WARNING: Long Post!!
Hi everyone ---
Haven't been following the thread for a while, and I'm getting back into the game with a recent purchase of ESAF.
I have to warn you that I don't post very often, so I have a penchant for *very* long posts, and run the risk of discussing stuff that may have been beaten to death already. Let me see if I can shed some light on a recurring theme --- why ESAF (or any other biometric company) hasn't been "bumped up" significantly.
First of all, like many of you, I firmly believe that biometrics technology has a stellar future, and will make lots of money for shareholders. It is starting to gain popularity , becoming incorporated into consumer products and it is being sold through some consumer channels. It is ready for prime time. When I first joined SI and started following NRID, IDX and other biometrics companies back in 1996, that would have been a dream come true.
But what's really missing from this picture is an IPO of "Red Hat" proportions.
Why do I pick RHAT? Why is it that we need an IPO of this kind? What the hell does Linux have anything to do with this?
To me, Linux and biometrics have a lot in common. Unix and its variants have been around for a long time. But using this OS was the province of real computer geeks. Have you ever tried to install Linux? Its a nightmare! Even now there are so many flavors of Unix and its hard to know which one (if any) will be "the choice". But if you talk to people who use Linux, they swear by it. Once the installation is done, it is not that difficult to learn to use. And, of course, its stability is legendary.
Who on Wall Street had ever heard of Linux? No one. So why was RHAT's IPO so successful? I think the only way to understand this is to look at the mechanics of what happens before a company goes public. Many of you probably know that the officers of a company and the underwriters have to "shop" a company around to other big financial institutions / mutual funds etc. These latter people are the ones that buy the shares when they are first sold and then, in turn, resell them to their own clients or on the market to individuals. It is during this "shopping around" process (also called the "road show") that company representatives travel all over the country and generate interest / hype for their company.
Ultimately, a combination of factors made RHAT a successful IPO. Linuix's user base had growing slowly, but beneath the radar of Wall Street. The company was marketed as a support and services company for something that was essentially free. But two keys things were that it was an alternative to the standard (Windows) and, equally importantly, it had the backing and investment of some really big players (Intel, Dell, amongst others). Intel and Dell went out on a limb to say some very positive things about Linux and Red Hat. But most importantly, they put their money where their mouth was. Wall Street took notice.
Now Linux is a household name. Any want to take wagers on what will happen when VA Linux Systems and Linuxcare go public? :) The future success of these companies will really be due to the fact that Red Hat's spectacular IPO brought a lot of attention to technology that has, by all accounts, a small user base.
Now to biometrics. IDX, NRID, DBII etc. all went public prior to the internet age --- when IPOs didn't command the hyper-attention and valuations they get today. Any other biometric company going public today is probably not big enough to make a splash --- with one exception: Verdicom.
Verdicom, the first spinoff of a spinoff (Lucent) has the backing of one of the largest and most respected companies in the US. I think one of the main reasons the Verdicom IPO (when it happens) will be successful is because of Lucent's backing. Since they are not a public company yet, they are not required to disclose any financials. So it is difficult to know the extent to which Lucent is supporting the company. But if past is precedent, Lucent certainly owns a substantial fraction of the company.
There is also something else interesting I have noticed about Lucent. There have been a lot of articles here in the SF / Bay Area about how Lucent was more Silicon Valley action. They have opened a new research lab here, recruit here, and bought Ascend Comm. They are experts in optical networking technology, and the spectacular success of some recent IPOs in this area has not escaped their attention.In addition, Verdicom is headquartered in Santa Clara -- in the heart of it all. Unless the people and the management of the company are totally brain dead, they have noticed how going public has changed this entire area. Going public has truly become a phenomena unlike anything we have veer seen. All in all, there are enough reasons for people who will push the Verdicom IPO to be successful.
And in the process of shopping Verdicom to all the investment banks, biometrics technology itself will be hyped up. It is a technology whose user base has been growing slowly, beneath the radar of Wall Street. The technology was mostly adopted by law enforcement and other niche groups, but it is moving to the mainstream. There are still many variants of it. Hopefully, the underwriters will use the correct buzzwords: "e-commerce", "internet security", etc. I don't know if ESAF will get any direct mention; but the fact remains that biometrics itself will get some good exposure. Plus the fact that Lucent is backing Verdicom will not hurt. Afterall, the ain't no "slap a dot-com on it and call it an e-business." This is a real company, with real products and partners, in a potentially huge market. Wall Street will be given an education in what people on this thread have known all along --- that biometrics is an enabling technology that offers the unique combination of security and convenience.
Right now I read about biometrics regularly in Computer Reseller Weekly or Information Week. We need an article in Barrons, the Wall Street Journal, or Time Magazine. And we need it on the front page.
So I guess I could summarize this long-winded post by this: Verdicom's eventual IPO is the catalyst that is going to give biometrics (and ESAF) the exposure they need to break out into the public view. Until then, I am not counting on Wall Street to suddenly wake up and say "Hey! What's biometrics?" Wall Street needs to wake up, and Verdicom will hopefully do that. We can look forward to the day when we don't have to discuss this company on the "Five Dollars and under" thread. |
