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Biometrics: Big Business
By James. H. Smith
January 26, 2006
Much of the discussion in the defense and homeland security market in the
last week centers on whether the upcoming initial public offering (IPO) of
US-based defense research company Qinetiq Group will be open to retail
investors.
The UK Ministry of Defence announced in mid-January its intention to float
the company in a GBP1.1 billion initial public offering (IPO).
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While the ministry has steadfastly maintained that shares were to be sold to
institutional investors only, there may be a way -- although unlikely -- for
retail investors to get a part of the action.
It appears that the sole opportunity for retail investors would be if
private client stockbrokers would apply for shares and resell those shares
at the retail level.
Most of the people I have spoken with say that retail investors should not
hold their collective breath but that it could be possible.
While Standard & Poor's (S&P) reported that for the full year 2005, the
rating agency's Aerospace and Defense Index advanced 14.0 per cent versus a
3.8 per cent rise in the S&P 1500, primarily driven by advances in Boeing
and Lockheed Martin shares, S&P maintains a negative outlook for the defense
segment.
However, some of the smaller players in the defense and homeland security
market remain upbeat.
Omaha-based Gabriel Technologies Corporation (OTCBB:
GWLK), a homeland
security company, recently announced the acquisition of a majority interest
in Resilent LLC in a stock and cash deal worth US$5.36 million. Resilent,
also based in Omaha, is currently doing business as Digital Defense Group.
Gabriel will acquire 50.1 per cent ownership of Resilent in exchange for
USD$2 million in cash and 2 million shares of Gabriel common stock.
Pali Capital is providing financing for the acquisition.
Gabriel's business is in developing, manufacturing and selling a series of
physical locking systems for the transportation and shipping industries,
aimed at keeping cargo safe from risks due to theft and terrorism.
Gabriel Technologies is also the parent company of the
next-generation-assisted GPS company, Trace Technologies LLC.
Digital Defense developed and manufactures portable, self-contained security
devices using fingerprints to access buildings and computers.
Among those offerings is a biometric security access card -- or biocard.
Digital Defense has initiated several biocard pilot programs with a number
of Fortune 100 companies, major airlines and the US Department of Defense.
Management believes significant purchase orders will be placed pending
successful completion of these programs. These pilot programs are forecasted
to generate a minimum of US$15 million in revenue in calendar year 2006.
Cale Smith, a Gabriel spokesman, told
InvestorIdeas.com, that, with the
acquisition, Gabriel now is a leading provider of proprietary solutions in
three rapidly growing segments of the homeland security market: asset
tracking, physical security and biometrics.
"Our legacy product is a physical locking device for the transport industry
and it has definite implications for the homeland security market. In fact,
the acquisition provides significant overlap between the homeland security
and defense sectors."
Smith said that there is a market in both sectors for small companies.
"Some companies are too small to achieve the critical mass required to
compete for government contracts. But other small companies have the
expertise to produce products through proprietary technologies that the
government is looking for."
Gabriel Technologies might be off in the right direction.
In mid-January, Nasdaq-traded identity solutions provider Viisage Technology
and biometric technology innovator Identix Inc, also traded on the Nasdaq,
entered into a definitive agreement to merge in an all stock transaction,
valued at about US$770 million on a fully diluted basis.
The merger is expected to close in the second quarter of 2006.
There is big money in biometrics. Companies competing in that sector are
going after a market that, by industry estimates, will reach US$3.5 billion
by 2008.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may
hold long or short positions in any of the stocks mentioned in this article
and those positions can change at any moment.
InvestorIdeas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article. James
Smith is a freelance writer. Nothing in the articles should be construed as
an offer or solicitation or recommendation to buy or sell any specific
products or securities. Past performance does not guarantee future results.
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