##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    July 31, 2008Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    to   Commission file number:
    001-32465
  VERIFONE
    HOLDINGS, INC. (Exact
    name of registrant as specified in its charter)
   Delaware

04-3692546(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)    2099
    Gateway Place, Suite 600
    San Jose, CA 95110 (Address
    of principal executive offices with zip code)
  (408) 232-7800
 (Registrants telephone
    number, including area code)
  N/A (Former
    name, former address and former fiscal year, if changed since
    last report)
   þ o
  Rule 12b-2
  Large accelerated filer
    þ

Accelerated filer
    o

Non-accelerated filer
    o

Smaller reporting company
    o(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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##### 



VERIFONE
    HOLDINGS, INC.
  TABLE OF CONTENTS
  INDEX
   
 PART I  FINANCIAL
    INFORMATIONItem 1


Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of
    July 31, 2008 and October 31, 2007


1Condensed Consolidated Statements of Operations
    for the Three and Nine Months Ended July 31, 2008 and
    2007


2Condensed Consolidated Statements of Cash Flows
    for the Nine Months Ended July 31, 2008 and 2007


3Notes to Condensed Consolidated Financial
    Statements


4Item 2


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 3


Quantitative and Qualitative Disclosures About
    Market Risk


41Item 4


Controls and Procedures


42PART II  OTHER
    INFORMATIONItem 1


Legal Proceedings


44Item 1A


Risk Factors


44Item 2


Unregistered Sales of Equity Securities and Use
    of Proceeds


44Item 3


Defaults Upon Senior Securities


44Item 4


Submission of Matters to a Vote of Security
    Holders


44Item 5


Other Information


44Item 6


Exhibits


44Signatures


45Exhibit Index


46EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.  FINANCIAL
    STATEMENTS



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES



CONDENSED
    CONSOLIDATED BALANCE SHEETS  July 31,


October 31,2008


2007(1)(Unaudited)(In thousands, except par value)ASSETSCurrent assets:Cash and cash equivalents

$
182,014


$
215,001Accounts receivable, net of allowance of $5,342 and $4,270


176,852



194,146Inventories


162,664



107,168Deferred tax assets


20,997



23,854Prepaid expenses and other current assets


69,727



63,413Total current assets


612,254



603,582Property, plant and equipment, net


53,263



48,293Purchased intangible assets, net


126,356



170,073Goodwill


634,928



611,977Deferred tax assets


69,835



67,796Debt issuance costs, net


12,406



12,855Other assets


46,561



32,733Total assets

$
1,555,603


$
1,547,309LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
105,796


$
105,215Income taxes payable


16,463



19,530Accrued compensation


22,887



21,201Accrued warranty


7,330



11,012Deferred revenue, net


54,312



43,049Deferred tax liabilities


6,221



6,154Accrued expenses


11,160



8,755Other current liabilities


101,207



86,465Current portion of long-term debt


5,034



5,386Total current liabilities


330,410



306,767Accrued warranty


1,227



655Deferred revenue, net


11,131



11,274Long-term debt


544,713



547,766Deferred tax liabilities


94,696



87,142Other long-term liabilities


34,081



10,296Total liabilities


1,016,258



963,900Minority interest


2,119



2,487Stockholders equity:Preferred stock: $0.01 par value; 10,000 shares
    authorized at July 31, 2008 and October 31, 2007; zero
    shares issued and outstanding as of July 31, 2008 and
    October 31, 2007






Common stock: $0.01 par value; 100,000 shares
    authorized at July 31, 2008 and October 31, 2007;
    84,194 and 84,060 shares issued and outstanding as of
    July 31, 2008 and October 31, 2007


842



841Additional paid-in capital


650,349



635,404Accumulated deficit


(137,535
)


(77,484
)Accumulated other comprehensive income


23,570



22,161Total stockholders equity


537,226



580,922Total liabilities and stockholders equity

$
1,555,603


$
1,547,309     (1)
    
    Amounts as of October 31, 2007 were derived from the
    October 31, 2007 audited consolidated financial statements.    1




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended July 31,


Nine Months Ended July 31,2008


2007


2008


2007(Unaudited)(In thousands, except per share data)Net revenues:System Solutions

$
228,766


$
205,972


$
588,078


$
586,407Services


29,932



25,729



89,142



78,540Total net revenues


258,698



231,701



677,220



664,947Cost of net revenues:System Solutions


151,698



132,268



403,208



391,510Services


18,577



13,837



54,873



41,572Total cost of net revenues


170,275



146,105



458,081



433,082Gross profit


88,423



85,596



219,139



231,865Operating expenses:Research and development


17,558



15,365



57,179



48,272Sales and marketing


23,540



23,686



70,945



69,549General and administrative


35,863



19,364



93,183



62,306Amortization of purchased intangible assets


6,183



5,416



18,855



16,456In-process research and development














6,650Total operating expenses


83,144



63,831



240,162



203,233Operating income (loss)


5,279



21,765



(21,023
)


28,632Interest expense


(6,447
)


(9,468
)


(21,877
)


(28,731
)Interest income


1,194



2,226



4,677



4,751Other income (expense), net


194



(4,156
)


