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Identix Leads Biometric Authentication
By Laura Taylor
November 21, 2000

Product and Vendor Background
Perhaps the most exciting product released At Comdex last week, was the Identix DFR-300 Fingerprint Scanner. Implemented in Compaq, Dell, and Toshiba laptops, the hardware fingerprint scanners are packaged with BioLogon™ for Windows 2000™ and features biometric identification and authentication, BIOS level security, single sign-on and multi-factor security.

A pioneer in identification technology, and a worldwide provider of Biometric authentication, Identix was founded in 1982, by then engineer Randy Fowler. Mr. Fowler has been credited with being the person to first patent image capture devices used for authentication purposes making Identix the original pioneer in fingerprint scanning technology. Retiring as CEO this year, Mr. Fowler still holds the position of Chairman.

With annual sales approaching $100million, Identix is clearly the market leader in fingerprint scanning technology. Identix's fingerprint authentication technology is designed to authenticate user level security for anti-fraud purposes, corporate asset protection, law enforcement, and various wireless Web and Internet applications.

Table 1: Corporate Information
Financials : Trading: Since 1985, NASDAQ: IDNX
3rd Quarter '00 Revenues: $20.1 million
3rd Quarter '99 Revenues: $17.6 million
Gross Profit '99: $17.5 million
FY 99 Revenues / Growth: $74.7 million / 23.4%
Market Capitalization: $442.5 million

Product Name : DFR 300 and BioLogon

Product Scope : Biometrics, Authentication, Identification, Security

Industry Focus : IT DAta Security, Internet and Wireless Web, Physical Security, LAw Enforcement, Time and Attendance

Key Features : Non-repudiation, BIOS level security, Single-sign on, Authentication, Interoperability with leading PC Vendors

Employees : 450 worldwide

Company Address : 787 7th Avenue, New York, NY 10019
Tel: 408.731.2000

Identix, has been working quietly, but strategically with industry leaders, Motorola, Compaq, Novell, Microsoft, Dell, IBM, Unisys, KeyTronic, Cherry and SCM Micro for the last 4 years to bring fifth and sixth generation biometric security technology into IT and consumer spaces, positioning biometrics as the lead component in multi-factor authentication for information, network, and physical security. Identix with Compaq distributed 2000 fingerprint scanners to Microsoft at Microsoft's Global Summit in July.

First announced In November 1999, the DFR 300, is among the world's smallest and competitively priced devices for reading fingerprints, allowing simple functions, such as unlocking a car, logging on to a computer, conducting transactions online or operating a cell phone, to be made more secure and convenient. Using a standard PCMCIA form factor, DFR 300 readers are ultra thin, 4.5mm (about 4 credit cards stacked thick), and relatively inexpensive, facilitating implementation in all kinds of products. Today, Identix readers and BioLogon software are sold through reseller channels by leading PC manufacturers for enterprise, desktop, and portable security applications.

Figure 1. Identix surges over leading Nasdaq market indicators, since announcing itrust

Last summer, Identix launched a new division called itrust, at the same time announcing Motorola as both an itrust investor and the service's first customer. itrust is a leased subscription service that is applied per transaction delivering security options in a dynamic model of services managed according to the security an individual transaction requires. itrust will control and manage secure transactions for users of online services that require security, such as financial services, banking, securities trading, e-commerce, music and entertainment downloads, online games, legal and business document transactions and exchanges-- anything needing secure transaction assurance and expedited processing. itrust, as a service, will maintain individual privacy, protect personal identity, secure transactions and facilitate control and delivery of information over the wireless Web and Internet 24 hours per day, 7 days per week, anywhere in the world.

Product Strategy and Trajectory
Identix's authentication systems have been used to lock down everything from bank vault's, armored vehicles, MasterCard's headquarters, and the Wall Street Journal's printing facilities. Though its original customers were banks and the California Department of Justice, today Identix receives the majority of its revenues from Federal Agencies. With the Comdex announcement and new OEM and itrust partners, Identix hopes to make new in-roads into the private sector's commercial IT organizations.

Given the security problems associated with eCommerce and information security in general, it appears as though Identix's target markets hold much promise. With as much as 2% of all Internet credit card sales being charged back to the seller due to lack of hard evidence that the sale was authorized (a signature), this product is sure to find a niche among eCommerce vendors. According to Joel S. Lisker, senior VP of security and risk management at MasterCard was quoted, "We're looking at fingerprints, voice prints, or even iris scans." MasterCard is planning on converting its 22,000 member banks to either smart cards and/or biometrics in the near future.

Currently Chicago's O'Hare International Airport is testing IDX's biometric technology for use in identifying people loading cargo on airplanes. The project involving 52 trucking companies, 25 airlines, and 700 airport employees is currently being tested in three phases. O'Hare is currently in the 3rd phase of this three phase project. After pilot program is complete, the U.S. Federal Aviation Administration will be evaluating the results for security, speed, accuracy, and ease of use.

