|
|
TASER
International, Inc. (TASR) |
|
|
CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" TASER
International – using acceptance in law enforcement markets to build consumer
confidence in their products Bio of CEO, Dr. Smith: “The Company started back in 1994, and shipped its first product in 1995. We primarily focused on the consumer market and built a self-defense product called the AIR TASERŽ that looked like a cell phone. The company primarily focused on women because of the ability to stand off up to fifteen feet and incapacitate someone with our device. We managed to sell about one hundred and fifty thousand (150,000) of our original devices, however this was not very successful in consumer terms. What was affecting our business was a patent that existed until 1998, which prohibited us from selling to the police and police are very important, because they are the opinion makers in any kind of self-defense business. People like to see what cops use, and they figure that if a cop is using it, it must be tested and it must work. Therefore, we refocused the company in late 1999, with a new product for police, called the M-26, which is the product that has taken off to where we now have one thousand, eight hundred (1,800) police departments using our product today.” CEOCFOinterviews: How are you split between consumer, police and
aviation? Dr. Smith: “Consumers are about 20% of our business and law
enforcement is about 80% plus. Aviation showed promise when United Airlines bought (1,300)
of our self-defense products a year ago in December (2001) and trained all 9000 pilots.
However, the aviation marketplace is being affected by the Department Of Transportation,
which has steadfastly refused to approve an application by United Airlines to put
self-defense devices on-board their airplanes. We do see change coming in that area
though, because the Homeland Security bill that went through will require the
Transportation Security Agency (TSA) to approve any application and they must act on it
within ninety days, whereas there was no deadline before.” CEOCFOinterviews: Will law enforcement continue to be 80% of your
business? Dr. Smith: “No, probably by the middle of 2003, we will have a
new consumer initiative under way. We have been doing a fair amount of market research and
determining what consumers like and what they don’t like about the TASER, and what we
need to do to really make it useful to consumers, which by far is our biggest market.
There are thirty-five million gun-owning households in America, who could buy one of these
just because the cops have them. There are seventy million non- gun-owning households,
which could also buy these because they are safer around kids. Consumers will be our
biggest focus and our biggest market but I would say that next year if we are lucky,
consumers might take 50/50 or 60/40 and then the following year we expect consumers to be
the vast majority of the business although we will continue to serve police. There are
only 12 million police in the world and there are and 105 million households in the United
States alone.” CEOCFOinterviews: What sets the TASER apart from other products in
this area? Dr. Smith: “It is a stun gun and all TASERs are stun guns but
not all stun guns are TASERs. The difference between the TASER and other stun guns is that
we have done some actual biomedical research on how it affects the human body when we
designed the device. We developed our WAve FORM to really be incapacitating to a human
being. This weapon will work if it touches you. That allowed us to build a WAve FORM and a
weapon that was very effective in taking people down despite all the hype about stun guns
that basically, don’t work. They have a terrible reputation. In addition, other stun
guns are cheap; you can buy them for ten bucks from Asia now. CEOCFOinterviews: Are TASERs subject to the same regulations as
other guns as far as consumers buying them? Dr. Smith: “No! TASERs are not firearms because we do not use
gunpowder. The original TASER was built way back in the 70’s and was not designed as
a firearm. However, there is one competitor, which cannot be sold to consumers because it
does use gunpowder. We are illegal for consumers in seven states, which are:
Massachusetts, New York, New Jersey, Rhode Island, Michigan, Wisconsin, and Hawaii. In the
states of Massachusetts and New Jersey, they are illegal for even the police. In the other
forty-eight states are legal for police to use. Michigan and Hawaii just changed their law
to allow police to have them. They used to be illegal in Canada for police, however they
are now legal and are used by all police departments in Canada.” CEOCFOinterviews: If I were in a state where it is legal and I
decide to use the TASER against someone that I am having an argument with, how would the
courts view that? Dr. Smith: “Perhaps that would be aggravated assault, I
don’t know what the exact classification would be. It is not a firearm so it
wouldn’t be using a lethal weapon, however the weapon is not built to be aggressive,
but built to be used defensively. That is why we limit the range to fifteen feet. If you
are trying to shoot someone further away than fifteen feet; it is not a defense situation,
you are trying to be aggressive. When you shoot the weapon, it leaves your signature
behind. The weapon was designed for use in the correct situation and we don’t want
people committing crimes with it.” CEOCFOinterviews: Will you tell us what the focus of the consumer
marketing campaign is? Dr. Smith: “Today the primary focus is that it is safe around
children. You can have it in your house and if a child gets hold of it, nobody is going to
be killed, or if your child took it to school and shot someone, nobody would be killed. It
is very effective, and it is easy to use, and it has no recoil when fired. One shot is all
it takes and it is very easy to train somebody to use. Further, it is legal to carry in
the car in California and handguns are not legal to carry in the car or on your person,
although it is a little big to be carrying on your person unless you want somebody to know
you have it. The issue is that it is legal in those forty-three states to carry on your
person, in your car and in your home. Going forward for consumers, the issue is that the
TASER is very big. You can use it at home and it is about the size of a nine-millimeter.
