Volume 5, Issue 1

October 2010

Inside this Issue

Editor's Intro: Changes at Acuity
Biometrics M&A: Consolidation Mania
ePassport and eVisa Adoption and the Rise of eGates
Preview The Global ePassport and eVisa Industry Report
Industry Events: Acuity Presents, Attends, and offers complementary Meetings

Welcome to the final edition of Biometrics Market Intelligence eUpdate.

Changes are afoot at Acuity Market Intelligence. Changes that we believe not only reflect the shifting market dynamics around biometrics but also will provide even great value to our loyal followers, subscribers, and Clients.

Biometrics are increasingly seen as a critical component of a more broadly defined and rapidly expanding identification solutions arena. In order to serve the broader vendor and end-user base of this expanding marketplace, as well as increasing demand from Acuity's traditional Clients for broader based market intelligence, Acuity is is expanding both its staff and its market focus.

As with any transition, the old must give way to the new. And so we will bid farewell to the Biometrics Market Intelligence eUpdate. However, as I said, do not despair. Look for the re-visioned eUpdate - with it's broader and in many ways more comprehensive market focus - to hit your inbox early next year with Acuity's Q1 2011 re-launch.

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And now, I would like to introduce my colleague and new Principal at Acuity Market Intelligence - Rudie Lion. Rudie has extensive market experience in smart cards, inspection systems, matching software, and testing services. He co-authored “The Global ePassport and eVisa Industry Report” with me earlier this year and previously was the four-time author of the Annual ePassport report of Keesing’s Journal of Documents and Identity.

With the addition of Rudie's expertise and knowledge base, Acuity has broadened its focus to encompass the whole of what we are referring to as "electronic people identification". This includes the entire value chain for the development and deployment of secure biometrically enabled credentials and the application infrastructures that rely on them.

The first product of the "new and improved" Acuity is The Global ePassport and eVisa Industry Report; the result of a six month collaboration between the Principals. This unprecedented data-driven report fills a significant market gap by aggregating previously unavailable global, regional, and national data on the projected volumes and revenues for ePassport and eVisa programs. The report also provides analysis and forecasts for critical technologies including biometrics, document readers, secure credentials, and smart chips and for solution components inclduing enrolment, data management, credentialing, verification, and integration.

Excepts from the report are included below. Also, please take advantage of the Executive Summary Preview of The Global ePassport and eVisa Industry Report. Or, just take the plunge and Order the report now. eUpdate subscribers get an extra hour of follow-up consultation when they purchase the report.

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Significant changes to support Acuity's expanded market focus will be implemented in 2011. These include a range of new product and service offerings, new staff, a new and improved website, enhanced report delivery capabilities, more flexible payment options, and more accessibility of the Principals. However, some things will not change. Acuity will remain fully committed to responsively providing reliable, high quality products and services that are consistently developed and delivered with integrity, intellect, and the rigorous level of insight and analysis you have come to expect from us.

As always, your feedback is welcome. And please feel free to forward your copy of the eUpdate to colleagues and encourage them to subscribe.

More in 2011!

Cheers,


C. Maxine Most

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Biometrics M&A: Consolidation Mania

The late summer of 2010 turned out to be especially hot for the biometrics industry. Three major mergers and acquisitions reverberated through the marketplace leaving many in the industry wondering what the ramifications would be. While Safran's purchase of L-1 was certainly no surprise, and the AuthenTec - Upek merger seemed inevitable to many (especially with hindsight), the 3M - Cogent deal came as a surprise to many; including me. Here are some thoughts on these compelling market developments.

How many companies were knocking the doors down at L-1 to make an offer, especially one that represents more than 30% of trading stock value for a company with questionable financial performance? Let's face it, L-1 was a lot more bluster and hype than it ever was real contender. Did LaPenta ever really intent to build a biometric powerhouse? That seemed the case when he showed at the Biometrics Consortium Conference in 2006 and told the biometrics community that he was going to show us how it ought to be done. L-1 really never became more than a container for a series of never quite integrated companies. They seemed to grow too aggressively, too quickly, loading up too much debt, without achieving profitability. You can certainly question La Penta's commitment to long term strategy and really building a sustainable business model, but then again, propelling L-1 to a market leadership position and selling it at a handsome premium is no small task.

There is no question that Safran's Morpho division will benefit from the acquisition - especially as BAE is taking the services components of L-1 off its hands. The question is, does buying the business justify the premium? My gut and the ten years I have watched biometric industry drama play out, tells me it doesn't. The fanfare around these acquisitions always focus on the immediate market expansion - which is never as real as it appears - and diminish the complexity and limited success rate of integrating organizations, e.g. people and technology. Even if the financial analysis is solid (and given how badly the investment community has bungled in the biometrics arena, I have my doubts), the market analysis on these deals always seems elementary at best and seriously flawed at worst. Two years from now, I may be eating these words feasting on humble pie. Until then is is Ribeye, medium rare, please.

The AuthenTec - Upek merger makes sense on many levels. And given the somewhat perilous and often melodramatic courtship that has taken place between these two players, perhaps the final act of this relationship dance will bring us all a sense of resolution, if not a little drama nostalgia. This deal configuration does really seem like the best outcome. Though I do have some concerns about Scott Moody exit from his role as CEO. Scott is one of the few Executives in biometrics that has, from the time I met him nearly ten years ago, had a crystal clear vision of what he wanted his organization to achieve and how he wanted to achieve it. He focused on his market, consistently delivered, and was able to responsively shift his strategy and tactics when the reality of the marketplace demanded it. It will be interesting to see how the merged company with new leadership will leverage this legacy.