With over 100 resellers across the world, including Compaq, Motorola, and NetNanny, the increase in the number of hits search engines are seeing for Indentix products is staggering.

Product Strengths
BioLogon is a sixth generation technology, which has been authenticating users worldwide over a decade. Integrating with Microsoft Windows 95/98, NT and Windows 2000, the BioLogon server is integrated into, and extends the SAM, in Microsoft operating systems. The SAM, is the Security Accounts Manager database. On a standard network, there is one SAM per domain. A domain is what defines the authentication boundaries of a network. BioLogon takes the SAM once step further by having all accounts authenticated by a fingerprint instead of a password. Passwords can be exchanged whereas fingerprints cannot.

Allowing you to manage fingerprint authentication for an entire enterprise, BioLogon significantly reduces the overhead of password administration, estimated to be from $100 to $300 per user annually. People do not lose their fingerprints, and no two fingerprints are alike. As well, it is not possible to share fingerprints, which means that eliminating and expiring the authentication mechanism is not necessary.

Ideal for multi-national corporations, BioLogin is localized in five languages. With 26 distributors world-wide, Identix products are available in most technology markets. Currenty Identix products serve customers in over 40 countries.

As an active biometric device, the Identix fingerprint scanner will fare better with privacy advocates than various passive biometrics devices designed for clandestine authentication purposes. Passive biometrics work without the owner's knowing participation or permission, for example stealth iris scans. With an active biometric, such as fingerprint, a user must elect to participate in the authentication or identification process, e.g. offer their finger for scanning.

Product Challenges
With over 18 years of engineering development behind them, Identix has created strong barriers of entry into this market. It will take an extremely savvy competitor to catch up to Identix from a technology and development perspective. The company best positioned to take on Identix is Lake Forest, CA based Ethentica. Ethentica, which was founded in 1997 (as Who?) has a competing fingerprint scanner that provides much of the same functionality of Identix's fingerprint scanner. With strong partners such as Amdahl and Verisign, we expect Ethentica to be the company to pose the only significant threat to Identix.

Implementing the Identix fingerprint scanning technology correctly is key to retaining its usefulness. If the fingerprint scanner is used to provide authentication across a network, it is important that the channel for transmitting the digital image is secure. By "sniffing" unsecured communications lines, hackers could grab an authentic digital fingerprint scan to impersonate someone other than the owner. For example, if the scan comes from a laptop in a remote office, if the link between the remote office and the BioLogon server is not secure, then the scan could potentially be intercepted and grabbed by a hacker's protocol sniffer. Identix addresses this threat by requiring secure sessions to occur at frequent timed intervals with each session requiring unique fingerprint data. So even if a hacker successfully tapped fingerprint data from a secure encrypted session, the hacker would succeed only in gaining initial access, dropping immediately at the next interval, when repeating the same fingerprint data.

Broad acceptance of biometrics security for IT markets is yet to occur, making Identix' success speculative still. Users may resist fingerprint scanning access despite the growing threat to private information and even identity. Silicon technology, capable of producing sensors even smaller than Identix' DFR300, may eclipse optical technology if higher material costs and electro magnetic discharge (EMD) interference can be resolved for capacitive sensors. In light of this potential competition, Identix is already aligned with silicon technology through its relationship with Infineon, under which Infineon uses BioLogon for enterprise authentication using its silicon chip sensors.

For Identix to succeed with itrust, the company will need commitments from certificate companies willing to participate in itrust rollout and support. The certificate partners will need to have the appropriate infrastructure to deliver a strong PKI component that extends across varying country requirements.

Vendor Recommendations
With minimal marketing and advertising, Identix has not only made significant in-roads into the authentication and biometric market, they are clearly a leader. By increasing advertising and market exposure, we expect Identix's momentum to ramp up significantly over the next few years. By gaining ground in the ASP eCommerce market, Identix could strengthen their revenue stream to higher levels.

User Recommendations
Fingerprint scanning technology is good for anyone wanting to protect highly sensitive or private information on a desktop or portable computer. In the near future wireless and Internet devices and services employing fingerprint biometrics may offer incomparable authentication technology. With this in mind, users considering additional measures of security today, will want to consider biometrics-equipped devices that are ready to take advantage of itrust services.

Through alliances with Compaq, Toshiba, and Dell, users wanting turn-key authentication technology from Identix, can obtain the fingerprint scanners through standard reseller channels. Market analysts are currently very bullish on Identix securities. When you're shopping for your fingerprint scanner for your Windows 95, 98, NT, or 2000 laptop, you might want to take a peek at the potential returns on an Identix market investment as well.


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