(6,240
)


(4,419
)Income (loss) before income taxes


220



10,367



(44,463
)


233Provision for income taxes


7,419



52,753



14,221



53,116Net loss

$
(7,199
)

$
(42,386
)

$
(58,684
)

$
(52,883
)Net loss per share:Basic

$
(0.09
)

$
(0.51
)

$
(0.70
)

$
(0.65
)Diluted

$
(0.09
)

$
(0.51
)

$
(0.70
)

$
(0.65
)Weighted average shares used in computing net loss per share:Basic


84,194



82,407



84,181



81,699Diluted


84,194



82,407



84,181



81,699     2




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months EndedJuly 31,2008


2007(Unaudited)(In thousands)Cash flows from operating activities:Net loss

$
(58,684
)

$
(52,883
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Amortization of purchased intangible assets


43,155



44,930Depreciation and amortization of property, plant and equipment


9,894



5,814Amortization of capitalized software development costs


1,142



800In-process research and development






6,650Write-off of capitalized software development costs


2,700



Loss on disposal of property, plant and equipment


375



Amortization of debt issuance costs


1,994



1,129Stock-based compensation


13,159



21,954Non-cash portion of loss on debt extinguishment






4,764Minority interest and equity in earnings of affiliates


(22
)


(86
)Other


37



(81
)Net cash provided by operating activities before changes in
    working capital


13,750



32,991Changes in operating assets and liabilities:Accounts receivable, net


18,306



(28,035
)Inventories


(54,875
)


47,967Deferred tax assets


1,327



(7,161
)Prepaid expenses and other current assets


(7,114
)


(5,852
)Other assets


(15,361
)


(3,709
)Accounts payable


386



19,487Income taxes payable


15,583



39,475Tax benefits from stock-based compensation


(939
)


(6,882
)Accrued compensation


742



(5,147
)Accrued warranty


(3,110
)


(2,640
)Accrued expenses and other liabilities


22,359



(15,432
)Deferred revenues


8,847



10,317Deferred tax liabilities


7,747



9,434Net cash provided by operating activities


7,648



84,813Cash flows from investing activities:Software development costs capitalized


(3,170
)


(4,532
)Purchase of property, plant and equipment


(14,368
)


(20,366
)Purchase of other assets






(500
)Acquisition of businesses, net of cash acquired


(15,366
)


(267,745
)Net cash used in investing activities


(32,904
)


(293,143
)Cash flows from financing activities:Proceeds from long-term debt, net of costs


286



613,252Purchase of convertible note hedge






(80,236
)Sale of warrants






31,188Repayment of long-term debt


(3,750
)


(262,554
)Proceeds from exercise of stock options


1,692



24,539Payment of debt amendment fees


(1,751
)


Tax benefits from stock-based compensation


939



6,882Investment in subsidiary by minority stockholder






1,050Other


(63
)


(17
)Net cash provided by (used in) financing activities


(2,647
)


334,104Effect of foreign exchange rate on cash and cash equivalents


(5,084
)


608Net increase (decrease) in cash and cash equivalents


(32,987
)


126,382Cash and cash equivalents at beginning of period


215,001



86,564Cash and cash equivalents at end of period

$
182,014


$
212,946Supplemental disclosure for cash flow information:Cash paid for interest

$
15,626


$
25,345Cash paid (received) for income taxes

($
1,002
)

$
13,779Supplemental schedule of non-cash transactions:Debt issuance costs withheld from proceeds

$



$
8,333Issuance of common stock and stock options for acquisition

$



$
435,228     3




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note 1.
    Basis of
    Presentation  The
    Company
    Principles
    of Consolidation
    Unaudited
    Interim Financial Statements
  Rule 10-01 Regulation S-X Form 10-Q Form 10-K
  Summary
    of Significant Accounting Policies
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes.
  Form 10-K
 4




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of
    Estimates
    Concentrations
    of Credit Risk
    Recent
    Accounting Pronouncements
  Fair Value Measurements. FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2 FAS 157-2
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities.
  Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51 and/or
  Business Combinations
 5




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or Accounting for Income Taxes
  14-1, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement) 14-1 APB 14-1
  Note 2.
    Balance
    Sheet and Statement of Operations Details  Inventories
    July 31,


October 31,2008


2007Raw materials

$
47,681


$
29,548Work-in-process


6,898



3,849Finished goods


108,085



73,771$
162,664


$
107,168   Prepaid
    Expenses and Other Current Assets
    July 31,


October 31,2008


2007Prepaid taxes

$
47,273


$
38,390Prepaid expenses


12,476



15,266Other receivables


5,661



7,827Other current assets


4,317



1,930$
69,727


$
63,413    6




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchased
    Intangible Assets, net
    July 31, 2008


October 31, 2007Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingValue


Amortization


Value


Value


Amortization


ValueDeveloped technology

$
172,325


$
(89,363
)

$
82,962


$
172,564


$
(64,981
)

$
107,583Core technology


14,442



(14,442
)






14,442



(14,442
)


Trade name


22,225



(22,225
)






22,225



(22,225
)


Internal use software


4,373



(1,461
)


