If you were short this company, here's what you must be thinking:
(1) Long-time insider ASCOM is selling;
(1a) No IDX directors are buying, really, and some are selling;
(2) Top line growth has stalled, and IDX operationally turned unprofitable;
(2a)PC sales have not taken off;
(3) Competitors include Veridicom (Intel invested) and Siemens; and
(4) Story stock in a suspect industry.
Here's what is missing, but they would like to see:
(5) IDX equipment doesn't work;
(6) IDX is getting outsold/underpriced by competitors;
(7) Industry has turned its back on Internet security;
(8) IDX has no strategic assets (i.e., meaningful partners, major pilots, software adoption, best hardware, etc.); and
(9) Stock in serious downtrend.
Somehow, I think what is missing on the short argument is more impressive than what is present. Arguments (1) and (1a) are far from conclusive, given surrounding circumstances. Arguments (2) and (2a) don't reliably predict failure, but just show there hasn't been a success (and ignore the dynamics of the live-scan marketplace). Argument 3 hasn't shown any life. Argument 4 is more ideological than real.
To the contrary, IDX equipment works; it's cheaper than the competition, and outselling the competition; the industry is clearly investing in Internet security that's compatible with the widescale adoption of biometric technology; IDX has several significant strategic assets, including the CPQ alliance, Mastercard (of all the strategic assets, I value the Mastercard connection most highly), O'Hare and B of A pilots, and the GSA template adoption; finally, the stock has withstood short selling fairly well.
I think the usually reliable, but shallow, short analysis is misleading them. Even if they are largely right on the PC and even smart card markets, IDX has significant assets in live scan and control/access markets that should put a floor under the stock price pretty close to where we are now. And given the chances that they are wrong . . . well, they just don't understand upside reasons. |