And now for the surprise behind door number three, 3M's acquisition of Cogent. Ok, honestly, who knew this was coming. Only one person from the investment or biometrics communities that I spoke to was not surprised. He simply told me to look at the numbers. Cogent's rapidly cascading margins were a strong indication that it was time to sell off the company. And from 3M's perspective, it certainly makes strategic sense. They are beefing up their security business and buying Cogent at an 18% premium, considerably lower than the average 29% offered to US based identification systems companies over the past 5 years, and much less than the 30%+ premium Safran is paying for L-1, is a relative bargain. Though I still think of post-it notes and invisible tape when I think of 3M, I suppose I will have to expand my brand identification.

Speaking of identification; this is the real thread that ties these deals together. Identification matters. People identification is hard. And folks, biometrics is the only game in town. This is the science of identifying people and the number and scope of applications where people ID is critical is growing rapidly, and will continue to grow rapidly for the next 10 to 20 years. What is interesting about these mergers and acquisitions is that biometrics is increasingly seen as enabling technology. So big boys in broader markets snatch the pure plays up, or sensor companies anticipate genuine commodification driving consolidation to manage a truly high volume, low margin marketplace.

Stay tuned for more deals as everybody and their brother suddenly stakes their claim in the identification space, biometrics are deemed essential though somewhat problematic, and pure play biometrics vendors are purchased by some of the most seemingly unlikely candidates.

ePassport and eVisa Adoption and the Rise of eGates

The following includes two previously unpublished charts accompanied by excerpts from The Global ePassport and eVisa Industry Report published in June 2010.

The nascent ePassport and eVisa Industry has quickly evolved far beyond its humble beginnings. Initial attempts to integrate biometric identifiers into high-security paper-based identification credentials have matured rapidly achieving both technological stability and operational credibility. EVisas are well on their way to reach similar status. As these secure documents rapidly create a twenty-first century credentialing platform, governments are keen to leverage this platform to further enhance security, operational efficiency, and passenger facilitation driving industry development in the related critical areas of Enrollment, Verification, and Automated Border Control.

Market adoption will reach critical tipping points for both ePassports and eVisas by 2014 with 86% adoption of total ePassports issued annually and 90% of total eVisas applied for annually. This near universal market penetration will drive the next big phase of market development - the implementation of eGates that integrate ePassport and eVisa authentication as well as live biometric verification. The strongest growth of Automated Border Control systems during the 2009 - 2014 timeframe is forecast for Asia with annual unit projections growing from 300 units to nearly 1000 units over this period. However, widespread and accelerated global adoption of Automated Border Control is not expected until the 2014 to 2020 timeframe.

This widespread adoption will introduce a new series of issues to the industry in regards to standard processing, user interface, and other human factors issues. Today these issues are not necessarily focal points of solution development; however, they will become critical deployment factors as limitations with the current credentials are exposed with frequent use of automated systems. Customer and user expectations for service, operational efficiency, and usability will also continue to rise as early adaptors become experienced with various Automated Border Control systems worldwide and use expands to mainstream less sophisticated users.

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Preview The Global ePassport and eVisa Industry Report

Eupdate subscribers receive an additional complimentary hour-long follow-up consultation added to existing offers with their purchase of The Global ePassport and eVisa Industry Report.

Single User License:                                        $7500.00


Limited Enterprise License (2 - 10 users):    $10,000.00
includes Excel file of Country Profile data plus 1 hour consultation

Unlimited Enterprise License (10+ users):    $12,500.00
includes Excel file of Country Profile data plus 2 hours consultation

More Information on the Report

Preview the Executive Summary (Brief registration required)

Preview the Introduction and Table of Contents and Figures

Order the Report

Recommended Events

Biometrics 2010, October 19 - 21, 2010, London
Acuity Sponsored, Presenting, and Complementary Consultations
Presentation Tuesday, October 19 at 13:45 - ePassport and eVisa market analysis: From technology to operational efficiencys
Contact Acuity to schedule a complementary consultation




ICAO Sixth Symposium and Exhibition on ICAO MRTDs, Biometrics and Security Standards Symposium, November 1-4, 2010, Montreal
Acuity Sponsored, Attending, and Complementary Consultations
Contact Acuity to schedule a complementary consultation

DON’T MISS THE INDUSTRY EVENT OF THE YEAR FOR MACHINE READABLE TRAVEL DOCUMENTS

Sixth Symposium and Exhibition on ICAO MRTDs, Biometrics and Security Standards
1–4 NOVEMBER 2010, MONTREAL, CANADA

The International Civil Aviation Organization (ICAO), a Specialized Agency of the United Nations, is pleased to invite your company to sponsor, exhibit or/and attend the Sixth Symposium and Exhibition on ICAO MRTDs, Biometrics and Security Standards which will be held at ICAO Headquarters, Montreal, Canada, from 1–4 November 2010.

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Copyright 2009 Acuity Market Intelligence, LLC. All Rights Reserved.
The editor makes no guarantees on the opinions expressed herein. This publication may be forwarded electronically in it's entirety. However, no part of this publication may be published in any form without explicit consent of the publisher.