2,912



4,485



(853
)


3,632Customer relationships


90,821



(50,339
)


40,482



91,023



(32,165
)


58,858$
304,186


$
(177,830
)

$
126,356


$
304,739


$
(134,666
)

$
170,073     Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007Included in cost of net revenues

$
8,001


$
9,278


$
24,300


$
28,474Included in operating expenses


6,183



5,416



18,855



16,456$
14,184


$
14,694


$
43,155


$
44,930     Cost of Net


OperatingFiscal Year

Revenues


Expenses


Total2008 (remaining 3 months)

$
7,770


$
6,573


$
14,3432009


31,759



20,597



52,3562010


24,796



12,137



36,9332011


15,034



3,332



18,3662012


2,614



462



3,076Thereafter


988



294



1,282Total

$
82,961


$
43,395


$
126,356   Goodwill
    Nine MonthsEnded


Year EndedJuly 31,


October 31,2008


2007Balance at beginning of period

$
611,977


$
52,689Additions related to acquisitions


16,158



540,043Resolution of tax contingencies and adjustments to tax reserves
    and valuation allowance established in purchase accounting


1,504



(5,229
)Currency translation adjustments


5,289



24,474Balance at end of period

$
634,928


$
611,977  7




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accrued
    Warranty
    Nine MonthsEnded


Year EndedJuly 31,


October 31,2008


2007Balance at beginning of period

$
11,667


$
5,432Warranty charged to cost of net revenues


4,658



3,664Utilization of warranty


(9,404
)


(13,089
)Change in estimates


1,587



4,768Warranty liabilities assumed in acquisitions


49



10,892Balance at end of period


8,557



11,667Less current portion


(7,330
)


(11,012
)Long-term portion

$
1,227


$
655   Deferred
    Revenue, net
    July 31,


October 31,2008


2007Deferred revenue

$
75,909


$
58,992Deferred cost of revenue


(10,466
)


(4,669
)65,443



54,323Less current portion


(54,312
)


(43,049
)Long-term portion

$
11,131


$
11,274   Other
    Current Liabilities
    July 31,


October 31,2008


2007Other tax liabilities(1)

$
46,899


$
39,310Accrued interest


2,967



2,620Accounts payable related accrual


18,841



16,246Accrued legal and audit fees


9,562



4,693Other


22,938



23,596Total other current liabilities

$
101,207


$
86,465     (1)
    
    Two of the Companys Brazilian subsidiaries that were
    acquired as part of the Lipman acquisition have been notified of
    assessments regarding Brazilian customs penalties and interest
    that relate to alleged infractions in the importation of goods.
    The Company has accrued $23.2 million as of July 31,
    2008 and $19.4 million as of October 31, 2007 related
    to these assessments. See Note 10, Commitments and
    Contingencies, for additional information related to these
    tax assessments. 8




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Other
    Income (Expense), net
    Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007Foreign currency transaction gains (losses), net

$
428


$
1,213


$
(5,430
)

$
3,106Foreign currency contract losses, net


(883
)


(914
)


(1,664
)


(2,929
)Loss on debt extinguishment






(4,764
)






(4,764
)Other, net


649



309



854



168$
194


$
(4,156
)

$
(6,240
)

$
(4,419
)   Note 3.
    Financings    July 31,


October 31,2008


2007Term B Loan

$
232,500


$
236,250Senior convertible notes


316,250



316,250Capital lease and other notes payable


997



652Total


549,747



553,152Less current portion


(5,034
)


(5,386
)Long-term portion

$
544,713


$
547,766   Secured
    Credit Facility
           9




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        1.375% Senior
    Convertible Notes
     10




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  business-day trading-day trading-day
        Form 10-K
 11




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          No. 00-19 (EITF 00-19), Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Companys Own Stock
  Earnings per
    Share,
 12




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 4.  Comprehensive
    Income (Loss)
    Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007Net loss

$
(7,199
)

$
(42,386
)

$
(58,684
)

$
(52,883
)Other comprehensive income (loss):Foreign currency translation adjustments


3,126



3.345



1,372



13,608Unrealized gain (loss) on interest rate hedge, net of tax


18



4



37



(19
)Comprehensive income (loss)

$
(4,055
)

$
(39,037
)

$
(57,275
)

$
(39,294
)     July 31,


October 31,2008


2007Foreign currency translation adjustments

$
23,596


$
22,224Unrecorded loss on interest rate hedges


(26
)


(63
)Accumulated other comprehensive income

$
23,570


$
22,161   Note 5.
    Stockholders
    Equity  Form 10-K
  Stock-Based
    Compensation
  Share-Based
    Payment
  Three Months EndedJuly 31,


Nine Months Ended July 31,2008


2007


2008


2007Cost of net revenues

$
455


$
570


$
1,003


$
2,417Sales and marketing


1,290



1,443



3,516



4,342Research and development


1,536



1,974



4,856



5,486General and administrative


1,378



1,872



3,784



9,709Total stock-based compensation

$
4,659


$
5,859


$
13,159


$
21,954  13




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Valuation
    Assumptions
  Share-Based
    Payment
  Three Months


