##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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
    April 30, 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




---



##### 



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

Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of April
    30, 2008 and October 31, 2007


1Condensed Consolidated Statements of Operations
    for the Three and Six Months Ended April 30, 2008 and
    2007


2Condensed Consolidated Statements of Cash Flows
    for the Six Months Ended April 30, 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


40Item 4

Controls and Procedures


41PART II  OTHER
    INFORMATIONItem 1

Legal Proceedings


43Item 1A

Risk Factors


43Item 2

Unregistered Sales of Equity Securities and Use
    of Proceeds


43Item 3

Defaults Upon Senior Securities


43Item 4

Submission of Matters to a Vote of Security
    Holders


43Item 5

Other Information


43Item 6

Exhibits


44Signatures


45Exhibit Index


46EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  April 30,


October 31,2008


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

$
215,039


$
215,001Accounts receivable, net of allowance of $5,095 and $4,270


171,958



194,146Inventories


133,461



107,168Deferred tax assets


21,366



23,854Prepaid expenses and other current assets


78,517



63,413Total current assets


620,341



603,582Property, plant and equipment, net


51,825



48,293Purchased intangible assets, net


140,429



170,073Goodwill


615,213



611,977Deferred tax assets


60,688



67,796Debt issuance costs, net


12,747



12,855Other assets


44,737



32,733Total assets

$
1,545,980


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

$
106,914


$
105,215Income taxes payable


16,437



19,530Accrued compensation


21,507



21,201Accrued warranty


8,521



11,012Deferred revenue, net


48,528



43,049Deferred tax liabilities


6,156



6,154Accrued expenses


9,623



8,755Other current liabilities


100,427



86,465Current portion of long-term debt


5,044



5,386Total current liabilities


323,157



306,767Accrued warranty


802



655Deferred revenue, net


11,578



11,274Long-term debt


545,960



547,766Deferred tax liabilities


92,679



87,142Other long-term liabilities


33,119



10,296Total liabilities


1,007,295



963,900Minority interest


2,051



2,487Stockholders equity:Preferred stock: 10,000 shares authorized at April 30,
    2008 and October 31, 2007; zero shares issued and
    outstanding as of April 30, 2008 and October 31, 2007






Common stock: $0.01 par value; 100,000 shares
    authorized at April 30, 2008 and October 31, 2007;
    84,194 and 84,060 shares issued and outstanding as of
    April 30, 2008 and October 31, 2007


842



841Additional paid-in capital


645,702



635,404Accumulated deficit


(130,336
)


(77,484
)Accumulated other comprehensive income


20,426



22,161Total stockholders equity


536,634



580,922Total liabilities and stockholders equity

$
1,545,980


$
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


Six Months EndedApril 30,


April 30,2008


2007


2008


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

$
203,711


$
191,469


$
359,312


$
380,435Services


29,290



25,414



59,210



52,811Total net revenues


233,001



216,883



418,522



433,246Cost of net revenues:Systems Solutions


141,906



125,951



251,510



259,242Services


17,743



13,286



36,296



27,735Total cost of net revenues


159,649



139,237



287,806



286,977Gross profit


73,352



77,646



130,716



146,269Operating expenses:Research and development


17,159



16,009



39,621



32,907Sales and marketing


22,762



22,823



47,405



45,863General and administrative


31,254



25,565



57,320



42,941Amortization of purchased intangible assets


6,782



5,690



12,672



11,041In-process research and development






90







6,650Total operating expenses


77,957



70,177



157,018



139,402Operating income (loss)


(4,605
)


7,469



(26,302
)


6,867Interest expense


(8,990
)


(9,507
)


(15,430
)


(19,263
)Interest income


1,395



1,534



3,483



2,525Other expense, net


(1,914
)


(2
)


(6,434
)


(263
)Loss before income taxes


(14,114
)


(506
)


(44,683
)


(10,134
)Provision for income taxes


3,873



4,312



6,802



363Net loss

$
(17,987
)

$
(4,818
)

$
(51,485
)

