DJ Identix And Motorola Link On Fingerprint Security Effort --
By Shawn Young
NEW YORK (Dow Jones)--Passwords and PIN codes: so hard to remember, so easy to steal. People write them down and stick them to computers, inviting fraud in the billions. They don't write them down and end up on the phone with customer service or the help desk.
Fingerprints: you can't lose them, can't forget them, can't fake them. At least not this side of mayhem and science fiction.
Identix Inc. (IDX), a Sunnyvale, Calif., maker of fingerprinting technology, and Motorola Inc. (MOT), of Schaumburg, Ill., are betting fingerprints will soon become the primary security system on a range of products from laptop computers to mobile phones to credit cards.
The companies plan to announce Tuesday that they are working together on products that will combine Motorola chips with products developed by Identix's Identicator Technology unit. Identix acquired privately-held Identicator in April for $42.7 million in stock plus $2 million in assumed debt.
The first of the products should be commercially available in a few months, Identix Chairman and Chief Executive Randy Fowler told Dow Jones Newswires.
"I don't know of any enterprise that doesn't want to replace the password," Fowler said. "Up to half the help desk calls in business are password-related."
Those calls, which gobble time and resources, come from the honestly confused, careless and forgetful. Then there are the larcenous.
"There's so much fraud in so many industries that it's worth billions in each industry," said Ray Burgess, a vice president in Motorola's semiconductor business.
Industry experts see fraud-prevention technology as a $1 billion market by 2001. The venture between Motorola and Identix hopes to have "several hundred million" of that market, Burgess said.
"We probably are going to be creating the market as well as serving the market," he said.
The new technology will be small enough and portable enough to be built into a computer keyboard, bank card or mobile phone.
Burgess declined to comment on whether Motorola's cellular phone division will be a customer. Motorola makes chips for Apple Computer Inc. (AAPL), but Burgess declined to speculate on whether the computer-maker plans to include fingerprint technology on its laptops.
Identicator, which makes a $100 external print recognition device for computers, already has relationships with Compaq Computer Corp. (CPQ) and MasterCard.
The need for such technology is growing as fewer commercial transactions, from bank deposits to corporate ordering, occur face to face, Fowler said. With trade increasingly impersonal, he said, technology has to find a way to duplicate what a person's mind does when it recognizes a face.
Passwords and codes are a crude start. Motorola and Identix hope their version, to be branded under the trademark IDSafe, will lead the way to a better system.
Analysts See Potential For Company, Technology
"There is a lot of password angst," said Hambrecht & Quist Inc. analyst Joseph Arsenio. Fingerprint recognition technology "could be a simple-minded solution to what's becoming a nightmare."
In an interview before the alliance with Motorola was announced, Arsenio said investors have been expecting the acquisition of Identicator to lead Identix to a lower-cost, more software- and consumer-oriented business model.
"We are anticipating that Identicator is going to drive some top-line growth," Arsenio said. After recent disappointments from Identix, he said, investors are pleased about the acquisition and the new model it indicates.
He said he expects the company to break even on revenue of $85 million this fiscal year, which ends in June. In fiscal 1998, the company earned 3 cents a share on revenue of $79.4 million.
Disappointments in the past two quarters stemmed from delays in completing the Indenticator deal and the internal realignments that stemmed from it, said Gilford Securities analyst Otis Bradley, who also was interviewed before the deal with Motorola.
Bradley said he thinks the company can bring in revenue of $125 million to $150 million and earn 35 cents to 50 cents a share in fiscal 2000.
He said widely-anticipated announcements, including one rumored to involve Motorola, have been slow in coming, but it hasn't dented his faith in fingerprint technology, which Identix uses in several markets, including lawenforcement and airplane security .
Other physical methods of identification are either less reliable or more complicated. Handwriting varies from day to day, colds and stress alter voices, and eye scanning involves cameras and putting one's face to a machine, said Bradley.
"I think there's a chance that within two or three years, fingerprint technology can go from nearly zero to 100%," he said.
- Shawn Young; 201-938-5248; shawn.young@dowjones.com
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