Nine MonthsEnded


EndedJuly 31,


July 31,2008


2007


2008


2007Expected term of the options (in years)


N/A



2.0



3.0



2.1Risk-free interest rate


N/A



4.8
%


2.9
%


4.8
%Expected stock price volatility


N/A



39.8
%


40.6
%


39.8
%Expected dividend rate


N/A



0.0
%


0.0
%


0.0
%               Performance
    Restricted Stock Units for the Companys CEO
      Form 10-K
 14




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Equity
    Award Activity
    WeightedWeighted


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual


IntrinsicShares


Price


Term


Value(In years)


(In thousands)Balance at November 1, 2007


8,331,637


$
27.10Granted


22,500



19.81Exercised


(104,575
)


8.84Cancelled


(704,874
)


29.51Balance at July 31, 2008


7,544,688


$
27.11



4.9


$
9,417Vested or expected to vest at July 31, 2008


7,172,815


$
26.86



4.9


$
9,291Exercisable at July 31, 2008


3,588,478


$
24.47



4.5


$
6,110     AggregateNumber of


IntrinsicShares


Value(In thousands)Balance at November 1, 2007


749,750Granted


7,500Vested


(7,500
)Cancelled


Balance at July 31, 2008


749,750


$
2,240Vested or expected to vest at July 31, 2008


642,174


$
1,457      15




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 6.
    Net
    Income (Loss) Per Share      Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007Basic and diluted net loss per share:Numerator:Net loss

$
(7,199
)

$
(42,386
)

$
(58,684
)

$
(52,883
)Denominator:Weighted-average common shares outstanding


84,194



83,078



84,181



82,589Less: Weighted-average shares subject to repurchase






(671
)






(890
)Weighted-average shares used in computing basic net loss per
    share


84,194



82,407



84,181



81,699Add dilutive securities:Weighted-average shares subjects to repurchase














Stock options and restricted stock units














Weighted-average shares used in computing diluted net loss per
    share


84,194



82,407



84,181



81,699Net loss per share:Basic

$
(0.09
)

$
(0.51
)

$
(0.70
)

$
(0.65
)Diluted

$
(0.09
)

$
(0.51
)

$
(0.70
)

$
(0.65
)     No. 90-19, Convertible Bonds with Issuer Option to Settle for Cash upon
    Conversion (EITF 90-19); EITF 90-19.
 16




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 7.
    Segment
    and Geographic Information  Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
    step-up over-and-under
    Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007Net revenues:International

$
161,197


$
128,391


$
412,303


$
379,136North America


97,783



103,961



265,790



288,899Corporate


(282
)


(651
)


(873
)


(3,088
)Total net revenues

$
258,698


$
231,701


$
677,220


$
664,947Operating income (loss):International

$
31,745


$
28,789


$
67,472


$
90,615North America


36,755



43,148



95,688



113,974Corporate


(63,221
)


(50,172
)


(184,183
)


(175,957
)Total operating income (loss)

$
5,279


$
21,765


$
(21,023
)

$
28,632  17




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    July 31,


October 31,2008


2007International

$
25,262


$
24,271North America


30,253



26,549Total

$
55,515


$
50,820     July 31,


October 31,2008


2007International

$
565,122


$
542,186North America


69,806



69,791Total

$
634,928


$
611,977     July 31,


October 31,2008


2007International

$
1,126,865


$
1,122,411North America


428,738



424,898Total

$
1,555,603


$
1,547,309     Three Months Ended


Nine Months EndedJuly 31,


July 31,2008


2007


2008


2007International

$
1,603


$
1,258


$
4,824


$
3,639North America


1,924



792



5,070



2,175Total

$
3,527


$
2,050


$
9,894


$
5,814   Geographic
    Information
    Three Months Ended July 31,


Nine Months Ended July 31,2008


2007


2008


2007Europe

$
80,930


$
69,912


$
214,482


$
209,875Latin America


60,401



42,673



145,668



124,841Asia


19,866



15,806



52,153



44,420United States


84,163



92,513



236,098



257,569Canada


13,338



10,797



28,819



28,242Total revenues

$
258,698


$
231,701


$
677,220


$
664,947    18




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    July 31,


October 31,2008


2007North America

$
30,254


$
26,549Europe


20,029



20,694Latin America


2,144



2,160Asia


3,088



1,417Total

$
55,515


$
50,820   Note 8.
    Business
    Combinations  A.C.
    Application Limited
    Peripheral
    Computer Industries Pty Limited
    Note 9.
    Income
    Taxes   19




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           20




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Commitments
    and Contingencies  Commitments
    Minimum


Sublease


Net MinimumFiscal Year

Lease Payments


Rental Income


Lease Payments2008 (remaining 3 months)

$
2,638


$
34


$
2,6042009


9,016



86



8,9302010


7,726



4



7,7222011


6,093







6,0932012


5,518







5,518Thereafter


12,226







12,226Total

$
43,217


$
124


$
43,093   FASB
    Interpretation No. 48 (FIN 48)
    Liabilities
    Contingencies
  Manufacturing
    Agreements
    Litigation
  Brazilian
    State Tax Assessments
  State
    Value Added Tax
   21




