SHAKING THE MONEY TREE
Future Stock: Identix: Let Your Finger Do the Talking in E-Commerce
by Robert Metz
prnewswire.com
Years ago, a deranged editor came to my desk and charged that my column
bore the "pawprint" of a well-known lobbyist. I didn't even speak with the
lobbyist but it was as hard for me to prove this as it was easy for him to
make the charge.
What we need in this age of computer fraud is a foolproof means of
detecting the unassailable pawprint of each individual. We need to do this
instantaneously.
As e-commerce grows, so does concern among users and would-be users. Most
of us have had at least one bad identification experience. We have lost a
credit card or have had one stolen. My wife's MasterCard was snatched once.
When the bank called two hours later, there had been withdrawals from three
different branches of our bank and some purchases. An alert bank clerk seized
the card. Damage: $1,500. But the bank and credit card company both paid,
having accepted forged signatures.
At this moment, thieves are lifting cell phone IDs out of the air and
charging calls costing thousands of dollars against these accounts. Even
when the bank or phone company takes responsibility for the unauthorized
usage, as they usually do, the experience is jarring. E-commerce needs
safeguards now. It's big business.
International Data Corp. says e-commerce receipts will hit $150 billion in
2000. The number of devices used to access the Internet may reach 300 million
by 2002. That would represent an almost 10-fold rise from the 32 million
devices in 1996.
Enter Identix Inc. , whose core technology for finger imaging
is proprietary. Identix customers include all the usual suspects starting
with the FBI, a clearing house establishment for finger prints collected by
police units the world over.
When I approached mid-cap stock maven John Westergaard for a Future Stock
candidate, he immediately spoke of Identix. Over the years Westergaard has
come up with a number developmental companies that made 10-fold gains in 10
years. His winners include Xerox, Flight Safety and Oakwood Homes. If you
visit this site regularly, you know 10-fold gains in 10 years is how I define
Future Stocks.
Westergaard has a "broadcast" site on Identix at westergaard.com.
He lays out the case there. He says Identix has 80% of the worldwide market
for "biometric identification systems employing digital finger imaging
technology."
But the "holy grail" for IDX is the "possibility its finger-imaging
technology will eventually be embedded in computers so there will be no
question as to who is on the other end of an online transaction." IDX's
technology might then become as widespread as is Microsoft's core operating
systems technology, Westergaard says.
If Westergaard's argument leads you to speculate in Identix, with
$80 million in yearly sales, you will be interested to learn that the stock is
selling well off its peak. The shares closed on Friday, May 29 at 7-1/8,
down 3/16. The 52-week high: 12-3/8; the low 6-1/2. The shares sold off
in early April after the company said revenues for FY3Qmar98 suffered in
part because two of the large orders it anticipated came in after March
31. Westergaard, who is avid when he is avid, complained that the bad
news caused the "aardvarks" at Salomon and Hambrecht & Quist to bail out.
While "they loved the stock at 12 they hate it at 7." Westergaard calls
this amazing and he asks in frustration, "How could they have recommended
the stock if they didn't believe this company is the number one play on
biometric identification?"
Check Westergaard's website for an analysis of the competition. But
if you hope to hold this one for Future Stock gains, be aware that IDX
would make a fine acquisition for a company like TRW. Were someone to
zero in on this company, Westergaard figures an initial bid might come in
at $18 with a final price in the $20 to $30 range. The takeover price
could be higher if there were more than one bidder.
Westergaard calls these estimates "just a guess." He would rather IDX
stayed independent but insiders control far less than half the stock with
roughly 27%.
The company had sales of $19 million in the March fiscal quarter, up
from $12 million in the similar quarter a year ago. Profits materialized
in 1997 at 5 cents a share. The company earned 6 cents a share in the most
recently reported 12 months.
If everything falls into place, Westergaard sees revenues of
$500 million in a few years, up from $80 million. Is this the little engine
that could? Could be. There is lots of news on this company as the world
becomes ever more security conscious.
Just last Thursday, May 28, New York City Police Commissioner Howard
Safir said his department would begin fingerprinting some 80,000 law
violators: "Our relationship with Morpho and Identix provides significant
time and cost savings," the commissioner said. Identix is a value added
reseller to Morpho.
IDX puts its case this way: "Each of the world's more than 7 billion
unique identities is stored in the tip of a finger." Will Identix have a
finger in every PC pie? |
