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First Data Corp: The Invisible Engine

First Data Corp. calls itself the "invisible engine." That is, every day, millions and millions of people interact with the company -- but do not even realize it.

In fact, the company has a long history, extending more than 125 years ago, when it was a part of Western Union Financial. It was in 1871 that the company sent the first electronic money transfer.

By the 1970s, First Data was the first processor of Visa and MasterCard bank-issued credit cards As of now, the company is a leader in transfers of money for just about any type of transaction. In all, the company moves about $2 trillion every year through its network.

The financials have been growing strongly. In the past quarter, revenues increased 12% to $1.44 billion compared to the same period a year ago. Earnings grew 21% to 58 cents per share. It was the third consecutive quarter of 20% EPS growth. In fact, the company raised its earnings estimates for 2000 and also projects $1 billion in free cash flow for the year. There was also a $1 billion stock buyback.

With its extensive infrastructure, First Data has been able to build innovative Internet products. For example, in October, the company announced the launch of eONE global. It is a separate division focused on developing new technologies for e-commerce and Internet payment systems. Part of this is PayCash, which is a service that allows Net purchases with cash. There is also Money Zap, which is a person-to-person payment system.

Actually, First Data already does processing for about 100,000 Internet merchants through banking alliances. The company services 60 of the top 100 e-commerce merchants.

No doubt, the world is becoming a cashless economy. And First Data will be a critical element. Interestingly enough, the company is selling at an attractive valuation. After all, its PE ratio stands at 15.