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Technology Stocks : Identix (IDNX)

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To: brad greene who wrote (6223)	1/16/1998 6:13:00 PM
From: Steve Felix	Read Replies (3) of 26039

Brad, Stopped to see my Smith Barney buddy yesterday. Claimed he had no thirty page report on IDX. Of course I do one trade with him a year, where I sell something and buy some more IDX. Did have a seven page report from 1/6/98 though. I hope this is new to someone, since my typing sucks. Opinion: We expect Identix to report mixed results for the December quarter [fiscal Q2]. Top line growth likely will exceed our estimate of $19.3 million, representimg more than 65% increase over the Dec. quarter of last year. However, the revenue mix likely will be skewed toward services which we believe performed better than expected during the quarter. Product revenue likely will be lighter than expected due to several expected orders which were to close in Dec. and were pushed out to the March quarter. Services margins, in the 17% to 18% range, are much lower than the product margins at about 50%. Therefore, the heavier emphasis on services revenue likely will lead to lower than expected gross margins and earnings per share. We believe that Dec. earnings per share likely will fall slightly short of our $0.04 estimate. While the Dec. quarter looks like it will not be quite as strong as we expected the underlying business fundamentals are solid and remain intact. As we have indicated in the past, the biometric business is a new and burgeoning industry leading us to "raise awareness and temper expectations" for the companies short term performance. Providing government agencies with fingerprint equipment on an OEM and direct sales basis is often rife with delays leading to lumpiness in sales as is evident in past performance. We do not believe that any sales/contracts that were expected in Dec. have been lost. In addition, we believe that the sales pipeline remains strong with contracts for both the products and services business. We expect the company to announce important new contracts during early part of the March quarter as well as making progress on the as yet untapped services business with its Sylvan Learning Systems joint venture. We would accumulate the shares on any weakness due to our belief that the fundamentals and business prospects remains strong and maintain our 1S-Buy rating and $13 to $14 price target..........their estimates...6/98 .20...6/99 .38...6/00 .56..

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