded on the nySe 

under the symbol hyC. 

dividend poLiCy 

We currently do not intend to pay any dividends on our 

common stock. While we may declare dividends at some point 

in the future, we cannot assure you that you will ever receive 

cash dividends as a result of ownership of our common stock 

and any gains from investment in our common stock may only 

come from increases in our stock prices, if any. 

annuaL report 2009

World Headquarters: 

hypercom Corporation | 8888 east raintree drive Suite 300, Scottsdale, aZ 85260, uSa 

Tel: +1.480.642.5000 | Fax: +1.480.642.4655 

info@hypercom.com | www.hypercom.com 

© 2010 Hypercom Corporation, all rights reserved. Hypercom is a registered trademark of Hypercom Corporation. 

The Hypercom logo is a trademark of Hypercom Corporation. All other products or services mentioned in this document 

are trademarks, service marks, registered trademarks or registered service marks of their respective owners.

Hypercom Corporation Annual Report - CiteSeer

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