Brad . . .
In answer to your questions: (1) No, and (2) No.
The closest IDX is getting to retail sales is via the Internet and the Digital River deal. This channel is reasonable because of the low distribution costs.
Further, you have to keep in mind where demand for the product really lies -- with the retailers and transaction enablers, rather than the consumers. If the consumer is at risk of buying from a phony fly-by-night ecommerce outlet, a fingerscanner on his computer is not going to protect him; if he does get his credit card number misused as a result of an Internet deal, he probably holds the damage down to the first $50. Neither possibility is all that likely, though -- at least no more likely than it was before the Internet.
No, the real interest in cutting down on remote transaction fraud comes from the retailers and, even more so, the banks and credit card transaction ensurers. They have to be protected from the erstwhile consumers who are faking information, or using a phony credit card. They have to be protected against people who are using off-the-shelf cheap components to 'skim' information from mag card stripes and otherwise beating Mastercard and Visa out of a billion dollars per year.
But Mastercard and Visa aren't going to be buying fingerscanners at Radio Shack. One day, we hope, they will be rolling out biometrically protected smart cards in one fell swoop, after making a billion dollars in buys from Identix in hardware and licensing fees. To me, that's the best way to break through the present chicken-and-egg problem, where the hardware doesn't sell because there aren't software applications, and the software doesn't go anywhere for lack of hardware on desktops.
Take a look at this column from today's Washington Post:
washingtonpost.com
He talks about online identity issues, and how there are so many entrants to make online shopping easier. This is the world as the rest of the people out there know it: Ecommerce shopping cards, just like at the supermarket today, where they give you some personal ID convenience in return for all kinds of marketing information. The more ambitious cards, like the Microsoft "Passport," are super-cards that someday are to be used in every store. Maximize the transaction convenience, maximize the marketing intrusiveness and loss of privacy. That's the current business model, aimed at the consumer as the market. Identix is not aiming at this market now, for the reasons I provided above. Identix is aiming at the sellers, not the buyers. Privacy advantages alone will probably not be enough to sell to consumers, given the $100 price tag and need to buy and install equipment. Further, the IDX technology could be used for evil (marketing) as well as good (privacy), depending on what kind of operating system and applications are at work.
If IDX works with a privacy-friendly DigitalMe, it's ideal for protecting your identity. If it works with a privacy-unfriendly Microsoft "Passport," you will be irrevocably ID'd to all the marketers without any hope of denying your identity.
Here is the argument of the people who don't believe in biometrics, or at least IDX: Don't invest in technology suppliers for the Internet since there are too many possible outcomes and the investment is just too risky; don't invest in a company that doesn't control its own destiny (i.e., stay away from chicken-and-egg stocks); besides, biometrics offers more security than the mass market needs; if it doesn't offer more security, competing products like smart cards will offer just enough for less money; the marketers won't go for a privacy-friendly solution; biometrics costs too much for all but a few users; fingerscanners aren't a 100% solution (what about those handless consumers?); didn't IDID have a big scandal a few years ago?
We have answers for all those issues, but you have to at least admit that you are accepting higher degree of market risk with this investment than, say, IBM, in order to have a chance at a wonderful return on your investment. I wouldn't be in this stock if I didn't think it were undervalued.
Motorola cell phones in stores by Christmas? I don't think so. Once again, a consumer application, and it has the same chicken-and-egg problem.
I believe Identix has a two track strategy to breakthrough in the marketplace. Each track relies on price dropping radically from the present levels. The first track is channel selling to businesses with specialty security needs, such as banks and large corporations. This is the CPQ track that hasn't been going as well as it might. This track should be recharged as soon as the DFR-300 is in production by IDX being more involved in end user sales. The second, slightly more long-range track, is Mastercard and the banks. A direct sale for a massive rollout could easily break out of the present hardware/software standoff and would just explode IDX into a multi-billion dollar market cap. I do have high hopes here, but the strategic danger is that some competitor (i.e., Who?Vision), or alternative security approach (i.e., AmEx smart card) could arise in the next year or two that could derail IDX.
The problem with the present two tracks is that they won't happen by Christmas. Here's what I want by year end: the DFR-300 in production and being sold in some significant quantity to a couple of end users, for as much less than $75 per workstation/laptop as IDX can manage. That's where Motorola could really help. |
