Some thoughts on IDX's position in the biometric ID market . . . .
With the decline in the stock price, we are seeing increasing signs of disgruntlement emerge, especially on other boards, complaining that IDX (1) does not do enough PR, and (2) is somehow ceding the market to its competitors who have been busy with press releases on products and alliances.
To begin with, I think IDX is in two different markets -- AFIS identifications, dominated by the TP-600, and the emerging bio-ID market, dominated for IDX by its Oracle alliance.
As I have posted before, I think IDX is in a very strong position in the tenprinter market. Whether they have a market share of almost 60% or 85%, depending on whom you ask, this is their bread and butter. It funds the other stuff. They are not losing market share here; FINX is gone, Printrak is losing ground, and DBII is fighting to hang on, but does not hope to compete at IDX' level. There are no other FBI-certified hardware suppliers. This market is growing by at least 30% a year, and will for several years more.
That brings us to the subject of everyone's concerns and dreams, the bio-ID applications. They include, in probable order of appearance, bank security, airport security, medical security, corporate intranet security, e-commerce, and smart card POS/e-commerce applications.
At this point, IDX has failed to crack consumer ATM applications. A couple of competing biometrics are in trials with Diebold, etc. It looks like fingerprint ID is not as well suited for outdoor ATM's as other methods. For instance, people wear gloves in some northern areas, fingerprint scanners are subject to vandalism, scanners can just get extremely dirty. However, IDX has shown increasing success at employee-related bank security applications, with installations in Colombia, Indonesia (bad luck, that one), Egypt, and Malaysia (upcoming with Siemens Nixdorf). I think we are going to see significant revenue streams from these banks this year, enough to add a few cents to the bottom line. They are high-margin applications. NRID also has a bank deal going on in Puerto Rico.
As to airport security, IDX has the O'Hare pilot on cargo access security. It is partly smart-card based, and has the potential to go national. All indications are that it is going well and everyone is waiting for a big announcement to say so. There is some biometric airport security pilot going on in Europe -- the Netherlands or someplace -- but it does not seem as ambitious, and does not include US competitors.
On the medical security front, we are seeing IDX in pilot in a couple of areas, as well as NRID and, I think, one or two other competitors. These pilots all seem to take a long time to work out. I don't expect real revenues from these during FY99.
Corporate intranet security. This is a very big one, and the subject of what I think is a lot of confusion. I.e., whether the $99 biometric locks are the market equivalent of Oracle installed biometric add-ons. The short answer is, of course they aren't. The long answer has to address whether things like the Compaq/Identicator alliance has major profit potential for Identicator. (I don't think so; IDT will have to come up with a lot more product before they get beyond the on/off switch stage.) Identicator is a small revenue ($7 million a year) and small (60 person) outfit. They have a generic-type minutiae-based system. Given the sizes of Compaq versus Identicator, and IDT's lack of a unique good, I suspect IDT is getting very little profit from this deal. They are getting good press, however, which will come in very handy when they go public, and I suspect that is the main benefit to them. It's an IPO to avoid. There isn't much there, really.
It is painfully true that there have been no sales from the Oracle alliance, yet. But there are pilots going. A couple of points here: It is obvious from IDX and other companies, like NRID, that pilots take quite a while. Quite a while. We have heard nothing from any competitors, despite 1998 press releases, that indicate any significant pilots with, say, Computer Associates. That implies to me that IDX has a big head start in this area. Further, if the Oracle alliance truly were a bust, and it would be obvious enough to Oracle by now were that true, we would be getting different signals. Like, we have nothing in pilot . . . or, we aren't expecting much there. Or even a press release by Oracle saying they dropped IDX. That's not the case here.
One other point deserves mention. IDX is making much of the fact that its competitors are "component" manufacturers, while IDX is providing a complete biometric solution. This rings true, at least in bio-ID (in the AFIS market Identix is a component manufacturer, along with DBII, while Printrak has the "complete" solution offered). Veridicom, etc., are offering silicon components. NRID is offering a "middleware" component. Identicator is offering an algorithm "component," etc., etc. Identix seems to be offering the whole deal in bio-ID via Oracle. As hard as it seems to be for IDX/Oracle to integrate all the details into a large system, who is going to do that for the component manufacturers? Is that why we haven't seen any equivalent efforts among IDX competitors? (And is that why IDX may be the only attractive buyout candidate in a few years from a Lockheed or IBM?)
I think a successful corporate intranet deal will segue into e-commerce applications. And the competition still isn't competing in this arena. If IDX pilots fail, if Oracle pulls out, we'll know we're in bio-ID trouble. If we see a competitor emerge on the scale IDX is attempting, we'll know we have a fight on our hands. But what I see is Identix out there by itself in long-term projects, beyond the technical horizons of its competitors, just hoping the market is there to meet it.
Integrated e-commerce/POS smart cards are over everyone's horizons. The Identicator Fort Bliss pilot is qualitatively below that level.
David |