$
(10,497
)Net loss per share:Basic

$
(0.21
)

$
(0.06
)

$
(0.61
)

$
(0.13
)Diluted

$
(0.21
)

$
(0.06
)

$
(0.61
)

$
(0.13
)Weighted average shares used in computing net loss per share:Basic


84,194



81,705



84,174



81,343Diluted


84,194



81,705



84,174



81,343    2




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months EndedApril 30,2008


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

$
(51,485
)

$
(10,497
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Amortization of purchased intangible assets


28,971



30,236Depreciation and amortization of property, plant and equipment


6,367



3,765Amortization of capitalized software development costs


721



570In-process research and development






6,650Write-off of capitalized software development costs


2,700



Disposal of property, plant and equipment


248



(56
)Amortization of debt issuance costs


1,293



660Stock-based compensation


8,500



16,095Minority interest and equity in earnings of affiliates


(224
)


63Other


21



(13
)Net cash provided by (used in) operating activities before
    changes in working capital


(2,888
)


47,473Changes in operating assets and liabilities:Accounts receivable, net


22,304



(13,490
)Inventories


(26,293
)


52,228Deferred tax assets


10,105



(3,366
)Prepaid expenses and other current assets


(15,915
)


(21,405
)Other assets


(14,748
)


(3,034
)Accounts payable


1,699



(5,251
)Income taxes payable


15,557



151Tax benefits from stock-based compensation


(939
)


(4,672
)Accrued compensation


218



(3,030
)Accrued warranty


(2,344
)


(1,037
)Accrued expenses and other liabilities


19,427



(20,179
)Deferred revenues


5,783



6,532Deferred tax liabilities


5,665



9,206Net cash provided by operating activities

$
17,631



40,126Cash flows from investing activities:Software development costs capitalized


(2,038
)


(2,921
)Purchase of property, plant and equipment


(9,529
)


(12,045
)Purchase of other assets






(500
)Acquisition of businesses, net of cash acquired


(2,985
)


(264,334
)Net cash used in investing activities


(14,552
)


(279,800
)Cash flows from financing activities:Proceeds from long-term debt, net of costs


286



305,335Repayment of long-term debt


(2,500
)


(1,250
)Proceeds from exercise of stock options


1,704



18,412Payment of debt amendment fees


(1,420
)


Tax benefits from stock-based compensation


939



4,672Other


(70
)


(11
)Net cash provided by (used in) financing activities


(1,061
)


327,158Effect of foreign exchange rate on cash and cash equivalents


(1,980
)


1,712Net increase in cash and cash equivalents


38



89,196Cash and cash equivalents at beginning of period


215,001



86,564Cash and cash equivalents at end of period

$
215,039



175,760Supplemental schedule for non-cash transaction:Cash paid for interest

$
9,323


$
18,039Cash paid for income taxes

$
5,486


$
13,381Supplemental disclosure for cash flow informationIssuance 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 14-1
  Note 2.
    Balance
    Sheet and Statement of Operations Details  Inventories
    April 30,


October 31,2008


2007Raw materials

$
39,604


$
29,548Work-in-process


8,264



3,849Finished goods


85,593



73,771$
133,461


$
107,168   Prepaid
    Expenses and Other Current Assets
    April 30,


October 31,2008


2007Prepaid taxes

$
54,346


$
38,390Prepaid expenses


12,700



15,266Other receivables


7,301



7,827Other current assets


4,170



1,930$
78,517


$
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
    April 30, 2008


October 31, 2007Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingValue


Amortization


Value


Value


Amortization


ValueDeveloped technology

$
172,232


$
(81,325
)

$
90,907


$
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


4,356



(1,314
)


3,042



4,485



(853
)


3,632Customer relationships


90,745



(44,265
)


46,480



91,023



(32,165
)


58,858$
304,000


$
(163,571
)

$
140,429


$
304,739


$
(134,666
)

