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Technology Stocks : Identix (IDNX) -- Ignore unavailable to you. Want to Upgrade?

To: steve who wrote (5363)	11/27/1997 9:46:00 AM
From: Keiko	Respond to of 26039

** HAPPY THANKSGIVING ** To all the IDX Threadsters--------from Onslow

To: steve who wrote (5363)	11/27/1997 1:04:00 PM
From: Hockeyfan	Read Replies (1) \| Respond to of 26039

Highlights of Needham & Co. Report - Although I had never heard of Needham before, my equity portfolio manager had and was impressed that this small stock specialist initiated coverage. He said they were kind of on par with Hambrecht & Quist. Much of the report describes the biometrics business and Identix's dominant market position. I will spare you the big picture which we all know. Earnings estimates of 13 cents, 24 cents and 40 cents are net of an assumed 35% tax bite. (By normalizing the earnings to a 35% tax rate Needham is ignoring approximately $2.5 million of tax NOL benefits annually for at least the next 10 years. These NOLs must be worth something.) Identix has about 60% of the worldwide biometric ID market and 70% of the worldwide fingerprint ID market. "The Company's products employ proprietary algorithms and customizable applications software, as well as industry leading expertise in optics and high resolution printing technology. In both biometric imaging and Bio-ID fields, Identix provides comprehensive solutions for customers." Although product sales have grown at the compound annual growth rate (CAGR) of 60% Needham conservatively estimates that the CAGR over the next 3 years will be only 40%. 1) It is important to note that Needham's 12 to 18 month price target of $16 is based on a PE of 40 times Needham's 6/30/2000 EPS estimate of 40 cents per share. 2) If the actual CAGR is matches the 60% CAGR currently being experienced the PE multiple should be closer to 60. 3) Needham's revenue estimates of $78.3 million, $100.3 million and $133 million are based on 40% CAGR do not include Sylvan or the 300 machine INS order. Sylvan is not mentioned anywhere in the note. If IDX only produces $133 million in revenue for FY2000 Randy Fowler will be VERY disappointed based on Randy's well documented statement that he would be disappointed if Identix didn't have $500 million in revenues by FY2000. "An investment in Identix requires a long term perspective as the Company is just entering its emerging growth phase and quarterly performance may be lumpy. Based on its position as the leading supplier to emerging with potentially explosive growth characteristics, our 12-18 month price target is $16 ." "The Company's expertise in networking and systems integration has allowed it to implement large-scale systems in some of the largest law enforcement agencies in the United States." "The company's gross margins of 50% in FY97 are evidence of its differentiated technology." Livescan Market "Identix has sold about 20,000 Bio-ID products to customers in approximately 40 countries through its worldwide network of sales offices and distributorships ..." "Fueled by a nascent international market and the FBI's goal to receive a majority of fingerprint submissions electronically by 1999, industry sources estimate that unit shipments should grow at a rate of about 50% annually over the next several years and more slowly beyond the end of this decade." The Company estimates that the installed base of livescan systems is 1750 units worldwide with 95% of these installed locally. "Since the introduction of its TP600 product in 1994, the Company estimates that it has shipped 70 - 80% of the installed base of these systems and its market share for FY97 was approximately 75%." "Although the current market size for biometrics is relatively small, the potential market over the next five years is enormous." Bio-ID "Industry sources suggest that mainstream adoption of biometric technology will take off when prices fall below $250." My Conclusion New coverage is always good. Lehman, Solly, Needham and to a lesser extent Sutro are all conservative which leaves plenty of room for upward EPS revisions and recommendation upgrades. They will defintely have to revise if Identix gets the 300 tenprinter INS order and Sylvan JV results start coming out. HAPPY THANKSGIVING ! Watch out for turkeys running around with their heads cut off!