David Gardner: If my study of the stock market is any good example, and my old pappy even taught me this, high profit margins often can invite competition. My final question for you Tom before we play our game Buy, Sell, or Hold is what is the competitive landscape out here for Tasers
Tom Smith: And we are starting to see some rumors about that from what we call the vaporware companies. People are talking about getting into this space. We have certainly attracted a lot of attention and focus on it, and we are not naive enough to think nobody is going to stay away from this, as you mentioned.
But at the same time, we have done what we think is a very good job of really protecting ourselves. We have 12 patents that have issued on our technologies, and we will use those to aggressively defend this space. We have another 17 applications that are pending for technologies that are currently under way.
The other side to that, the barrier to entry, is we have really established ourselves as the leader in this space with the law enforcement market. We have been out there now and we have had the medical studies reviewed. Obviously with the scrutiny we have received from these media attention on the ... deaths.
Now we have had a lot of independent medical studies come out. From my mention, the three governments, the United Kingdom, U.K., excuse me, the United States and Canada, and I think it is going to be hard for somebody to try and follow in our footsteps with the technology that we have got in place, working around the patents that we have in place, the customer relationships we have in place and all of that medical review that has now been done independent of what we have done to validate the safety of this technology.
So I think there are people that are going to look at this and try to come in here. We are going to try and continue to be the leading company and come out with new technologies so we are going to definitely try and make it difficult for them to do that, and I do think there are a lot of hurdles. It took us a long time to get this right as well.
David Gardner: We are going to close, Tom, with our game Buy, Sell, or Hold. I am going to be throwing out things happening in the business world or our society and ask you if they were stocks, which they are not, but if they were, would you be buying, selling, or holding right now and a sentence as to why. Are you ready?
Tom Smith: Sure.
David Gardner: Let's start off with Mace. If it were a stock, buy, sell or hold?
Tom Smith: Sell.
David Gardner: Why?
Tom Smith: It is a technology that has had its time. It is a great tool, but I don't think it is going to be a continued item that would go mainstream into the future. We are really changing the threshold of the way law enforcement does business, and it certainly has its place out there, but it relies on inflicting pain where we actually go and we don't care about your pain threshold. We physically stop you. So it is something that is going to still be around but it is not going to be around in huge numbers or with a huge growth opportunity in the future.
David Gardner: Next one for you: first-person shooter video games. These are video games where from a first-person standpoint, kids old and young, I include myself as one of them, run around and shoot things. Buy, sell, or hold?
Tom Smith: Sell. I have talked to a lot of people. I interact with law enforcement on a very regular basis, and unfortunately I think what some of these games do is dehumanize the aspect of that really happening in our world out there. It is just something I don't see contributing a lot to where we are going and I would rather see people outside doing; when we were growing up it was cops and robbers out in the yard, which I think is a lot more interactive and fun than in front of a screen.
David Gardner: So you are saying, "Dave Gardner, put away your Halo Two and Half-Life Two and get a life?"
Tom Smith: (Laughs.) I don't know that I will go that far yet. He has obviously proven it is a successful business. I just, from my perspective, I would rather see the kids outside rather than inside.
David Gardner: OK. Next one up, McGruff the Crime Dog. If he were a stock, buy, sell, or hold?
Tom Smith: Buy. I believe in what he is doing. We are trying to make a difference for the world out there, and there are a lot of challenging times ahead for us, and I really think they are focused on the right aspect, which is trying to make our world a safer place.
David Gardner: The recently lapsed assault weapons ban; pick it up there. 3-2-1, go. The recently lapsed assault weapons ban, the prospects of reinstatement thereof. Buy, sell, or hold?
Tom Smith: Hold. That one I really don't have a bead on. That is from a personal perspective. That is a pretty controversial issue that has a lot of emotion on both sides of it, and it is pretty politically charged. I really don't have a feel which way that one is going to go.
David Gardner: The re-election of President George W. Bush, prospective to your bottom line. Buy, sell or hold?
Tom Smith: Buy. I think President Bush is going to be helping small businesses out there. I believe in what he is doing and the fight on terrorism, which I think is going to have an impact on us as well. So I think he is going to be good for us.
David Gardner: Do I therefore correctly infer that you would prefer to see President Bush over a President Kerry?
Tom Smith: Correct.
David Gardner: Next one up for you, Taser use by the National Guard. Buy, sell or hold?
Tom Smith: Buy. We received our first order on the National Guard this year, and I think again because with the success we have seen in law enforcement, we are now seeing a lot of interest in the military. They bought several million dollars from us earlier this year. That was in the mainstream army. Now with the National Guard being involved more, we have received and processed our first order from them, and I believe that is going to continue as well.
David Gardner: Two more for you, Tom. They were popular in the 1980s anyway. Nunchucks, basically the weapon made of two pieces of wood connected by a chain. Buy, sell, or hold?
Tom Smith: Sell. It is a specialty item that in the hands of the right individual can be very, used very well. But again something that you have to have a lot of training and expertise in to use.
David Gardner: Yeah, maybe more than just one in-home training session, eh?
Tom Smith: I think it's going to be a long training session, and that one will really hurt when you screw up on that training.
David Gardner: Last one for you, Tom. The TV show, I believe it is a Fox show, Cops. Buy, sell, or hold?
Tom Smith: Hold. I think it is a show that has got a good following out there. I don't know how much it is going to grow, but it is certainly -- for the long-term it is going to be around for quite a while. We have appeared on their show many times. I think you will see us on there quite a bit more. I just; I think they have got their audience that follows them and I don't think they are going to go anywhere, but I don't know that they will be attracting a whole lot of new people in the future.
David Gardner: Tom Smith is the co-founder and president of Taser International. He joined us from the studios of member station KJZZ in Tempe, Arizona. Tom, thanks for joining us on The Motley Fool Radio Show.
Tom Smith: Thanks for having me. I appreciate it.
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