$
170,073     Three Months Ended


Six Months EndedApril 30,


April 30,2008


2007


2008


2007Included in cost of net revenues

$
8,124


$
9,586


$
16,299


$
19,195Included in operating expenses


6,782



5,690



12,672



11,041$
14,906


$
15,276


$
28,971


$
30,236     Cost of Net


OperatingFiscal Year

Revenues


Expenses


Total2008 (remaining 6 months)

$
15,578


$
13,068


$
28,6462009


31,749



20,437



52,1862010


24,848



11,976



36,8242011


15,058



3,288



18,3462012


2,682



465



3,147Thereafter


991



289



1,280Total

$
90,906


$
49,523


$
140,429  7




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill
    Six Months Ended


Year EndedApril 30,


October 31,2008


2007Balance at beginning of period

$
611,977


$
52,689Additions related to acquisitions


2,884



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


1,326



(5,229
)Currency translation adjustments


(974
)


24,474Balance at end of period

$
615,213


$
611,977   Accrued
    Warranty
    Six Months Ended


Year EndedApril 30,


October 31,2008


2007Balance at beginning of period

$
11,667


$
5,432Warranty charged to cost of net revenues


3,620



3,664Utilization of warranty


(6,707
)


(13,089
)Change in estimates


694



4,768Warranty liabilities assumed in acquisitions


49



10,892Balance at end of period


9,323



11,667Less current portion


(8,521
)


(11,012
)Long-term portion

$
802


$
655   Deferred
    Revenue, net
    April 30,


October 31,2008


2007Deferred revenue

$
69,165


$
58,992Deferred cost of revenue


(9,059
)


(4,669
)60,106



54,323Less current portion


(48,528
)


(43,049
)Long-term portion

$
11,578


$
11,274  8




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Current Liabilities
    April 30,


October 31,2008


2007Other tax liabilities (1)

$
44,045


$
39,310Accrued interest


5,971



2,620Accounts payable related accrual


18,584



16,246Accrued legal and audit fees


7,575



4,693Other


24,252



23,596Total other current liabilities

$
100,427


$
86,465     Other
    Income (Expense), net
    Three Months Ended


Six Months EndedApril 30,


April 30,2008


2007


2008


2007Foreign currency transaction gains (losses), net

$
(495
)

$
1,866


$
(5,857
)

$
1,893Foreign currency contract losses, net


(1,423
)


(1,801
)


(781
)


(2,014
)Other, net


4



(67
)


204



(142
)$
(1,914
)

$
(2
)

$
(6,434
)

$
(263
)   Note 3.
    Financings    April 30,


October 31,2008


2007Term B Loan

$
233,750


$
236,250Senior convertible notes


316,250



316,250Capital lease and other notes payable


1,004



652Total


551,004



553,152Less current portion


(5,044
)


(5,386
)Long-term portion

$
545,960


$
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




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##### Table of Contents



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




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    transfer-restricted
  Form 10-K
       12




---



##### 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,
  Note 4.
    Comprehensive
    Income (Loss)    Three Months Ended


Six Months EndedApril 30,


April 30,2008


2007


2008


2007Net loss

$
(17,987
)

$
(4,818
)

$
(51,485
)

$
(10,497
)Other comprehensive income (loss):Foreign currency translation adjustments


1,712



3,928



(1,754
)


10,263Unrealized gain (loss) on interest rate hedge, net of tax


12



(4
)


19



(23
)Comprehensive income (loss)

$
(16,263
)

$
(894
)

$
(53,220
)

$
(257
)     April 30,


October 31,2008


2007Foreign currency translation adjustments

$
20,470


$
22,224Unrecorded loss on interest rate hedges


(44
)


(63
)Accumulated other comprehensive income

$
20,426


$
22,161   Note 5.
    Stockholders
    Equity  Form 10-K
  Stock-Based
    Compensation
  Share-Based
    Payment
 13




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended April 30,


Six Months Ended April 30,2008


2007


2008


2007Cost of net revenues

$
(78
)

$
930


$
548


$
1,847Sales and marketing


1,517



1,683



3,320



3,512Research and development


729



1,433



2,225



2,899General and administrative


862



4,253



2,407



7,837Total stock-based compensation

$
3,030


$
8,299


$
8,500


$
16,095   Valuation
    Assumptions
  Share-Based
    Payment
  Three Months Ended April 30,


