The Department of Homeland Security launched its US VISIT program today. US VISIT, which stands for U.S. Visitor and Immigrant Status Indicator Technology, requires that each foreign visitor be fingerprinted and photographed upon entry to (and eventually upon departure from) the United States. US VISIT will be implemented at more than 50 land crossings between the U.S. and its neighbors by the end of this year. The total expenditure approved by Congress for the program exceeds $330 million in 2004.
The participation in this program by Homeland Security should tell you something obvious about US VISIT: It's designed to help track the comings and goings of the hundreds of thousands of international visitors to the United States. Many experts consider the government's failure to do this more rigorously in the past has left the country more vulnerable to terrorist attacks such as the one that took place on Sept. 11, 2001. Homeland Security believes that the process will add no more than 15 to 20 seconds to the time it requires to process each passenger at border controls.
A Minneapolis company, Identix (NASDAQ:IDNX), which makes identification systems that use fingerprints and other biological data, should logically be expected to garner substantial business from US VISIT. And with annual revenues below $100 million, substantial participation by Identix would be nothing short of a home run for the company's investors. Identix boasts of some contract wins in the past year, including the United Kingdom's Passport Office Nationwide Identity Pilot Program as a subcontractor to Schlumberger (NYSE:SLB). The company also recently announced that it was selling its products to the Commonwealth of Pennsylvania. Well, they called it a "state," but I'm fussy that way.
Identix also happens to be one of the most heavily shorted companies on any of the American exchanges. The reasons why are myriad, and start with years of phenomenal cash burn and operating losses as well as a history of substantial shareholder dilution and overpromising/underdelivering by management.
As Jeff Fischer noted in a recent article, "[g]iven the world's intense focus on security, you would think a firm that provides fingerprinting and face recognition technology would be bulletproof." Yes, you would. Instead, the company announced reduced earnings due to revenue recognition delays late last month. Perhaps more shockingly, Identix' CFO Erik Prusch, suddenly resigned to "relocate with his family to the West Coast" (text courtesy of CCBN).
The skeptic in me MUST ask this question: If you're in a top position in a company that seems to be in the sweet spot in an industry under heavy demand by our (and other) governments, do you just up and leave right at the moment things ought to be getting good?
I don't have an answer here, but if I were a shareholder, I sure as heck wouldn't like the question, either. It makes no sense -- executives simply do not DO such a thing.
US VISIT's facilities in place starting today are temporary. Homeland Security has just released a request for proposals for more permanent solutions. If Identix is selected later this year for the long-term implementation, certainly it will play well in Minneapolis.
