This week in biometrics industry stocks
As the biometrics industry continues to grow and expand Biometric Update is bringing a new focus to some of the stock stories in the sector. Check in with this space each week for a rundown of some of the financial news emerging out of the group of biometrics industry stocks we like to follow.
– Might a new wave of government-based biometric business be about to emerge in Canada? Seems so. The trendy magazine Vice reports this week that, “For over a year, Canadian military, intelligence, police, and border agencies have been meeting to develop and coordinate their biometric capabilities.” The story is based on Freedom of Information requests. The story notes that, “[The initiative]… shows that the Canadian government is reigniting its focus on biometrics after a similar attempt a decade ago fizzled out. According to these documents, which include emails, meeting agendas, and briefing reports, the meetings are an effort to coordinate the critical mass of biometrics programs that exist across many government agencies, particularly those relating to national security.” The story also notes that the US has put together similar working groups such as the National Science and Technology Council sub-committee on biometrics, which was a “formal working group” established in 2003 to coordinate biometrics efforts. The report notes that the group regularly released public updates of its work. In contrast, according to the Vice report, the Canadian effort is “informal.” Apparently, the Canadian Security Intelligence Service (the country’s analogue to the CIA), the Royal Canadian Mounted Police (the national police) and the Canadian Armed Forces, as well as the country’s border and immigration agencies, are all taking part in what is being called the “Government of Canada Biometrics Community of Practice” (CoP). According to the story the group had its first meeting in March of 2016. “The [initiative] was established … to encourage information-sharing and foster collaboration between federal departments and agencies that have an interest in biometric technologies and their applications,” according to a quote from a Department of National Defense (DND) spokesperson. Vice also reported last year that the RCMP is, “… seeking to upgrade its fingerprint data with biometric facial recognition technology in order to keep pace with US law enforcement.”
– Last week brought with it some big swings in share prices. Market players are said to be a little more concerned these days about Trump’s gonzo management style as president. He may actually be creating more chaos than growth in the economy. The expectation among some that tax cuts and reduced regulations would lead to an economic bump have not turned out. The bond market is now signalling a slowdown in growth. Recent highs in various sectors of the stock market have been trimmed. One company that has had a bit of movement in its stock price is Synaptics Inc. Shares of the company lost 20% of their value in the days after a deal to acquire two companies, Conexant Systems and Marvell Technology Group, were recently announced. Synaptics also trimmed its guidance for revenue in the fourth quarter of 2017 and the market punished the company for that. But a suggestion in the financial trade press to ‘buy the dip’ seems prescient. Shares in the company have largely rebounded since then. Synaptics also announced this week it will offer $450 million in convertible senior notes due 2022. The proceeds will be used to pay off $123.8 million in outstanding debt. The company also said some of the proceeds will be used to repurchase up to $100 million worth of shares, which will be looked on favorably by investors. The two recent acquisitions are also expected to give Synaptics exposure to the burgeoning IoT space. A recent report from IDC forecasts the, “… IoT market will grow at 16.7% in 2017 to reach $800 billion; [compound annual growth] of 15% is expected during 2017-2021.” The two acquisitions put Synaptics in that space. The Conexant deal gives the company a foothold in home networking. The only other sector as hot as IoT is the emerging world of automated vehicles (AVs). And Synaptics has a foothold there as well. A brokerage that is positive on Synaptics AV efforts is Needham & Company, which talked up the company in a recent investor seminar focused on technology in the automotive sector. A Needham analyst recently reiterated their ‘buy’ on the stock and set a price target of $65 for shares. According to Needham, “…automotive revenue [at Synaptics] is estimated at $40 million for the year, or [about] 2% of total revenue in 2017.” The analyst expects that number to double by 2020 and triple by 2022. Synaptics now has products being designed into vehicles this year at eight original equipment manufacturers. Altogether it seems investors like the story at the company. Although the stock price of Synaptics fell from about $60 to $51 a share recently, it’s already now back around $59.
-Gemalto also suffered a bit of decline recently in the wake of a surprise profit warning from the Dutch-UK digital security company. The company blamed the correction on its revenue numbers to the, “…slow adoption of the chip-and-pin payment method in the U.S.” Investors were likely spooked by the fact the company announced the cut to its guidance just weeks after giving guidance on its full-year 2017 numbers. According to a report, “… fourth-quarter revenue will be between 7% and 9% lower and that revenue from its payment business will be some €100 million ($108 million) lower for the full year.” That bit of negative news has been noted by investors. Since then the ‘short interest’ in the stock (a bet that the value of shares will fall in the future) has increased 9.3% according to stats from market regulator FINRA.