Six Months Ended April 30,2008


2007


2008


2007Expected term of the options (in years)


N/A



2.0



3.0



2.0Risk-free interest rate


N/A



4.6
%


2.9
%


4.8
%Expected stock price volatility


N/A



40.0
%


40.6
%


41.0
%Expected dividend rate


N/A



0.0
%


0.0
%


0.0
%              14




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Performance
    Restricted Stock Units for the Companys CEO
      Form 10-K
     15




---



##### Table of Contents



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


RemainingNumber of


Average


Contractual


AggregateShares


Exercise Price


Term


Intrinsic Value(In Years)


(In thousands)Balance at November 1, 2007


8,331,637


$
27.10Granted


22,500



19.81Exercised


(104,575
)


8.84Cancelled


(408,102
)


27.85Balance at April 30, 2008


7,841,460


$
27.29



5.3


$
3,949Vested or expected to vest at April 30, 2008


7,349,274


$
27.00



5.2


$
3,863Exercisable at April 30, 2008


2,730,629


$
22.83



4.7


$
2,224     Number of


AggregateShares


Intrinsic Value(In thousands)Balance at November 1, 2007


749,750Granted


7,500Vested


(7,500
)Cancelled


Balance at April 30, 2008


749,750


$
1,676Vested or expected to vest at April 30, 2008


628,916


$
1,248         Note 6.
    Net
    Income (Loss) Per Share   16




---



##### Table of Contents



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


Six Months EndedApril 30,


April 30,2008


2007


2008


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

$
(17,987
)

$
(4,818
)

$
(51,485
)

$
(10,497
)Denominator:Weighted-average common shares outstanding


84,194



82,706



84,174



82,344Less: Weighted-average shares subject to repurchase






(1,001
)






(1,001
)Weighted-average shares used in computing basic net loss per
    share


84,194



81,705



84,174



81,343Add 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



81,705



84,174



81,343Net loss per share:Basic

$
(0.21
)

$
(0.06
)

$
(0.61
)

$
(0.13
)Diluted

$
(0.21
)

$
(0.06
)

$
(0.61
)

$
(0.13
)     No. 90-19, Convertible Bonds with Issuer Option to Settle for Cash upon
    Conversion (EITF 90-19); EITF 90-19.
    Note 7.
    Segment
    and Geographic Information  Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
 17




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      non-cash step-up step-down over-and-under
    Three Months Ended


Six Months EndedApril 30,


April 30,2008


2007


2008


2007Net revenues:International

$
133,087


$
121,948


$
251,107


$
250,745North America


100,287



95,857



168,007



184,938Corporate


(373
)


(922
)


(592
)


(2,437
)Total net revenues

$
233,001


$
216,883


$
418,522


$
433,246Operating income (loss):International

$
19,623


$
30,402


$
35,727


$
61,826North America


37,767



39,098



58,933



70,826Corporate


(61,995
)


(62,031
)


(120,962
)


(125,785
)Total operating income (loss)

$
(4,605
)

$
7,469


$
(26,302
)

$
6,867     April 30,


October 31,2008


2007International

$
23,960


$
24,271North America


30,391



26,549Total

$
54,351


$
50,820     April 30,


October 31,2008


2007International

$
545,392


$
542,186North America


69,821



69,791Total

$
615,213


$
611,977  18




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    April 30,


October 31,2008


2007International

$
1,123,993


$
1,122,411North America


421,987



424,898Total

$
1,545,980


$
1,547,309     Three Months Ended April 30,


Six Months Ended April 30,2008


2007


2008


2007International

$
1,488


$
1,052


$
3,220


$
2,382North America


1,852



711



3,147



1,383Total

$
3,340


$
1,763


$
6,367


$
3,765   Geographic
    Information
    Three Months Ended April 30,


Six Months Ended April 30,2008


2007


2008


2007Europe

$
75,870


$
68,808


$
133,553


$
139,963Latin America


40,658



41,497



85,267



82,168Asia


16,560



11,643



32,287



28,614United States


91,309



85,472



151,934



165,057Canada


8,604



9,463



15,481



17,444Total revenues

$
233,001


$
216,883


$
418,522


$
433,246       April 30,


October 31,2008


2007North America

$
30,391


$
26,549Europe


19,813



20,694Latin America


1,604



2,160Asia


2,543



1,417Total

$
54,351


$
50,820   Note 8.
    Business
    Combinations  Peripheral
    Computer Industries Pty Limited
   19




