Biometrics industry stocks this week

August 11, 2017 - 

As the biometrics industry continues to grow Biometric Update is bringing a new focus to the stories around the stocks in the sector. Check in with this space each week for a rundown of the financial news and interesting ideas from the week that was.

-BIO-key International has been having a good summer. Shares were trading as low as $2.09 this past May. But the stock has advanced to trade above $3.40 this week. To celebrate BIO-key executives had the privilege of ringing the closing bell on Nasdaq this past Thursday. BIO-key executives travelled to downtown New York City to the Nasdaq MarketSite at 4 Times Square (43rd and Broadway). There, Michael DePasquale, chairman and CEO, rang the bell bringing the trading day to a close. A press release from Nasdaq described the company as one that is “revolutionizing [biometric] authentication.” Congratulations to the BIO-key team.

-Norwegian firm IDEX ASA reported revenues for the first half of 2017 this week. The company’s CEO Dr. Hemant Mardia and CFO Henrik Knudtzon presented the numbers in a webcast. Revenue trailed the 2016 numbers but the news was still positive. IDEX generated a bit above USD $590,000 in the second quarter of 2017 and USD $1.45 million for the first half of 2017. (This compares to USD $1.77 million and USD $2.23 million respectively in 2016). As well, the company reported several key product advances, including, “… significant commercial progress on its biometric card programs.” The company introduced a new fingerprint sensor based on its latest application-specific integrated circuit, which boasts improved power management. According to the company, “The new sensor supports dual-interface biometric card operation without an internal power source.” This month IDEX also introduced a new “matcher algorithm” for biometric cards that is specifically designed to improve performance in cases where there, “… are acute power, processing and memory limitations.” The company also reported a biometrics-based smartcard being tested in conjunction with Mastercard has successfully completed an end-user trial in Europe. According to IDEX execs, “… further trials will be conducted and preparations for the final card certification are well underway. Mastercard has announced that a commercial roll-out is targeted for late 2017.” Another bit of good news for the company was the announcement that it had received an initial order for its smartcard sensor from a major Asian security card provider that sells into the region’s government identification and access control sector. IDEX execs say that they expect “several additional customers” to commence sampling during the second half of 2017. As for the business environment ahead the IDEX execs said, “The mobile market is rapidly evolving towards infinity displays, which maximizes the viewable area on smartphones… This structural design requires the fingerprint sensor to be moved to the back of the handset or to be integrated into the display itself, both representing unique opportunities for using the IDEX off-chip sensor.” In terms of strategy the execs say they are focused on driving adoption of sensor technology in three mass markets: “cards, mobile and IoT.” The company’s highest priority is to, “… reinforce its leadership position in the biometric cards market.” Impressive stuff. No wonder the company’s stock is up almost 10% year-to-date.

-Another company announcing half-year results this week was South Korean chip-maker MagnaChip. The company’s CEO, YJ Kim, manned the conference call, telling listeners that, “… more than two years ago we made a strategic decisions to focus our foundry business on analog technology to better align our internal capabilities with the needs of global [integrated chip] players…” A recent deal the company announced with ELAN Microelectronics seems to follow from that strategy. ELAN recently selected MagnaChip as its foundry partner in a bid to make smartcards with embedded integrated circuit-based fingerprint sensors. In a press release Kim was quoted as saying his MagnaChip’s manufacturing process is “well-suited” for smartcards that “require low power consumption.” Stock in MagnaChip has done well this year. In January of this year shares were trading at just $6.10, but have climbed to about $10.50 a share this week. Kim announced in the conference call that the company reported total revenue for the second quarter of $166.7 million, essentially flat compared to the $167.1 million generated in the second quarter of 2016.

-Mighty Wall Street investment bank Morgan Stanley recently announced it is launching a Multicultural Innovation Lab to help start-ups secure funding. One of the five companies admitted to the lab is a firm called Kairos. The company’s website says it is working on an artificial intelligence product that uses “computer vision and machine learning” to recognize faces in videos and photos. The tech can determine, “… identity, emotions and demographics.” According to the company, “What we have created provides developers the building blocks to add the benefits of face analysis to any product, app or service – affordable and easily… If machines can know who a person is, and how they feel – incredible insights can be unlocked… The ‘mainstreaming’ of face recognition is enabling companies to engage it in a multitude of profitable uses, across industries.” Founded in 2012 and based in Miami the company has already attracted investments from Kapok Capital, New World Angels, the Florida Institute, 500 Startups and Backstage.

