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Why Starbucks' Digital Platform Will Be the Model for Retailers

NEW YORK (TheStreet) - There was no shortage of news coming from Starbucks (SBUX - Get Report) earnings conference call on Thursday evening. One of the more interesting nuggets of information was surrounding Starbucks' digital platform.

It's no secret that Starbucks is far ahead in not only the food and beverage industry but retailers in general (with few exceptions) when it comes to mobile and digital payments. So much so that Starbucks CEO Howard Schultz said on Thursday that "major tech companies" and "national retailers" have contacted the coffee chain asking if the company would be "willing to license or white label" its technology and mobile platforms.

While Schultz didn't name names on the call, it's clear the company is considering it. Schultz said this area of revenue could ultimately prove to be a "very significant" additional drive of shareholder value, and that more information about their mobile and digital efforts would be coming in the months and quarters ahead.

The Starbucks CEO elaborated on the company's position during the conference call's question and answer session. When an analyst asked what the potential risks would be to Starbucks if they went through with a licensing program, Schultz said the more important question is "why are [these companies] asking us to do this?"

Schultz reiterated in the call that approximately 14% of Starbucks' tender sales come from mobile payments rising 75% from just one year ago. More than 10 million Starbucks customers are actively using its mobile platform. "Most national retailers did not invest ahead of the growth curve ... to execute this and to fully understand it," he said, adding that technology companies don't have the consumer interface to execute a platform. "We are in a very unique position. ... We strongly believe there is an opportunity to create a monetization" that will complement its business.

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"We have not made a decision as to what we will do, but I can share with you we are actively pursing a number of conversations," he said. "We are in the sweet spot to take advantage" of the situation.

As part of its investor day in March, the company announced an updated version of its Apple (AAPL) iPhone app, which included the ability for customers to tip their baristas digitally if they so chose to do. More than 25% of all transactions are made by its loyalty members through My Starbucks Rewards, the company said in the March press release highlighting key points from the investor day.

The Seattle-based company said after the markets closed on Thursday that quarterly net income attributable to Starbucks rose 9.4% to $427 million, or 56 cents a share, for the March 30-ending quarter. That number excluded a 3-cent non-routine gain in 2013 related to the sale of the company's equity in its Mexico joint venture. Starbucks had guided in its first-quarter earnings for the second quarter EPS to be in the range of 54 to 55 cents a share.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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