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UPDATE 1-U.S. immigration debate hits First Data shares
Fri Jul 21, 2006 5:37 PM ET


By Dan Wilchins

NEW YORK, July 21 (Reuters) - Shares of First Data Corp. <FDC.N> fell 4.8 percent on Friday, their biggest one-day drop since 2003, after the company said debate about United States immigration policy was weighing on results in its Western Union division.

First Data said late on Thursday that second-quarter earnings rose 11 percent to a level in line with analysts' expectations.

However, First Data Chief Executive Ric Duques said in a conference call that immigrants, especially those without documentation, are increasingly concerned about wiring money back home because they do not want to attract government attention.

"Do I need to hold onto my cash? You would, if you were worried about paying back taxes, fines, or legal fees, or if a state government had seized remittances from people that cannot prove their legal residence," Duques said.

First Data said that this could weigh on its full year earnings.

"Investors had not appreciated the magnitude of the effect of immigration policy on Western Union's business," said John Kraft, an analyst at D.A. Davidson in Lake Oswego, Oregon.

The United States is in the midst of a national policy debate about immigration. The Senate has passed a bill that would offer amnesty to millions of undocumented immigrants already in the United States, but would also pay for measures to keep out new illegal immigrants.

Members of the House of Representatives, which in June passed a bill that would give more money to border security agencies to control illegal immigration, have heaped scorn on the Senate's plan to offer a path to citizenship for existing illegal immigrants.

State legislators have passed laws aimed at illegal immigrants, including a measure in Colorado requiring adults to show valid identification to apply for nonemergency government benefits.

If pressure on immigrants continues, First Data said it may post full-year earnings from continuing operations at the lower end of its previously forecast range of $2.35 to $2.42 a share.

In the second half of the year, First Data is spinning off Western Union, which is seen as a faster-growing business, from its other operations, which generate solid cash flow but do not grow as quickly.

First Data's shares fell $2.09 to closed at $41.76 on the New York Stock Exchange, their biggest one-day loss in percentage terms since October 2003.