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Importation
    of Goods Assessments
         22




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Patent
    Infringement Lawsuits
  SPA
    Syspatronic AG v. VeriFone Holdings, Inc., VeriFone, Inc.,
    et al.
    Cardsoft,
    Inc. et al v. VeriFone Holdings, Inc., VeriFone, Inc.,
    et al.
    Communication Transaction Solutions, Inc. VeriFone
    Holdings, Inc., VeriFone, Inc., et al.
  pay-at-the-table
  Class Action
    and Derivative Lawsuits
  In re VeriFone
    Holdings, Inc. Securities Litigation C 07-6140 Eichenholtz v. VeriFone
    Holdings, Inc. et al. 07-6140 Lien v. VeriFone Holdings, Inc. et al. 07-6195 Vaughn et al. v. VeriFone Holdings, Inc. et al. 07-6197 Feldman et al. v. VeriFone
    Holdings, Inc. et al. 07-6218 MMC; Cerini v. VeriFone Holdings, Inc. et al. 07-6228 Westend Capital Management LLC v. VeriFone Holdings,
    Inc. et al. 07-6237 MMC; Hill v. VeriFone Holdings, Inc. et al. 07-6238 Offutt v. VeriFone Holdings, Inc. et al. 07-6241 Feitel v. VeriFone Holdings, Inc., et al. 08-0118
 23




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Rule 10b-5
  In re VeriFone Holdings, Inc. Shareholder
    Derivative Litig 07-6347, King v. Bergeron, et al. No. 07-CV-6347), Hilborn v. VeriFone Holdings, Inc., et al (Case No. 08-CV-1132), Patel v. Bergeron, et al No. 08-CV-1133), Lemmond, et al. v. VeriFone Holdings, Inc., et
    al No. 08-CV-1301); In re VeriFone Holdings, Inc. Derivative Litigation No. 1-07-CV-100980, Catholic Medical Mission Board v.
    Bergeron, et al No. 1-07-CV-100980), Carpel v. Bergeron, et al No. 1-07-CV-101449).
      Regulatory
    Actions
   24




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Litigation
    Note 11.
    Restructuring
    Charges  Accounting for Costs Associated
    with Exit or Disposal Activities
  ,
    Employers Accounting for Postemployment Benefits Accounting for Costs
    Associated with Exit or Disposal Activities
    Three Months Ended


Nine Months EndedJuly 31, 2008


July 31, 2008Cost of net revenues

$
307


$
470Sales and marketing


651



2,987Research and development


262



1,341General and administrative


1,018



1,866$
2,238


$
6,664   Form 10-K
  Note 12.
    Related-Party
    Transactions   25




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##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  This section and other parts of this Quarterly Report on
    Form 10-Q
    contain forward-looking statements that involve risks and
    uncertainties. In some cases, forward-looking statements can be
    identified by words such as anticipates,
    expects, believes, plans,
    predicts, and similar terms. Such forward-looking
    statements are based on current expectations, estimates, and
    projections about our industry, managements beliefs, and
    assumptions made by management. Forward-looking statements are
    not guarantees of future performance and our actual results may
    differ significantly from the results discussed in the
    forward-looking statements. Factors that might cause such
    differences include, but are not limited to, those discussed in
    Part II, Item 1A Risk Factors below and in
    Item 1A of our Annual Report on
    Form 10-K
    for the year ended October 31, 2007 filed with the SEC. The
    following discussion should be read in conjunction with our
    consolidated financial statements and related notes included in
    our 2007 Annual Report on
    Form 10-K
    and the condensed Consolidated Financial Statements and Notes
    thereto included elsewhere in this Quarterly Report on
    Form 10-Q.
    Unless required by law, we expressly disclaim any obligation to
    update publicly any forward-looking statements, whether as
    result of new information, future events, or otherwise.
    Overview
  26-year
     26




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##### Table of Contents



Restatement
         27




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##### Table of Contents



Results
    of Operations
  Net
    Revenues
      Three Months Ended July 31,


Nine Months Ended July 31,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeSystems Solutions

$
228,766


$
205,972


$
22,794



11.1
%

$
588,078


$
586,407


$
1,671



0.3
%Services


29,932



25,729



4,203



16.3
%


89,142



78,540



10,602



13.5
%Total

$
258,698


$
231,701


$
26,997



11.6
%

$
677,220


$
664,947


$
12,273



1.8
%   System
    Solutions
       28




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##### Table of Contents



top-ups,
  Multi-lane,
  Services
    Gross
    Profit
    Three Months Ended July 31,


Nine Months Ended July 31,Amount


Gross Profit Percentage


Amount


Gross Profit Percentage2008


2007


2008


2007


2008


2007


2008


2007Systems Solutions

$
77,068


$
73,704



33.7
%


35.8
%

$
184,870


$
194,897



31.4
%


33.2
%Services


11,355



11,892



37.9
%


46.2
%


34,269



36,968



38.4
%


47.1
%Total

$
88,423


$
85,596



34.2
%


36.9
%

$
219,139


$
231,865



32.4
%


34.9
%     Multi-lane
 29




---



##### Table of Contents



step-up over-and-under
      Multi-lane
      step-up
 30




---



##### Table of Contents



Research
    and Development Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeResearch and development

