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Identix Misses Revenue Target

Budgetary problems in Washington and the dramatic drop in technology spending by companies have hurt sales.
Dec 16, 2002Dec 16, 2002 - Identix (Nasdaq: IDNX), a Minnetonka, Minn.-based biometrics company, said yesterday that sales for its fiscal second quarter would fall below guidance provided by the company in August. Back then, Identix forecast record growth for the coming year (see Identix Posts Steep Loss).

Identix's Atick
During a conference call with financial analysts, Identix President and CEO Joseph Atick blamed the company's problems on a number of factors. Chief among them are the continuing budgetary and appropriations delays in Washington. With the exception of the Department of Defense, federal agencies are operating on temporary spending bills that prevent them from going forward with new initiatives.

The budgetary problems also extend down to the state level. Many state and local governments depend on matching funds from the federal government to make new technology purchases. And many states are facing large deficits because the economic slowdown has reduced the amount of tax revenue they are receiving.

Another problem has been confusion over the Department of Homeland Defense. The department was only created last month, and its mission has not been well articulated. Many agencies that will become part of the new department are reevaluating their roles and their technology needs. And in some cases, funds are being diverted to prepare for a possible war with Iraq.

And finally, Atick blamed Identix's weak sales on the dramatic slowdown in technology spending by companies. He cited a Bureau of Economic Analysis study that suggests investment in technology in the United States is at its lowest level in 30 years. "We face a challenging environment for Identix and the biometrics industry as a whole for the next couple of quarters," he said.

Identix now says it expects revenue to be in the range of $20 to $23 million for the fiscal second quarter, which ends on Dec. 31. In August, it forecast revenue of $27 to $30 million. The company also said it expects to post a pro forma net loss per share of between 6 cents and 8 cents, before charges related to its merger with Visionics Corp. and before stock compensation charges. In August, it forecast a loss of 5 to 7 cents per share.

Even though the company reduced its earnings forecasts for all of fiscal 2003, Atick said he was optimistic about prospects for the company and for the industry. He said Identix was reducing expenses and making progress in integrating its products with those of Visionics. He also indicated that the company was developing new revenue streams.

"We are continuing to develop a new value proposition based on software, not hardware," he said. "This is the case even in core business where hardware is a major component. We are using our identification platform as a foundation for delivering integrated solutions to our customers and to create new sources of revenue."

The company is also working with systems integrators and developing a services division. Atick said this would put the company in a good position to take advantage of the growth opportunities when the current climate changes.

"We believe the biometrics industry is no longer an industry in search of a value proposition," he said. "It is no longer an industry that has to justify its existence. An increasing number of human actions are now requiring identification, and hence, biometrics. Today, the industry is moving from the phase of evangelism to the phase of proposing technical architectures and solutions."

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