Where we stand . . .
The stock price is still around $10, more or less where it has been for several years. Those of us who make and keep investments based on stock price movements are either complaining or out of the stock. But those of us who make investments on the fundamentals of a company have to be pretty satisfied. IDX is pulling away from its competition. Let's look at the competitive risk, and the market risk in the IT marketplace:
Competitive Risk
In the PC marketplace, Identix has OEM deals with Compaq and Toshiba, and a major reseller in Dell -- three deals with major PC manufacturers. (Toshiba is major in laptops, and Compaq and Dell are the top two boxmakers.) IDX has OEMs in Keytronics and Cherry, as well. No competitor has even one deal of the magnitude of these three. Veridicom has a deal with Acer, a third-tier player; Digital Persona has compatibility with IBM.
In wireless, IDX has Motorola, and MOT is primed to give biometrics a big push. There is a Samsung product and perhaps something else in Korea, but nothing of MOT's magnitude out there. Nokia and Ericcson have not taken up biometrics at all.
In the past year, Identix has received investments from Motorola and Verisign in itrust, with a likely investment coming from Aether and a couple of other unidentified companies. An IDX/MOT OEM/distributor agreement is expected to be announced at any time, and Verisign has signaled it will be working with IDX technology in the future. Although Digital Persona and Veridicom received seed money from Intel a few years ago, neither has announced any major strategic investments, neither has been able to come to market with an IPO, and rumor has it that both are apparently scratching for further cash.
Software acceptance: GSA has adopted the IDT (now IDX) fingerprint template for federal government use, and IDX is a first-tier subcontractor to three of the five contractors on the $1.5B GSA smart card common access contract. IDX software is the standard for CPQ, Dell, Toshiba, and MOT. IDX has the inside track with VRSN. MSFT has just certified IDX software (and hardware) for Windows 2000, and is demonstrating IDX software to MSFT customers, as well as having used IDX software at its launch in February 2000, and having used it in a sales promotion in Hong Kong last December. IDX has stated that MSFT is working only with Identix on biometrics. Novell is using IDX in NMAS. No competing software has any similar level of acceptance. I/O's MSFT deal has sunk without a trace, amid signs (and rumors) that MSFT has thrown them over for IDX, especially given the adamant pro-BioAPI stance of the US government, Intel, and CPQ. Sony, while an I/O customer, has no marketplace presence. Secugen has not made any significant inroads, either. ESAF, once a potential competitor, is now just a bad joke. Networks orient around common standards, and the acceptance of the Identix standard appears to be accelerating to the point where critical mass may already been achieved. There are two potential threats remaining on the software front: MSFT and Intel, the gorillas. If MSFT decides it wants to come out with its own biometric standard, or Intel develops a BIOS chip using, say, Veridicom software, Identix will have a major problem in the PC marketplace. But there's no concrete sign of either possibility yet; they are just something to worry about.
Hardware: Identix leads the field in combining price point, form factor, and physical reliability. The silicon vendors such as Veridicom and Authentec have not been able to break through on price and sensor fragility. The optical and other vendors, such as Digital Persona and Ethentica, have been unable to compete effectively on price and size (although Ethentica may have a similar PCMCIA product). An introduction by IDX of the DFR-400 would widen its lead here.
ASP level: itrust is the most ambitious and sophisticated of the several biometric application service providers. It includes transaction management, security, and authentication. Ethentica (nee WhoVision) and eTrue (nee Miros) are primitive compared to the itrust concept, limited to an internet-based sign-on concept. Of course, Identix hasn't launched itrust yet, so this is more of an anticipated advantage.
Competitive risk conclusion: The risk from other biometric fingerprint vendors is at a minimal level. The greater, but still slight risk, is from an entry into the field by MSFT or Intel. If Identix could lock up the cooperation of these two players, this part of the game is won. Facial and voice authentication will have their own minor niches, but don't really compete with fingerprint.
Market Risk
I believe that the stock is still at $10 largely because the market risk issue hasn't been addressed to investors' satisfaction. (There are two other factors adversely affecting the stock price -- the tenprinter marketplace, where DBII has given IDX some problems, and the tech bear market -- but they are secondary concerns.) Although press coverage of biometrics has picked up as the price point has dropped, we still haven't seen the first major deployments occur. The 650-seat Florida Supreme Court doesn't count. It is unlikely that there will be a total failure of the potential biometric market, but the size of the market is in great doubt. If we can see two or three 50,000 seat deployments by IDX, preferably both government and private sector, the stock price will move to a completely different level. Until then, and until these deployments work as promised, the technology is unproven and the market for the technology is unproven. |