$
17,558


$
15,365


$
2,193



14.3
%

$
57,179


$
48,272


$
8,907



18.5
%Percentage of net revenues


6.8
%


6.6
%










8.4
%


7.3
%         Sales
    and Marketing Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeSales and marketing

$
23,540


$
23,686


($
146
)


(0.6
)%

$
70,945


$
69,549


$
1,396



2.0
%Percentage of net revenues


9.1
%


10.2
%














10.5
%


10.5
%        31




---



##### Table of Contents



General
    and Administrative Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeGeneral and administrative

$
35,863


$
19,364


$
16,499



85.2
%

$
93,183


$
62,306


$
30,877



49.6
%Percentage of net revenues


13.9
%


8.4
%










13.8
%


9.4
%         Amortization
    of Purchased Intangible Assets
      Interest
    Expense
    14-1, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement)
 32




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##### Table of Contents



14-1
  Interest
    Income
      Other
    Income (Expense), Net
      Provision
    for Income Tax
     33




---



##### Table of Contents



Segment
    Information
  step-up over-and-under
    Three Months Ended July 31,


Nine Months Ended July 31,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeNet revenuesInternational

$
161,197


$
128,391


$
32,806



25.6
%

$
412,303


$
379,136


$
33,167



8.7
%North America


97,783



103,961



(6,178
)


(5.9
)%


265,790



288,899



(23,109
)


(8.0
)%Corporate


(282
)


(651
)


369



56.7
%


(873
)


(3,088
)


2,215



71.7
%Total net revenues

$
258,698


$
231,701


$
26,997



11.7
%

$
677,220


$
664,947


$
12,273



1.8
%Operating income (loss)International

$
31,745


$
28,789


$
2,956



10.3
%

$
67,472


$
90,615


$
(23,143
)


(25.5
)%North American


36,755



43,148



(6,393
)


(14.8
)%


95,688



113,974



(18,286
)


(16.0
)%Corporate


(63,221
)


(50,172
)


(13,049
)


(26.0
)%


(184,183
)


(175,957
)


(8,226
)


(4.7
)%Total operating income (loss)

$
5,279


$
21,765


$
(16,486
)


(75.7
)%

$
(21,023
)

$
28,632


$
(49,655
)


(173.4
)%      34




---



##### Table of Contents



step-up
  Liquidity
    and Capital Resources
  Nine Months Ended July 31,2008


2007Net cash provided by (used for):Operating activities

$
7,648


$
84,813Investing activities


(32,904
)


(293,143
)Financing activities


(2,647
)


334,104Effect of exchange rate fluctuation on cash and cash equivalents


(5,084
)


608Net increase (decrease) in cash and cash equivalents

$
(32,987
)

$
126,382     Operating
    Activities
     35




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##### Table of Contents




    The $54.9 million increase in inventories is due to several
    factors, including sales for certain products, particularly in
    North America that fell short of expectations, strategic
    decisions to increase inventory for certain products to reduce
    the incidence of missed sales opportunities due to insufficient
    quantities on hand, increased inventory of MX Multilane Retail
    products ahead of projected sales potential, and increased use
    of ocean rather then air freight to ship inventory.
    A $15.4 million increase in other assets primarily due to
    the deferral of costs of goods for inventory delivered to
    customers for which net revenues and associated cost of net
    revenues is recognized as the customers are billed.
    A $7.1 million increase in prepaid expenses and other
    current assets due mainly to an increase in prepaid income taxes.    
    A $22.4 million increase in accrued expenses and other
    liabilities due to the investigation and 2007 quarterly
    restatement related costs, professional fees and long-term tax
    reserves on adoption of FIN 48;
    A $18.3 million decrease in accounts receivable due to
    better collections;
    A $15.6 million increase in income taxes payable;
    A $9.1 million decrease in deferred tax balances; and
    A $8.8 million increase in deferred revenue due mainly to
    the deferral of revenue for certain transactions because all
    revenue recognition criteria have not been met.  Investing
    Activities
    Financing
    Activities
      Contractual
    Obligations
    Less Than








More ThanTotal


1 Year


1 to 3 Years


3 to 5 Years


5 YearsTerm B Loan (including interest)(1)

$
297,427


$
17,954


$
35,064


$
33,972


$
210,437Senior convertible notes (including interest)


334,670



5,375



8,697



320,598



Capital lease obligations


121



22



99







Operating leases


43,217



2,638



16,742



11,611



12,226Minimum purchase obligations


89,546



89,546











$
764,981


$
115,535


$
60,602


$
366,181


$
222,663     (1)
    
    Interest in the above table has been calculated using the rate
    in effect at July 31, 2008. 36




---



##### Table of Contents



FASB
    Interpretation No. 48 (FIN 48)
    Liabilities
    Earnings
    before Interest, Taxes, Depreciation and Amortization (EBITDA),
    as adjusted
        
