Investment Trends With...
Mr. Joel P. Fishbein
Director / First Vice President
Janney Montgomery Scott, LLC

SecurityStockWatch.com: Please give our audience an overview of your background and your role at Janney Montgomery Scott.

Joel Fishbein: I am a Senior Technology Analyst at Janney Montgomery Scott and have been with the company for the last 3 ½ years. My investment thesis and methodology is fundamentally driven and research intensive, including consistent contact with management, competition, suppliers, and is based on, among other things, market position, valuation, financial strength, management experience, growth rate, and historic record. Prior to joining Janney Montgomery Scott, I was employed on the buy side. During my time on the buy side I primarily focused on telecommunications services and equipment, cable, networking, data storage, enterprise equipment, and Internet security and infrastructure.

SecurityStockWatch.com: Your company recently hosted the Biometric Technology Industry Forum in New York City on April 5, 2005, to examine the current biometric industry landscape and highlight some of the leading public and private
companies in the space. Please give us a brief thumbnail of the companies which presented. Is the conference an annual event?

Joel Fishbein: As you said we had a good mix of public and private players in the space including: A4Vision, Authentec, BIO-Key, Bioscrypt, Cogent, Daon, Identix, ImageWare, Iridian, Motorola Biometrics, Precise Biometrics, Saflink, UPEK and Viisage. The conference was a great success in terms of introducing investors to the emerging biometric space. We had over one hundred attendees and hope to make it an annual event.

SecurityStockWatch.com: Which of these companies are you presently covering and what are your current recommendations for these companies?

Joel Fishbein: We currently formally cover Identix (IDNX-BUY), Viisage (VISGE-BUY) and Cogent (COGT-BUY) but closely monitor the space and are always looking for new ideas. We like all three of the names but recently upgraded our rating on Cogent Systems to BUY from Neutral, as we believe the company is positioned for substantial and profitable revenue growth and is a clear leader in biometric identity solutions.

In our opinion the shares have become attractive since pulling back from a recent high of over $38.00 per share. Based on the company’s leading-edge technology and robust profitability, we believe that Cogent shares deserve a premium multiple to the industry. We believe that over the next 12 months the shares have upside potential of over 30%, as the company continues to meet or exceed expectations and grow its market position in the emerging biometrics space.

SecurityStockWatch.com: Your April 2005 Research Report, "Biometric Technology Industry" is optimistic regarding biometric industry growth. It says, "We believe we are in the nascent stages of biometric deployment and see a dynamic market for several years to come." What are the key market drivers that will result in this growth.

Joel Fishbein: We believe the biometric market is moving past the education phase and into the mainstream adoption phase. The biometrics industry is not new, and many of the early adopters have experimented with various forms of biometric solutions for years but we think the main drivers of biometric adoption include improvement in accuracy rates and average prices declining.

SecurityStockWatch.com: What's your estimate of the current biometric industry market size and where do you see it in five years. Among the biometric business segments; i.e, fingerprints, facial recognition, iris scan, and others, do you anticipate faster growth for some segments vs. others?

Joel Fishbein: According to the International Biometrics Group, the biometrics market is expected to grow at a 40% CAGR through 2008, from an estimated $1.2 billion in 2004 to $4.6 billion in 2008. We think these estimates are close to the real growth rates in the industry as entities throughout the world demand higher security and stronger verification solutions. Currently some companies like Cogent Systems (COGT) are growing much faster than that. In the near to mid term we think the growth will come from fingerprint technology with limited adoption of facial recognition and iris scanning technology. Though I must say that we have just scratched the surface in terms of innovation so time will tell which technology(s) emerge.

SecurityStockWatch.com: Please give our audience an overview of the Government programs which are currently underway for biometric solutions. Do you expect to see growth in the enterprise sector following these Government deployments?

