Orange County Business Journal

Identive Misses on Revenue, Earnings

Chris Casacchia Monday, October 31, 2011

Santa Ana-based Identive Group Inc. on Monday reported third-quarter revenue and adjusted profits that missed Wall Street expectations.

The company, which makes scanners, readers, cards and other security devices for buildings and computers, posted sales of $26.8 million, up 30% from a year earlier.

Analysts on average had forecast revenue of $28.5 million.

Identive posted a loss of nearly $2.5 million, compared to a $600,000 loss a year ago.

Analysts were expecting a loss of $575,000.

Investors seized upon the disappointing earnings report and sent Identive shares down nearly 7% Monday to a market value of about $136 million.

Sales in the September quarter were driven by broad global demand for identity management services and access control systems for business and government buildings, executives said.

Delays in U.S. government projects offset some sales, according to the company.

Identive has benefited from new demand in the public and private sector for gear to curb security breaches at businesses, schools, government buildings and others.

In many cases, Identive is the company behind the technology in identification cards, biometrics systems, tokens and mobile phones that allow users to access buildings and computers, make electronic payments and safeguard intellectual property.

It still has to turn the corner on profits after posting another loss but appears well positioned to take advantage of a new technology gaining adoption.

Identive in July announced it would supply 1 million near-field communication tags to a “leading mobile handset manufacturer.”

Near-field communications, commonly referred to as NFC, allows communication over very short distances. A user can wave a smart phone over an NFC tag and immediately get connected to a website, launch an application or make a payment at the check-out counter.

Identive spent $2.8 million in research and development in the third quarter, a 121% jump from a year ago.

The increase was earmarked for developing NFC chips, tags, sensors and other related devices, as well as expanding its cashless transaction business, Identive Chief Executive Ayman Ashour said.

In June Identive acquired Pleasanton-based idOnDemand Inc., in a $16.1 million deal, contingent on meeting certain benchmarks.

IdOnDemand’s system allows businesses and organizations to use a single credential for secure access, as the company provides encoded cards and credential management services via the cloud.

“The ongoing proliferation of NFC-enabled mobile phones and the increasing adoption of cloud-based service models such as idOnDemand's are clear industry trends, and our investments aim to ensure that Identive is positioned to capitalize on the opportunities they will generate,” Ashour said.

In the current quarter, analysts are expecting adjusted profits of $1.7 million on $33.2 million in revenue.