Biometrics industry stocks this week
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.
-Gemalto N.V. reported earnings this week. Management blamed weak demand in the U.S. and a slowdown in its removable-SIM card market for the non-stellar results (goodwill on the SIM business was written down, registered this quarter). Nevertheless, the company went on to tell a positive story, explaining to analysts that the company will produce a steady revenue stream in the second half of the year, partly as a result of new business in the biometric sector. According to the executives on the call the company achieved an “important milestone” when it finalized the recent acquisition of 3M’s Identity Management business. ”We are internalizing the biometric function and [clients] now see Gemalto more as a one-stop shop… having a good understanding of what needs to be done as far as the biometric data base is concerned, this is, for them, material… we offer a deeper solution,” said the CEO. “As we have said previously, we are very pleased by the completion this acquisition… it is being very well received by our customers. The combination enables Gemalto to provide its customers with a comprehensive end-to-end offering in the field of Identity Management. We are now in a position to address Tier 1 biometric market opportunities.” Gemalto’s CFO went on to say that the ability to offer a wider, more complete banking service package will allow the company to reap opportunities that come with passage of the European Payment Service Directive 2. This EU directive expands the number of firms providing payment and financial services by allowing third party operators and non-banks to enter the payment market. The government wants to increase competition. The new competitors will need a one-stop identity management system. The directive comes into effect in 2018. “We are already the market share leader in eDocuments before the acquisition, and we are now set to further leverage this positioning. By integrating biometrics to our array of technologies, we are now in a position to span the scope of services that ranges from enrollments, issuance and to the growing number of e-services that these documents enable,” said the CEO. Let’s hope those revenues come in and help firm things up. The company’s share dropped from about $46 a share to $36 over the month of August.
-Also struggling last month was Synaptics, which has had a bad year all around. The share price plunged another 20% over the course of this past month. The company is still taking heat for not getting a scanner ready in time for the front of the last Samsung S8. The scanner had to be tacked on the back. This was not a hit with the buying public. There have been a couple quick acquisitions since then. It doesn’t seem to be enough. Sure, the company reported decent fourth-quarter earnings. Investors it seemed wanted a more optimistic story about future expectations. Apparently the guidance management offered was underwhelming, the stock price slipped again in the wake of the latest release. The industry is moving on to newer technologies. Synaptics, which has been criticized as overly reliant on its Samsung business, will suffer out to 2019. The company will lose some Samsung contracts to other fingerprint sensor providers according to analysts. “We believe its non-Samsung capacitive fingerprint business is unlikely to grow given fierce low-cost competitors in China,” according to one.
Not all is lost, however. Management has admitted the lack of future growth from capacitive fingerprint sensors. Now it’s on to the new, new thing. The company is, according to the analyst, “… committing the majority of its resources to developing and commercializing an optical fingerprint sensor.”
-As the latest earnings season drifts into history it might be worth looking at some other quick mentions of biometric-based projects in the batch of conference calls just ended. Some other mentions include the following:
Cirrus Logic executive Jason Rhode, updating first quarter 2018 numbers, said his company, “… made significant progress in new product development… we believe will expand the company’s product portfolio and enhance our competitive position in key markets, including our first 28-nanometer voice biometrics chip… ”
Roger Krone from Leidos Holdings noted the company had a task order from the U.S. Army to provide program management services to the Department of Defense Biometrics program. Leidos is the massive defense industry firm with roots in SAIC, which helped design the cruise missile. The company employs 33,000, generated $10 billion in revenue last year. Not long ago Leidos picked up Lockheed Martin’s Information Systems & Global Solutions (IS&GS). According to Krone, “This win marks an example of a true revenue synergy as we’re able to leverage legacy IS&GS’ prime position on the DoD Automated Biometrics Identification System vehicle and our extensive combined qualifications in tactical biometrics collection, processing and solution development.” According to Wikipedia, the Defense Department’s Automated Biometric Identification System (ABIS), “[Is] …a crucial element of the military’s global identity management and battlefield support systems.” As well ABIS is a “… mainstay of biometrics data sharing partnerships with the departments of Justice, State and Homeland Security.” An earlier version was used “in theatre” by U.S. military forces in Iraq in the 2000s to look up matches between insurgents caught in the field and individuals in the DOD’s database and the FBI’s Integrated Automated Fingerprint ID System (IAFIS). It is also used around the world at U.S. installations for identity management.
Jeffery Yabuki, CEO of a company called Fiserv Inc., announced during its conference call that the so-called “Verifast” palm-based biometric solution was named the security innovation of the year in a competition. The device also ended up finalist for best consumer-focused product. Fiserv is a massive provider of financial services technology. Banks, credit unions, securities broker dealers, leasing and finance companies; they go to Fiserv, top three (by revenue) among technology providers to U.S. banks. Total revenue last year was $5.51 billion, which is not huge, huge, but huge. Today it’s a Fortune 500 company, having grown through more than 150 acquisitions over the past 25 years. At first the company was buying up up bill payment and cheque clearing systems. Later on it acquired online banking companies. A deal to acquire a Citicorp property led to contracts with the major American commercial banks. Now Fiserv is buying mobile banking applications and products to ensure “… secure online banking channels.” The device mentioned in the earnings calls, Verifast, is a biometric device that reads palm veins. According to the company palm vein scanning is, “…a highly reliable method of identification… Veins are ‘hidden’ under the skin, making forgery virtually impossible. Patterns are complex, with more than five million reference points… scanning is hygienic, easy and intuitive to use.” According to the company, the technology is for authenticating consumers in a branch of a financial institution or employees accessing financial institution networks and systems. Stock in the company has done consistently well over time, recently trading at $122 a share.
-The wearables sector came up in several different media reports last week. First off, the CEO of major Canadian electronics retailer, Best Buy, noted in a conference call that one of the hot sellers this past quarter were the next generation wearables coming to market. Another mention was in the grandaddy of business magazines, Fortune. According to a story published last week the newer more complex wearables are the ones selling. The last generation of “dumber” wearables are suffering a stall in sales growth. According to the analysts at IDC the overall market for wearables expanded a solid 10% between the second quarter of 2016 and 2017. More complex wearables enjoyed a boost in sales over 60%. The more basic fitness trackers saw sales decline by almost 1%, the first drop ever. The Fortune magazine article quoted an IDC analyst as saying, “The transition towards more intelligent and feature-filled wearables is in full swing.” Which seems about right. This week Garmin released the vívoactive 3, a next-level wearable that features contactless payments from a regular debit-accessible bank account. The biometrics-based payment system comes from NXT-ID subsidiary Fit Pay. According to a press release, the ability to do contactless payments is, “ … a powerful new feature to one of the most complete smartwatches on the market for the active consumer.” The marketing angle seems right: “The vívoactive 3 with Garmin Pay gives people with active lifestyles an incredibly easy and convenient way to pay without having to carry a phone or wallet – something anyone who runs, bikes or just leads a fast-paced life will love,” said Michael Orlando, president of Fit Pay, COO, NXT-ID. Garmin unveiled the new digi-jewelry at the International Franchise Association’s Consumer Electronic Unlimited show in Berlin on August 31, 2017. Consider this the start of the second wave of new more complex and useful wearables. The press release noted a study from Juniper Research that found more than half of global transactions (53%) through POS (point of sale) will be contactless within five years compared to just 15% this year.
As if there was nothing more to say about wearables this week some sort of high point in terms of awareness occurred as the MLB league-leading Boston Red Sox were alleged to have used an Apple smartwatch to monitor and communicate the pitching signals of opposing teams. Perfect. You couldn’t buy advertising like that.