    Provision for (benefit from) income
    taxes.  While income taxes are directly related to
    the amount of pre-tax income, they are also impacted by tax laws
    and the companys tax structure. As the tax laws and our
    tax structure are not under the control of our operational
    managers, management believes that the provision for (benefit
    from) income taxes should be excluded when evaluating our
    operational performance.
    Interest expense and interest income.  While
    working capital supports the business, management does not
    believe that related interest expense or interest income is
    directly attributable to the operating performance of our
    business.
    Depreciation of property, plant and
    equipment.  Management excludes depreciation
    because while tangible assets support the business, management
    does not believe the related depreciation costs are directly
    attributable to the operating performance of our business. In
    addition, depreciation may not be indicative of current or
    future capital expenditures. 37




---



##### Table of Contents




    Amortization of capitalized
    software.  Management excludes amortization of
    capitalized software because while capitalized software supports
    the business, management does not believe the related
    amortization costs are directly attributable to the operating
    performance of our business. In addition, amortization of
    capitalized software may not be indicative of current or future
    expenditures to develop software.
    Amortization of certain acquisition related
    items.  We incur amortization of purchased core
    and developed technology assets, amortization of purchased
    intangible assets, amortization of step-down in deferred revenue
    on acquisition, and amortization of
    step-up in
    inventory on acquisition in connection with acquisitions.
    Management excludes these items because it does not believe
    these expenses are reflective of ongoing operating results in
    the period incurred. These amounts arise from prior acquisitions
    and management does not believe that they have a direct
    correlation to the operation of our business.
    In-process research and development.We incur IPR&D
    expenses when technological feasibility for acquired technology
    has not been established at the date of acquisition and no
    future alternative use for such technology exists. These amounts
    arise from prior acquisitions and management does not believe
    they have a direct correlation to the operation of
    VeriFones business.
    Stock-based compensation.  These expenses
    consist primarily of expenses for employee stock options and
    restricted stock units under SFAS No. 123(R). Management
    excludes stock-based compensation expenses from non-GAAP
    financial measures primarily because they are non-cash expenses
    which management believes are not reflective of ongoing
    operating results.
    Acquisition related charges and restructuring
    costs.  This represents charges incurred for
    consulting services and other professional fees associated with
    acquisition related activities. These expenses also include
    charges related to restructuring activities, including costs
    associated with severance, benefits, and excess facilities. As
    management does not believe that these charges directly relate
    to the operation of our business, management believes they
    should be excluded when evaluating our operating performance.
    Non-cash portion of loss on debt
    extinguishment.  This represents the non-cash
    portion of loss incurred on the extinguishment of our credit
    facility. While this credit facility supported our business,
    management does not believe the related loss on extinguishment
    is a cost directly attributable to the operating performance of
    our business.
    Capitalized software write-off.  This
    represents charges related to the write-off of previously
    incurred and capitalized software development costs due to
    restructuring activities and changes in our market approach in
    certain areas. As management does not believe that these charges
    directly relate to the operation of our business, management
    believes they should be excluded when evaluating our operating
    performance. 38




---



##### Table of Contents



Three Months Ended July 31,


Nine Months Ended July 31,2008(1)


2007


2008(1)


2007U.S. GAAP net loss

$
(7,199
)

$
(42,386
)

$
(58,684
)

$
(52,883
)Provision for income taxes


7,419



52,753



14,221



53,116Interest expense


6,447



9,468



21,877



28,731Interest income


(1,194
)


(2,226
)


(4,677
)


(4,751
)Depreciation and amortization of property, plant and equipment


3,527



2,049



9,894



5,814Amortization of capitalized software


421



230



1,142



800Amortization of purchased intangible assets


14,184



14,694



43,155



44,930Amortization of step-down in deferred revenue on acquisition


282



652



873



3,088Amortization of
    step-up in
    inventory on acquisition














13,961In-process research and development














6,650Stock-based compensation


4,659



5,859



13,159



21,954Acquisition related charges and restructuring costs






2,297







9,714Extinguishment of debt issuance costs






4,764







4,764Capitalized software write-off










2,700



EBITDA as adjusted

$
28,546


$
48,154


$
43,660


$
135,888     (1)
    
    Net loss for the three months ended July 31, 2008 was
    negatively impacted by $15.4 million of costs related to
    the restatement and $2.2 million in restructuring costs.
    None of the $17.6 million has been added back in
    calculating EBITDA. Net loss for the nine months ended
    July 31, 2008 was negatively impacted by $33.5 million
    of costs related to the restatement and $6.7 million in
    restructuring costs. None of the $40.2 million has been
    added back in calculating EBITDA.    Off-Balance
    Sheet Arrangements
  Regulation S-K,
  Recent
    Accounting Pronouncements
  Recent Accounting
    Pronouncements Form 10-Q,
  Critical
    Accounting Policies and Estimates
   39




---



##### Table of Contents



Accounting for Uncertainty in
    Income Taxes
  Income
    Taxes
    non-U.S. net
     40




---



##### Table of Contents



Form 10-K
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rates
  three-month
  Foreign
    Currency Risk
  non-U.S. dollar
    non-U.S. denominated
  Equity
    Price Risk
   41




---



##### Table of Contents



ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
      Form 10-Q.
    
