Contractors bullish on federal ID technology market

By Marjorie Censer
Monday, September 6, 2010

When the global identification technology firm MaxID announced last month it will relocate its U.S. headquarters from Pleasanton, Calif., to Fairfax, the move reflected the firm's sense that the market for federal ID services and equipment may present a growth opportunity at a time of constrained government budgets.

Last week came more evidence, as 3M announced it planned to buy Cogent Inc., a Pasadena, Calif., company with a federal sales office in Reston. Cogent provides finger, palm, face and iris identification systems to governments and private firms.

Cogent projected the biometric market, now about $4 billion worldwide, would grow about 20 percent a year as governments and law enforcement agencies take a greater interest in ID systems.

MaxID specializes in handheld devices that can be used to read fingerprints, provide facial recognition and scan a wide range of credentials, such as passports, military access cards and civilian ID cards. The company is just starting to sell some its products to commercial companies -- such as rental car firms that can use the devices to scan driver's licenses -- but President Brian Skiba said he expects the government to be the main driver of the market as a whole. Sales to governments -- of which U.S. sales make up the biggest chunk -- make up about 75 percent of the company's revenue, according to Skiba.

MaxID and Cogent are hardly the only companies sizing up the opportunities.

Unisys, which bases its U.S. operations in Pennsylvania but has an extensive local presence, is working on integrating multiple biometric technologies, including systems that can recognize irises.

The company has contracted with multiple airports in the past to provide security systems that include ID programs. For instance, Unisys is working with the Los Angeles airport system as well as the Barcelona system.

Additionally, Unisys has handled national identification programs for countries including Malaysia, South Africa and Angola. Most recently, Unisys was selected to create an ID database for Mexico that would store iris, fingerprint and facial biometric data from the country's citizens.

But analysts said the market for identity tools like biometrics remains somewhat unclear.

Timothy J. Quillin, an analyst with Little Rock-based investment bank Stephens, is bullish on the sector. He said identity solutions could be "one of the areas where you might see increased spending," even in an era of constrained spending. He cited the military and homeland security interest in biometrics and identification databases as the key driver.

"It's a pretty dynamic, fast-changing market," he said. "Any time there's change, I think there's opportunity."

However, Brian Ruttenbur, an analyst with investment firm Morgan Keegan, said he doesn't expect the growth within the market to be domestic.

"The big growth is not going to be in the U.S. It's going to be internationally -- Central and South America, the Middle East, Eastern Europe, even parts of Asia," he said. "There's a ton of things happening across the globe that [are] moving at a much quicker pace."

And though Skiba argued that the government's investment will pave the way for commercial markets, analysts said they don't expect private industry to soon make a significant investment in the field.

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