-Audio chip developer Cirrus Logic delivered a solid earnings report this week. The company announced revenue grew almost 24% to $321 million in the first quarter. As many know, the company’s main client is Apple, which delivered 76% of the company’s sales in the first quarter. That number is down from 78% last quarter, but the company still has most of its eggs in that Apple basket. No wonder the company is looking around for other revenue streams. One new product announced by the company is a voice-based biometrics chip that is said to be at the “tape-out” stage (the point at which a final design is sent to manufacturing). The new biometric product may be ready to go but the firm’s CEO was careful to tamp down expectations, telling analysts that “meaningful” revenue from the company’s new products is still “years away.”

-A spate of stories appeared in the general media this week discussing the recent announcement by a Wisconsin vending machine company that it is “chipping” 50 of its employees. The company plans to inject rice-sized chips into the fleshy party between the fingers and thumb of its employees to, “… facilitate wireless payment for snacks as part of a voluntary test program.” The company, Three Square Market, designs, “… software for break room markets that are commonly found in office complexes,” according to a media report. So the plan to chip employees is a bit a test for a technology that could be used by the company in its products. The CEO of the company is quoted as saying, “It’s the next thing that’s inevitably going to happen, and we want to be a part of it.” However if the stream of articles in the mainstream media are any indication it seems many think it will be a while before the average North American accepts this new technology. One writer questioned whether acceptance would happen as easily and as rapidly as the Three Squarre CEO hopes noting there is a, “… perceptible ‘ick’ factor that people need to get over if such implants are to take off…” An article in USA Today was titled, “You will get chipped. It’s just a matter of time,” but went on to note that a “full-throated” debate has broken out on the Internet over the practice. According to the USA Today reporter, “Religious activists are so appalled, they’ve been penning nasty 1-star reviews of the company, Three Square Market, on Google, Glassdoor and social media.” It was only in 2015 that an evengelical Christian working in a mine in the United States claimed he could not use the biometric hand scanner set up by his employer because it violated his religious beliefs. Evangelical Christians believe biometric scans and chip implants represent the “mark of the devil” mentioned in the Bible, and so acceptance of chipping in the American heartland will be a challenge. It’s worth noting that in the court case, U.S. Equal Employment Opportunity Commission v. Consol Energy Inc., the jury ruled in the employee’s favor. A source quoted in the USA Today story said that, “It will happen to everybody… But not this year, and not in 2018. Maybe not my generation, but certainly that of my kids.” Another source quoted in the article put the date of acceptance even further out. “In 10 years, Facebook, Google, Apple and Tesla will not have their employees chipped. You’ll see some extreme forward-looking tech people adopting it, but not large companies,” according to the source. The idea of being chipped has too “much negative connotation” he said, but by, “… 2067 we will have been desensitized by the social stigma.” Mark the date.

-The major business magazine in America, Fortune, recently ran an article on a biometric firm named BioCatch. The story reports the firm is using behavioural biometrics to help credit bureaus spot fraudsters applying for credit cards. A major client of BioCatch is the massive retail credit reporting company Experian. The organization runs credit checks on new clients for major retailers and sells credit reports to individuals wondering about their rating. According to the Fortune writer the company’s software, “… analyzes the way users interact with devices and websites by tracking a wide range of factors including how fast they type or the way they move their mouse across a web page. The information collected can help BioCatch determine whether users who are who they say they are or impostors.” Using these behavioural biometrics the company claims it can catch the bots that are creating a flood of automated fraud. Stolen identity information is showing up on the ‘dark net’ in greater amounts than ever according to the story. “Behavioural biometrics is one of the up and coming techniques [that is]… effective in this day and age when you have more scripted attacks and more bot armies recruited to submit applications,” according to a source in the report. The piece goes on to describe the ‘tells’ that give away a bot. “Fake users might be slower than real ones in filling out basic information like date of birth and name but might be very familiar with how a form is structured and will move more quickly between questions… For real users, ‘there tend to be natural pauses between data entry, as you don’t really know if the form is going to ask you for your phone number, or zip code next,'” according to the story. An interesting stat in the piece: About six percent of U.S. consumers were victims of identify fraud in 2016.

-According to an article in American Banker magazine Canadian authorities have noticed a seasonal-based dip in the performance of iris-based biometric scanners. Apparently, when the days get shorter in the winter, there is an effect in terms of the reliability of iris-scanning. It turns out that some of the scanning kiosks were receiving more natural light at certain times of the year “making pupils smaller.” As pupils are more dilated in December due to lower light “there was less iris to scan…,” leading to a reduction in reliability. Yet another hassle related to living through the long and dark Canadian winter.

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About Jeff Sanford

Jeff Sanford has worked as a business journalist for more than fifteen years. He has held staff jobs at major commercial publications such as Canadian Business and National Post Business magazine. He has contributed to various Canadian, U.S. and UK-based publications. He has written about markets, economy, finance, energy, infrastructure, government policy and technology. He currently lives and works in the west-end Toronto neighbourhood of Parkdale.