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.
-U.S. stock market indexes sold off earlier this week. The declines were led by fairly sharp plunge in technology shares. One of those tech companies selling off was Apple. It seems investors were spooked by news that the company had told suppliers to reduce shipments of parts for the new iPhone X by up to 40% as demand for the new phone seems to be muted. Stock indexes recovered over the week, however. A promise by Fed head Janet Yellen to cut rates in the year to come if need be contributed to the optimism.
-Within the tech sector the fallout from the world’s single largest data breach — the loss of 134 million profiles (including SSNs) by Equifax — continued to be a huge subject of conversation. The company’s CEO finally stepped down after laying off other C-suite executives last week. An executive from a private equity fund who sits on the Equifax board has steped in as non-executive chairman for the interim. Shares in Equifax are now off at least 25% since the incident. Officials in both Washington and on Wall Street are aghast at the breach. The data lost is exactly what criminals need to begin to compose a new identity. The breach did not have to happen (it seems to be a matter of executive negligence). But it happened, and that’s creating a new more intense conversation about security. Federal prosecutors have launched a criminal investigation. The CEO was going to have to face a congressional committee (until he stepped down, anyway). A large fleet of lawsuits have been launched. It will be interesting to see if new regulations around security follow. It certainly can be argued that something needs to happen. A panel debate that aired on Canada’s CBC radio these week featured a tech executive who claimed that current software security systems have been built on a “foundation of sand,” and that security technology needs to be improved at a deep and fundamental level. Also this week, the investment bank attached to Canada’s largest retail bank, RBC Capital Markets, released a report claiming that the recent spate of data thefts have the potential to affect the economy while also turning, “… consumers off of digital payments,” thereby hindering the emergence of a cashless society. According to the RBC analysts, “We believe large-scale data breaches/fraud (such as the Equifax breach) can slow the pace of innovation and drive consumers back to using cash for payments… In terms of the payment companies we follow, we do not expect any significant direct exposure but, clearly given the size of the breach, cardholder info has been exposed and cards will be re-issued; therefore, we believe possible ‘air pockets’ in spending could be created, but should be short lived.” The report went on to cite studies that have shown data breaches sometimes send consumers “back to cash,” to avoid worries about identity theft. The report cited a study carried out by Gemalto that found a, “… majority of consumers steered clear of retailers, banks and social media sites if they had been breached.” If there was ever a time for the biometrics sector to step forward and make its case, this is it.
-Working to alleviate the new fears around identity theft is Precise Biometrics, which recently announced its new anti-spoof ‘liveness’ technology is being built into a new Microsoft keyboard. Earlier this year Precise Biometrics entered an agreement to acquire the assets of NexID Biometrics, a specialist in spoof mitigation and liveness detection. This is a key acquisition for Precise. The ability to spoof fingerprint scanners is a real concern. The ability to build into a product the capacity to detect “liveness” is important today. According to the company, “By 2020 almost six out of ten financial transactions are expected to be performed via biometric authentication, primarily via fingerprint sensors in mobile devices. But identity theft and fraud is rampant and without any sufficient anti-spoof protection for fingerprint sensors, mobile commerce will be at risk.” The company just celebrated its 20th anniversary. According to a corporate blog post documenting a party held to mark the occasion, the original vision for the company came from Christer Fåhraeus, a “brilliant Swedish IT and biotech entrepreneur” who saw the need for a powerful fingerprint software algorithm that, “… could operate effectively on a platform with limited processor power and memory (such as mobile phones and smart cards).” According to the blog post the founder also met up with his original team as part of the anniversary and was quoted as saying that, “Back in 1997 I saw that this was going to be big in a world where fingerprints are everywhere, why not use them to open a door lock or a computer?” The current CEO of the company Håkan Persson was also at the celebration. He said that fingerprint recognition is used globally hundreds of millions of times every day to unlock mobile devices and that the convenient and safe technology is spreading rapidly into new areas, such as payment cards, locks, wearables and other IoT products. “Fingerprint Technology has become the preferred choice to authenticate on smartphones and is now moving into more and more products that will be coming out on the market in the next years”, said Persson. “As biometrics is increasingly used for authorizing mobile payments and other sensitive applications, the need for higher security and fraud mitigation is growing.” The events of the past few weeks have emphasized exactly how important better security its. In a press release announcing the new keyboard fitted with liveness detection, “Precise Biometrics argues that the issue of liveness detection on mobile devices — which are increasingly being used for online purchases — is quickly becoming a critical issue.” The liveness detection feature is now part of a product called Precise BioLive. Shares in Precise Biometrics were trading about SEK 1.51 this week.