– In other news from the UK biometric industry a report out of London, England notes that a new tech start-up named AimBrain has raised £4 million in Series A funding. The company is described as one that provides “biometric identity as a service to help fintech companies and other financial institutions fight fraud.” BGF Ventures led the round, with participation from, “Episode 1, Entrepreneur First (EF), and a number of angel investors including Simon Rozas, Chris Mairs, and Charles Songhurst.” The company was founded in 2015 and is said be in the “same cohort” as Magic Pony, a startup that that is now part of Twitter. The report goes on to explain that AimBrain has built biometric authentication technology based on voice, face “and how you interact with your device, such as typing speed or the way your hand shakes…” The company’s key selling points is that the, “startup’s ‘plug and play’ modular approach…enables all three forms of authentication to be used at the same time or in a granular fashion… For example, a bank could use behavioral authentication in the background, allowing a customer to access a banking app without the need for multiple passwords. If the same customer then phones the bank’s call center, voice analysis could be used, while facial recognition could be used at ATMs or in-branch.” A co-founder of the company, Andrius Sutas, is quoted as saying, “No single biometric is good enough in itself… To mitigate as much risk as possible, you need a platform approach.” The company’s focus on the fintech sector is probably wise. Fintech has been a hot area of late. In Toronto a new fintech incubator is attracting lots of attention. A recent report from the Toronto Financial Services Alliance found that fintech investments have exploded of late, with 140 firms having done about 160 deals in the last few years.
– A report in a defense industry trade journal features an interview with Lt. Gen. Alan Lynn of the Defense Information Systems Agency (DISA), the U.S. military’s IT provider. Lynn talked a bit about the future of biometrics in the Army and suggested “next-generation biometric identifiers are related to the data that soldiers create through their activity. That could include everything from the way that a soldier walks, to the way she holds her phone, to places that she’s been,” according to the story. Lynn is quoted as saying, “In the future, we see that the systems you carry on you, developing information on you and taking information from you… Your walk is as individual as your thumbprint. Why is that important? Well, if you are in warfighting, oftentimes you wear gloves, oftentimes you wear masks…you can’t use a lot of the biometrics you would normally use. But your gait, your walk, that’s going to be there. We think that’s an important part of our future for identity.” DISA will also authenticate identity based on patterns of life according to the story. Says Lynn, “Where you go says a lot about you, and your phone tracks it. Statistically speaking, a large enough dataset of locations and times is as strong an identity as many common physical features. You go to your workplace; you go home; you notice your phone already registers those two places? Because it knows where you’re going. Those are patterns of life. Those are things that can be imported into the device.” The general went on to suggest (as the co-founder of AimBrain did) that the future of biometric identification is based on a combination of multiple indicators, “…to achieve a composite score.” According to Lynn, “When you start getting all of that data… your identity score goes up. That will determine how much access you have to different portions of the network.”
– A newspaper report from the Turks and Caicos Islands finds that biometric information (fingerprints) will be gathered from all residents. The legislation to make this lawful is to be passed soon according to the premier of the country, Sharlene Cartwright Robinson. She announced the plan during a radio interview in the first week of June. According to Robinson the measures are necessary to fight crime and so the entire populace of the country will be entered into the database. “We will have legislation in place for that, it would be absolutely nonsensical to just do part of the population, we must fingerprint everyone,” Robinson is quoted as saying. “When we go to America and every time we have to place our fingers to print on whatever that machine is, I mean they also look into the camera and all these things we don’t complain… The fact is, if we’re not going to have persons who are going to be coming forward to help the police solve offences then we have to look at all crime fighting initiatives that will help and that is one of the things we have to do.”
– It seems many are coming around to the conclusion that convenience trumps any concerns about privacy. Or so goes the conclusion of a recent report from Mastercard and the University of Oxford. The study finds that “people across the UK are happy to use biometric security processes such as iris scans or fingerprint authentication.:” Ajay Bhalla, president, Global Enterprise Risk & Security, Mastercard, commenting on a corporate blog was quoted as saying, “Effective mobile biometrics melt into the broader experience of consumer-centric financial services… They’re driving the trend toward a password-free future where digital identity is all about who we are, not what we remember.” The survey found that, “… less than half (46 per cent) trusted fingerprint recognition to replace their traditional password, in spite of the benefits it offers in security and convenience,” according to a report. The rapid rollout of biometric functions on smartphones may be breaking down resistance to the use of biometrics. According to the report, “A number of banks in the UK have rolled out biometric technology in the past two years for both customer authentication and banking services. Santander UK, for example, launched a service this year that allows customers to make payments by asking their iPhone to do it for them.”
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