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 9.
    Income
    Taxes             20




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##### 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 6 months)

$
5,206


$
67


$
5,1392009


7,826



86



7,7402010


6,622



4



6,6182011


5,020







5,0202012


4,436







4,436Thereafter


10,485







10,485Total

$
39,595


$
157


$
39,438   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)
  Department
    of Justice Investigation
    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.
    Class Action
    and Derivative Lawsuits
  In re VeriFone
    Holdings, Inc. Securities Litigation 07-6140 Eichenholtz VeriFone
    Holdings, Inc. et al. C 07-6140 Lien VeriFone Holdings, Inc. et al. 07-6195 Vaughn et al. VeriFone Holdings, Inc. et al. 07-6197 Feldman et al. VeriFone
    Holdings, Inc. et al. 07-6218 MMC; Cerini VeriFone Holdings, Inc. et al. 07-6228 Westend Capital Management LLC VeriFone Holdings,
    Inc. et al. 07-6237 MMC; Hill VeriFone Holdings, Inc. et al. C 07-6238 Offutt VeriFone Holdings, Inc. et al. 07-6241 Feitel VeriFone Holdings, Inc., et al. C 08-0118
 23




---



##### 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 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
    Other
    Litigation
   24




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 11.  Restructuring
    Charges
  Accounting for Costs Associated
    with Exit or Disposal Activities
  Form 10-K
 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.
    Restatement
       26




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##### Table of Contents



Overview
  26-year
           27




---



##### Table of Contents



Results
    of Operations
  Net
    Revenues
      Three Months Ended April 30,


Six Months Ended April 30,Net


%








Net


%2008


2007


Change


Change


2008


2007


Change


ChangeSystems Solutions

$
203,711


$
191,469


$
12,242



6.4
%

$
359,312


$
380,435



(21,123
)


(5.6
)%Services


29,290



25,414



3,876



15.3
%


59,210



52,811



6,399



12.1
%Total

$
233,001


$
216,883


$
16,118



7.4
%

$
418,522


$
433,246



(14,724
)


(3.4
)%   System
    Solutions
    top-ups,
  pay-at-the-table
 28




---



##### Table of Contents



top-ups,
  pay-at-the-table Multi-lane
  Services
    Gross
    Profit
    Three Months Ended April 30,


Six Months Ended April 30,Amount


Gross Profit Percentage


Amount


Gross Profit Percentage2008


2007


2008


2007


2008


2007


2008


2007Systems Solutions

$
61,805


$
65,518



30.3
%


34.2
%

$
107,802



121,193



30.0
%


31.9
%Services


11,547



12,128



39.4
%


47.7
%


22,914



25,076



38.7
%


47.5
%Total

$
73,352


$
77,646



31.5
%


35.8
%

$
130,716



146,269



31.2
%


33.8
%     Multi-lane
 29




---



##### Table of Contents



step-up non-cash step-up step-down over-and-under
    step-up
  Multi-lane
      step-up
 30




---



##### Table of Contents



step-up over-and-under
    Research
    and Development Expenses
    Three Months Ended April 30,


Six Months Ended April 30,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeResearch and development

$
17,159


$
16,009



1,150



7.2
%

$
39,621



32,907


$
6,714



20.4
%Percentage of net revenues


7.4
%


7.4
%










9.5
%


7.6
%         Sales
    and Marketing Expenses
    Three Months Ended April 30,


Six Months Ended April 30,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeSales and marketing

