powered by GlobeinvestorGold.com
TORONTO (GlobeinvestorGOLD) — If you've seen movies such as Mission: Impossible or Minority Report, you're probably already pretty familiar with biometric devices — they're the gizmos that allowed Tom Cruise to gain entry to a sealed room using a palm-print or an eyeball. Such devices aren't quite as ubiquitous as they might seem in spy films or science-fiction movies, but they are becoming a lot more common, thanks to the U.S. focus on security following the attacks of September 11, 2001.
The government of President George Bush even set up a special federal entity — the Department of Homeland Security — to co-ordinate better security at borders and within the United States. All this created a kind of frenzy for security-related products and companies, a wave that has subsided somewhat recently but helped to push up the shares of companies such as Ipix, which makes security video cameras, and Taser, which makes handheld stun guns used by police and security.
Is there a way to play the biometric side of the security sector? In fact, there are a number of ways — including some that are Canadian — but there are also some large caveats. For example, most of the industry (if it could be called that) is made up of either large technology companies that have a small biometric product business, or relatively tiny companies that have little or no operating history, a weak or even non-existent track record of profitability, and other serious issues. This is not an investment for the faint of heart.
Among the big players in the sector is Texas Instruments, the electronic device maker, whose main business consists of semiconductors, memory chips and pocket calculators. But TI also has a division that makes a variety of sensors for use in industrial and commercial applications, and it recently started selling kits that companies can use to set up their own fingerprint identification systems, using its own sensors and software or those from other companies. That may be a small part of the company's $10-billion (U.S.) annual revenue, but it is still a part of its business nevertheless. Unisys also makes biometric scanning equipment.
One of the companies that Texas Instruments recently signed an agreement with for its fingerprint ID systems was a Canadian company called Bioscrypt Inc., which is traded in Toronto. The company's stock climbed by more than 7 per cent on July 13 to $2.45 (Canadian) on news that its fingerprint-scanning software would be marketed by TI — although other companies will also have their products promoted by TI, including Fingerprint Cards of Sweden. The stock was selling at 68 cents last year at about this time.
"The fact that Texas Instruments has said 'this is going to be our standard for people developing biometric solutions using fingerprints' is a validation of their technology," David Shore of Desjardins Securities told Reuters. "It's not going to drive big revenues for them now, but it's further validation of our thesis on the story." The analyst said that he has a "top pick" rating on the stock and a 12-month price target of $3.75. He says the company should be able to see its annual revenues grow by as much as 75 per cent in 2004 to $15.4 million.
Among the small players in the facial, eye and fingerprint scanning business are a company called Viisage, which makes face-scanning equipment, and a palm-scanner company called Identix. In May, Viisage saw its shares rise by 13 per cent to a high of $14 after it announced a $10-million (U.S.) order from the U.S. Department of Defense to develop "smart" ID cards. The stock has since slid back to about the $6 level, but it is well above the $3.34 it was trading at in January. The company reported a smaller loss in its latest quarter and said it expects to increase sales to about $60-million this year.
Identix saw its stock rise to more than $8 a share in April from about $4 in January, but it has since slid to about the $6 level as well. The company — which makes a range of equipment for scanning fingerprints, skin and facial features — has annual sales of about $55-million and in the latest quarter lost $3.5-million on its operations. The company says its sales have been restrained by a lawsuit launched by a competitor, which claimed it had been denied a chance to bid on a contract with the Department of Homeland Security — a contract won by Identix (the competitor recently lost that case).
Another Canadian player in the field, interestingly enough, is a company called Canadian Bank Note. Although its primary business is making coins and bills for the Canadian government and others, CBN also has an identification business, which makes passports and other forms of ID. That division was recently awarded a contract with the government of New Zealand to develop a next-generation passport that would incorporate a microchip, on which would be stored various information about the holder — including biometric data such as fingerprints or even a DNA sample.
Even if you did invest in Canadian Bank Note, it wouldn't be for long, however. Chief executive officer and principal shareholder Douglas Arends recently announced that he intends to acquire all the outstanding shares of the company and take it private.
Mathew Ingram joined The Globe and Mail's online news team in June of 2000, after spending four years as the Western business columnist, based in Calgary.