First Data Mulls Card Unit Sale

The company hires Morgan Stanley to explore options for its sagging U.S. card issuing segment.
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First Data

(FDC) - Get Report

said Wednesday it is exploring options for its U.S. credit card issuing unit, which has been dragging down profits.

The Denver-based credit card processor and owner of money-transfer giant Western Union also cut its full-year earnings forecast.

First Data said it hired Morgan Stanley to help explore options for the U.S. portion of the card issuing business. As a whole, First Data's card issuing services segment accounted for 23% of the company's revenue from external customers last year.

"This business continues to dampen the growth rates of the entire company, and maximizing shareholder value over the long term remains our top priority," said Charlie Fote, First Data's chairman and chief executive, in a statement.

Last month, First Data reported an 8%

drop in its third-quarter earnings, hurt in part by a 25% decline in operating profit at the card issuing services division.

Depending on when there may be any actions for the card segment, First Data expects the business to hurt growth rates through the middle of 2006. Besides the card issuing segment, First Data operates two other divisions -- merchant services and payments services, which each are expected to show growth in 2006.

For 2005, First Data sees earnings of $2.14 to $2.16 a share. The forecast is below its October projection of $2.19 to $2.23 a share, including a 13-cent charge. Analysts, on average, predict 2005 earnings of $2.29 a share, according to Thomson First Call.

The company said the new forecast takes into account October segment operating results and delays in certain acquisitions. First Data also noted that final fourth-quarter results will be heavily influenced by consumer spending in the holiday season.

First Data shares recently changed hands at $41.69, down 75 cents, or 1.8%.