$
22,762


$
22,823


$
(61
)


0.0
%

$
47,405


$
45,863


$
1,542



3.4
%Percentage of net revenues


9.8
%


10.5
%










11.3
%


10.6
%    31




---



##### Table of Contents



General
    and Administrative Expenses
    Three Months Ended April 30,


Six Months Ended April 30,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeGeneral and administrative

$
31,254


$
25,565


$
5,689



22.2
%

$
57,320


$
42,941


$
14,379



33.5
%Percentage of net revenues


13.4
%


11.8
%










13.7
%


9.9
%         Amortization
    of Purchased Intangible Assets
      Interest
    Expense
   32




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##### Table of Contents



14-1, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement) 14-1
  Interest
    Income
    Other
    Income (Expense), Net
    Provision
    for Income Tax
         33




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##### Table of Contents



Segment
    Information
  step-up step-up over-and-under
  Three Months Ended April 30,


Six Months Ended April 30,Net


Percentage








Net


Percentage2008


2007


Change


Change


2008


2007


Change


ChangeNet revenuesInternational

$
133,087


$
121,948


$
11,139



9.1
%

$
251,107


$
250,745


$
362



0.1
%North America


100,287



95,857



4,430



4.6
%


168,007



184,938



(16,931
)


(9.2
)%Corporate


(373
)


(922
)


549



59.5
%


(592
)


(2,437
)


1,845



75.7
%Total net revenues

$
233,001


$
216,883


$
16,118



7.4
%

$
418,522


$
433,246


$
(14,724
)


(3.4
)%Operating income (loss)International

$
19,623


$
30,402


$
(10,779
)


(35.5
)%

$
35,727


$
61,826


$
(26,099
)


(42.2
)%North American


37,767



39,098



(1,331
)


(3.4
)%


58,933



70,826



(11,893
)


(16.8
)%Corporate


(61,995
)


(62,031
)


36



0.0
%


(120,962
)


(125,785
)


4,823



3.8
%Total operating income (loss)

$
(4,605
)

$
7,469


$
(12,074
)


161.7
%

$
(26,302
)

$
6,867


$
(33,169
)


483.0
%        34




---



##### Table of Contents



step-up
  Liquidity
    and Capital Resources
  Six Months Ended April 30,2008


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

$
17,631


$
40,126Investing activities


(14,552
)


(279,800
)Financing activities


(1,061
)


327,158Effect of exchange rate fluctuation on cash and cash equivalents


(1,980
)


1,712Net change in cash and cash equivalents

$
38


$
89,196     Operating
    Activities
        
    A $26.3 million increase in inventories for projected sales;
    A $15.9 million increase in prepaid expenses and other
    current assets due to an increase in prepaid income
    taxes; and
    A $14.7 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 $22.3 million decrease in accounts receivable due to
    better collections; 35




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##### Table of Contents




    A $19.4 million increase in accrued expenses and other
    liabilities due to the investigation and restatement related
    costs, professional fees and long-term tax reserves on adoption
    of FIN 48;
    A $15.8 million decrease in deferred tax balances;
    A $15.6 million increase in income taxes payable; and
    A $5.8 million increase in deferred revenue due to an
    increase in deferred services such as customer- supported
    installations.  Investing
    Activities
    Financing
    Activities
  stock-based
    Contractual
    Obligations
    Less Than








More ThanTotal


1 Year


1 to 3 Years


3 to 5 Years


5 YearsTerm B Loan (including interest)(1)

$
303,216


$
18,260


$
35,660


$
34,548


$
214,748Senior convertible notes (including interest)(1)


336,844



5,375



8,697



322,772



Capital lease obligations


147



32



115







Operating leases


39,595



5,206



14,448



9,456



10,485Minimum purchase obligations


70,281



70,281











$
750,083


$
99,154


$
58,920


$
366,776


$
225,233     (1)
    
    Interest in the above table has been calculated using the rate
    of effective at April 30, 2008.  FASB
    Interpretation No. 48 (FIN 48)
    Liabilities
    Earnings
    before Interest, Taxes, Depreciation and Amortization (EBITDA),
    as adjusted
   36