-Voice-based biometrics firm Nuance Communications has a large footprint in the healthcare sector. But it also recently announced it is opening a “user-experience” center in suburban Detroit. Why would a company with a large existing footprint in the healthcare sector build in Michigan? Why not build the centre in Silicon Valley? It seems Nuance clearly understands that the next new big thing in digital economy is the rise of the automated vehicle (AV). There is no doubt that interest in AVs over the last year and a half has exploded. The advance of learning-based software is giving rise to self-driving cars. This is a technology that was not being considered even five years ago. Suddenly it seems AVs are the big trendy new thing.
The new interest in this sector was kicked off at a race sponsored by the U.S. military though the DARPA division, which famously offered a $1 million to the first car that could navigate a desert track without a driver. The first year the race was held programmers tried to come up with rules-based programming solutions. Those turned out to be a disaster. No one vehicle crossed the finish line. The next time the race was held programmers used learning-based software. That did the trick. AIs are suddenly proving they can be trusted on the roads. Google is currently way out in front of the competition when it comes to AVs. Learning-based programs, of course, need lots of experience to generate their ability to drive unassisted. The Google cars have now driven millions of miles in tests, far more than any other AV (and there are suddenly many, many being tested). As a result Google is generally thought to be far out in front of the race to develop an AV that works. And what seems to be coming is an epic once-in-history merging of the digital technology from Silicon Valley and the big steel of Detroit. Just a couple years ago the big automakers didn’t think Silicon Valley could come up with an AV. Now it seems that’s possible and the big global automakers are suddenly racing to catch up. GM recently bought Lyft to get into the race. GM is said to be allowing that company to operate as a Silicon Valley-type start-up within the rigid and formal corporate structure that is GM. Early mistrust between the Detroit firms and the Silicon Valley companies has given way to a new grudging respect (the auto companies didn’t feel they were getting respect from the Silicon Valley firms, which were a bit too cocky). What is occurring now is a frenetic and fast race to come to market with an AV. Ford has promised it will have a mass market AV on the road by 2020. In 2018 Audi will introduce the first so-called Level 3 AV to the market (the vehicle will be able to pilot itself in driving situations under 30 miles an hour, but will require a human to keep hands on the wheel). The latest Cadillac will have a system that can detect if the driver is having a heart attack and will be able to pull the car to the side of the road, put on the hazards and contact first responders. No wonder then that the number of venture firms in this new space jas exploded over the past year and a half. Nvidia, which is known for making chips for game consoles, has focused on the AV market and became the single highest returning stock last year. Shares in the company having now appreciated well over 400% recently. Everyone seems to realize that the appearance of viable AVs represents a massive market. By many measures the auto industry is the world’s single largest economic sector. So no wonder Nuance is setting up in Detroit. There is a new AV testing ground at the University of Michigan, other companies are setting up in the region. The epic, one-time merging of the big steel of Detroit and the digital tech of Silicon Valley is going ahead, and is about to change the world in profound ways. AV evangelists predict owners will be able to rent out their rides while they’re at work, allowing the owner to make money off of what is the second biggest consumer good the average person will buy in their lifetime. Cities will be freed from gridlock as AVs communicate among themselves to allow much more precise navigation of city streets (why have stop lights if the cars can communicate among themselves to determine what order the vehicles will go through the intersection before they arrive?) The major U.S. investment bank J.P. Morgan even put out a report predicting that the sales of alcohol will take off as the idea of driving drunk becomes obsolete in the era of AVs. Analysts in the sector argue about how fast it is this new world will arrive — the predictions range from, basically, “tomorrow” to “never.” Whatever the case, billions are suddenly flooding into this sector. Nuance is smart enough to see the opportunity and is making a move. According to a media report the company’s new Detroit facility will research user experiences and “car-to-home connectivity.” The Burlington, MA-based company also says it will develop key technologies for AVs such as voice-assisted commands that will be a major part of the new driver assistance system. One report quotes the General Motors Chief Technical Officer as saying that improving voice-recognition systems is important right now, “Every manufacturer, to a greater or lesser extent, has issues with voice recognition.” Which is where Nuance comes in.
According to Nuance the new Drive Lab will, “… study drivers’ preferences, in-car experiences and future automotive interactions.” The executive vice president and general manager of the Mobile Division is quoted as saying, “Automotive technologies are changing rapidly, and innovations like autonomous vehicles and advanced shared mobility are closer to reality than we think, so it’s important that we put a strategic focus on research to provide a truly intelligent automotive assistant that users can trust, now and in the future.” In fact, it is a Nuance product that will be at the heart of the “conversational” system in the 2018 Audi A8. Going on, the Nuance vp says that, “Automotive is the largest segment of the Mobile division at Nuance, which also serves industries such as telecommunications, financial services and health care.” That shouldn’t be a surprise. The auto industry is massive. Cars are about to become much more digital. Good for Nuance for staking a claim on this new and fertile land. The company’s stock was trading at about $15.50 this week.