    A transaction-level material weakness in the design and
    operation of control activities, relating to the preparation,
    review, approval and entry of manual, non-standard, journal
    entries. This material weakness contributed to adjustments in
    several accounts and the restatement of the interim condensed
    consolidated financial statements for the quarterly periods
    during the fiscal year ended October 31, 2007. The accounts
    most affected in the restatement included inventory and cost of
    net revenues; however, this material weakness could impact all
    financial statement accounts.
    An entity-level material weakness in the control environment
    related to our period-end financial reporting process due to an
    insufficient number of qualified personnel with the required
    proficiency to apply our accounting policies in accordance with
    U.S. GAAP, following the November 1, 2006 acquisition
    of Lipman Electronic Engineering Ltd. This material
    weakness contributed to adjustments in several accounts and the
    restatement of the interim condensed consolidated financial
    statements for the quarterly periods during the fiscal year
    ended October 31, 2007. The accounts most affected in the
    restatement include inventories and cost of net revenues;
    however, this material weakness could impact all financial
    statement accounts, with a higher likelihood for accounts
    subject to non-routine or estimation processes, such as
    inventory reserves and income taxes.
    An entity-level material weakness in control activities related
    to the design and operation of our supervision, monitoring and
    monthly financial statement review processes. This material
    weakness contributed to adjustments in several accounts and the
    restatement of interim condensed consolidated financial
    statements for the quarterly periods during the fiscal year
    ended October 31, 2007. The accounts most affected in the
    restatement include inventory and cost of net revenues; however,
    this material weakness could impact all financial statement
    accounts. 42




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##### Table of Contents




    A transaction-level material weakness in the design and
    operating effectiveness of controls related to income taxes.
    Specifically, our processes and procedures were not designed to
    provide for adequate and timely identification, documentation
    and review of various income tax calculations, reconciliations
    and related supporting documentation required to apply our
    accounting policy for income taxes in accordance with
    U.S. GAAP, particularly following the November 1, 2006
    acquisition of Lipman Electronic Engineering Ltd. This material
    weakness impacted our ability to report financial information
    related to income tax accounts and resulted in adjustments to
    income tax expense, income taxes payable, deferred tax assets
    and liabilities, and goodwill accounts during the fiscal year
    ended October 31, 2007.  Managements
    Remediation Initiatives
    
    We have enhanced and expect to continue to enhance our manual
    journal entry policy, including a more stringent manual journal
    entry review and approval process that requires tiered approval
    levels in which escalating dollar amounts require additional
    approval by increasingly more senior personnel;
    We migrated to a new worldwide, integrated, enterprise resource
    planning (ERP) system. The new ERP system is our principal
    computing platform and provides for a single unified chart of
    accounts worldwide. This system was activated for the majority
    of our worldwide operations in the first fiscal quarter of 2008
    and by the end of the second fiscal quarter of 2008 over 90% of
    our consolidated net revenues and cost of net revenues were
    processed on this system;
    We have added and expect to continue to add qualified accounting
    and finance personnel having sufficient knowledge and experience
    in general accepted accounting principles, cost accounting, tax,
    and management of financial systems;
    We intend to enhance our review process over the monthly
    financial results by requiring additional documentation and
    analysis to be provided that will then be reviewed by
    appropriate key senior personnel from both finance and
    non-finance areas;
    We expect to enhance the segregation of duties between the
    financial planning and the accounting and control
    functions; and
    We intend to enhance our governance and compliance functions to
    improve control consciousness and prevention of errors in
    financial reporting, as well as to improve tone, communication,
    education, and training for employees involved in the financial
    reporting process, including the appointment of a chief legal
    and compliance officer.  Changes
    in Internal Control over Financial Reporting
  Rule 13a-15(f)
  
    We have enhanced our manual journal entry review and approval
    process so that the required approval levels (in which
    escalating dollar amounts require additional approval by
    increasingly more senior personnel) are performed in the
    enterprise resource planning (ERP) system and thus entries
    cannot be recorded unless the approval is obtained
    electronically by the appropriate level of personnel. This
    control also provides a clear audit trail of the entry.
    We have added additional qualified accounting and finance
    personnel having sufficient knowledge and experience in general
    accepted accounting principles to the cost accounting and
    corporate accounting group.   43




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##### Table of Contents



PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS  Form 10-Q,
  ITEM 1A.
    RISK
    FACTORS  Form 10-K
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 5.
    OTHER
    INFORMATION    ITEM 6.
    EXHIBITS    ExhibitNumber

Description10
.1

Third Amendment to Credit Agreement, dated as of July 31, 2008
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on July 31, 2008).31
.1

Certification of the Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Interim Chief Financial Officer, as
    required by Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and the Interim
    Chief Financial Officer  as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.  44




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##### Table of Contents



SIGNATURES      By:
    /s/  Douglas
    G. Bergeron     By:
    /s/  Clinton
    Knowles      45




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##### Table of Contents



EXHIBIT INDEX  ExhibitNumber

Description10
.1

Third Amendment to Credit Agreement, dated as of July 31, 2008
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on July 31, 2008).31
.1

Certification of the Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Interim Chief Financial Officer, as
    required by Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and the Interim
    Chief Financial Officer as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.  46