---



##### Table of Contents




    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.
    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 37




---



##### Table of Contents



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.
    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.    Three Months Ended April 30,


Six Months Ended April 30,2008(1)


2007


2008(1)


2007U.S. GAAP net loss

$
(17,987
)

$
(4,818
)

$
(51,485
)

$
(10,497
)Provision for income taxes


3,873



4,312



6,802



363Interest expense


8,989



9,507



15,429



19,263Interest income


(1,395
)


(1,534
)


(3,483
)


(2,525
)Depreciation and amortization of property, plant and equipment


3,340



1,761



6,367



3,765Amortization of capitalized software


249



275



721



570Amortization of intangible assets


14,907



15,276



28,971



30,236Amortization of step-down in deferred revenue on acquisition


373



922



591



2,436Amortization of
    step-up in
    inventory on acquisition






3,513







13,961In-process research and development






90







6,650Stock-based compensation


3,030



8,299



8,500



16,095Acquisition related charges and restructuring costs






6,623







7,417Capitalized software write-off










2,700



EBITDA as adjusted

$
15,379


$
44,226


$
15,113


$
87,734     (1)
    
    Net loss for the three months ended April 30, 2008 was
    negatively impacted by $12.1 million of costs related to
    the restatement and $2.3 million in restructuring costs.
    None of the $14.4 million has been added back in
    calculating EBITDA. Net loss for the six months ended
    April 30, 2008 was negatively impacted by
    $18.1 million of costs related to the restatement and
    $4.4 million in restructuring costs. None of the
    $22.5 million has been added back in calculating EBITDA.   38




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  Regulation S-K,
  Recent
    Accounting Pronouncements
  Recent Accounting
    Pronouncements Form 10-Q,
  Critical
    Accounting Policies and Estimates
      Accounting for Uncertainty in
    Income Taxes
  Income
    Taxes
    non-U.S. net
   39




---



##### Table of Contents



Form 10-K
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rates
    Foreign
    Currency Risk
  non-U.S. dollar
   40




---



##### Table of Contents



non-U.S. denominated
  Equity
    Price Risk
    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 41




---



##### Table of Contents



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.
    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 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 42




---



##### Table of Contents



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 continued to enhance the functionality of the Oracle 11i
    system by implementing the system in additional subsidiaries so
    that as of the end of our second fiscal quarter over 90% of our
    consolidated net revenues and cost of net revenues were
    processed in the system; and
    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.   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   43




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##### Table of Contents



ITEM 6.
    EXHIBITS    ExhibitNumber

Description3
.1

Amendment No. 1 to the Bylaws of VeriFone Holdings, Inc.
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on March 31, 2008).10
.1+

Separation Agreement, dated as of April 1, 2008, among VeriFone
    Holdings, Inc., VeriFone, Inc. and Barry Zwarenstein
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on April 1, 2008).10
.2

Second Amendment to Credit Agreement, dated as of April 28, 2008
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on April 29, 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 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 Chief
    Financial Officer as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.     +
    
    Indicates a management contract or compensatory plan or
    arrangement. 44




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##### Table of Contents



SIGNATURES      By:
    /s/  Douglas
    G. Bergeron      By:
    /s/  Barry
    Zwarenstein        45




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##### Table of Contents



EXHIBIT INDEX  ExhibitNumber

Description3
.1

Amendment No. 1 to the Bylaws of VeriFone Holdings, Inc.
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on March 31, 2008).10
.1+

Separation Agreement, dated as of April 1, 2008, among VeriFone
    Holdings, Inc., VeriFone, Inc. and Barry Zwarenstein
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on April 1, 2008).10
.2

Second Amendment to Credit Agreement, dated as of April 28, 2008
    (incorporated by reference to the Current Report on Form 8-K
    filed by VeriFone Holdings, Inc. on April 29, 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 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 Chief
    Financial Officer as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.     +
    
    Indicates a management contract or compensatory plan or
    arrangement. 46