Joel Fishbein: Biometrics was highlighted by the 9/11 commission as a key initiative that could provide the type of security required to protect US borders. Historically, legislation and government implementation have been catalysts for the use of advanced technology. With homeland security initiatives increasing, the escalating use of biometrics will propel growth in the near term. The Office of Homeland Security has begun to initiate regulatory policies that would require certain levels of security for government agencies and enterprises. Heightened border security, aviation security, and network security are just three of many areas that the Office of Homeland Security is targeting. In addition, we see other government mandates including the Health Insurance Portability and Accountability Act, Graham-Leach-Bliley Act, and the Sarbanes-Oxley Act as potential drivers for the space. Internationally, there are several criminal and civilian government projects aimed at improving security.

We view the commercial market as a huge “greenfield” opportunity. Large organizations often must issue multiple passwords, ID cards, tokens, and other forms of identification or authentication for employees. This system creates the enormous task of managing the additions, cancellations, and database storage of these identifiers. Biometric solutions can streamline an organization’s security system by eliminating the need for multiple identifiers, as the user’s authentication is tied to physical characteristics. We view financial services, healthcare, and e-commerce as primary areas of commercial opportunity for biometric companies.

SecurityStockWatch.com: With 200 biometric companies out there, we agree with you, consolidation seems inevitable. Any signs that this consolidation has started to occur?

Joel Fishbein: The industry remains fragmented, but we expect the biometric space to consolidate. We have already seen several companies buy pieces of technology from smaller vendors but we do expect some larger acquisitions to take p[lace over the medium term. As larger biometric companies and other vendors look to broaden their product offerings in order to provide a comprehensive suite of biometric solutions, consolidation will accelerate in the market place making the stronger providers stronger. As this consolidation increases, we believe that there will be a number of providers forced to either liquidate or look for alternative options.

SecurityStockWatch.com: Joel, many thanks for your time today. Are there any other subjects you would like to talk about?

Joel Fishbein: I think its an exciting time to be a part of this emerging growth sector. I think we will be hearing a lot more about it in the future.

RESEARCH ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES

I do not personally own any of the companies mentioned in this interview.

I, Joel Fishbein, hereby certify that the views expressed in this interview accurately reflect my personal views about any and all of the subject securities or issuers. No part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views I expressed in this interview.

Janney Montgomery Scott LLC (“JMS”) is a market maker in the securities of IDNX (Identix), COGT (Cogent Systems), VISG (Viisage) and may at any time hold a long or short position in these securities.

Janney Montgomery Scott LLC (“JMS”) or an associated person will sell COGT, IDNX, and VISG to, or buy them from, customers on a principal basis.

Analysts are compensated based on, in part, Janney Montgomery Scott LLC’s profitability, which includes its investment banking revenues.

Janney Montgomery Scott LLC (“JMS”) or an affiliate received compensation for investment banking services from VISG in the past 12 months.

Janney Montgomery Scott LLC (“JMS”) or an affiliate managed or co-managed a public offering of securities for VISG in the past 12 months.

Janney Montgomery Scott LLC (“JMS”) or an affiliate may seek compensation for investment banking services from COGT, IDNX, and VISG in the next 3 months

Analysts are compensated based on, in part, Janney Montgomery Scott LLC’s profitability, which includes its investment banking revenues.

Investment opinions are based on each stock’s 6-12 month return potential. Our ratings are not based on formal price targets, however our analysts will discuss fair value and/or target price ranges in research reports. Decisions to buy or sell a stock should be based on the investor’s investment objectives and risk tolerance and should not rely solely on the rating. Investors should read carefully the entire research report which provides a more complete discussion of the analyst’s views.

BUY Janney expects that the subject company will appreciate in value. Additionally, we expect that the subject company will outperform comparable companies within its sector.
NEUTRAL Janney believes that the subject company is fairly valued and will perform in line with comparable companies within its sector. Investors may add to current positions on short-term weakness and sell on strength as the valuations or fundamentals become more or less attractive.
SELL Janney expects that the subject company will likely decline in value and will underperform comparable companies within its sector.