It is a large handheld weapon. We need to get it to a size that will fit in a purse. I
believe down the road that will happen.” CEOCFOinterviews: Will having it on the airlines help in your
marketing efforts? Dr. Smith: “The big problem is that very many people
don’t know about TASERs or about how effective they are. The reason it was so
important for us to get this on United Airlines is because, it would give us a lot of
consumer advertising. We have already trained nine -thousand pilots and twenty- thousand
flight attendants have been introduced to our TASER. Many of these people have talked to
their friends and relatives and many of those, have come and bought from us. Word-of-mouth
really helps, just think of all the airlines doing that and all the flight attendants
being trained. Three foreign carriers are using the TASERs in the cabin as well as the
cockpit.” CEOCFOinterviews: Do you manufacture the TASERs yourselves? Dr. Smith: “Yes, everything is assembled right here in
Scottsdale, including the ammunition.” CEOCFOinterviews: How do you reach the police community? Dr. Smith: “It is a slow word-of-mouth process. We have
sixty-five Manufacturers reps and some of them are focused on police. We have forty
distributors that are focused on police and we advertise in police magazines. We have
telesales people here in-house. Frankly, I am surprised it has taken so long.” CEOCFOinterviews: Is there much competition? Dr. Smith:
“We have two competitors here in the US; one in Cleveland and another one out in
California. The original Tasertron Company is now called TASER Technologies. They are the
only competitors that we have.” CEOCFOinterviews: Are you competing with any new technologies? Dr. Smith: “No! The TASER is the best new thing in twenty-five
years. Ask the police; they have not had anything in their hands for the past twenty-five
years that equals this. They love it!” Dr. Smith: “We have one hundred and sixty dealers throughout
the country.” Dr. Smith: “Yes, they are mostly gun shops, sporting goods and
spy shops.” CEOCFOinterviews: Can you tell us about patents on the current
intellectual property and how future product development will affect that? Dr. Smith: “We have intellectual property on the current unit.
We are developing new intellectual property that we are patenting currently as we speak,
based on a lot of research that we are doing on our own and some that is funded by the
federal government.” CEOCFOinterviews: What is the main difference about what you are
selling to consumers and what you are selling to police? Dr. Smith: “The police units are a little more powerful but
more importantly it has a twenty one foot range, and they need it because they are dealing
with combative individuals. For Consumers with a defensive weapon, fifteen feet is more
than enough range. The police unit is slightly more powerful and it has a few built-in
things that they need like every time the gun is fired it logs in the date and time it is
fired; for police that is important to protect them and the people they are arresting to
make sure they don’t torture people. We had a case here in Arizona, where a guy was
arrested, and the lawyer said “you got a confession out of my client by torturing him
with a TASER” they brought in internal affairs and they down-loaded the data right to
the PC, desk-top and it showed one firing, which is exactly what the officer said. That
normally takes three years and a jury makes that decision and it is very expensive
process. They saved a huge bunch of paper work, and an officer’s career.” CEOCFOinterviews: Are you receiving support from police unions? Dr. Smith: “Yes, we have great support from police
unions.” CEOCFOinterviews: Is there a point where you feel you will reach
critical mass? Dr. Smith: “I think we are getting close and with the police
departments we are almost there, but we will have to establish that in the consumer
market.” CEOCFOinterviews: Do you market to foreign police departments as
well? Dr. Smith: “Yes we do! We go to all the European countries and
we expect to start seeing some good revenues from that next year.” CEOCFOinterviews: Will you tell us a little about the cash and
credit position of the company? Dr. Smith: “We have no debt, and we have 3.6 million in cash
at the end of last quarter.” CEOCFOinterviews: Has current economic conditions affected your
orders? Dr. Smith: “Municipalities are running out of tax revenue
faster than we would have thought, and 911 has put a lot of strain on local communities,
they have paid a lot of overtime to police for terrorist activities. There is lower tax
revenue coming in to the states and lower sales tax revenue coming into the cities. We are
seeing that affect us. It has cut a couple of orders; one order that was supposed to be
two hundred units was cut to seventy-five by the City Council. We will get the orders
because they love the units, but the problem is this delays the timing and it makes it
more difficult to predict. However, the business continues to grow. If you look at our
fourth quarter last year, on the law enforcement side we did 2.8 million in the fourth
quarter; almost eight hundred thousand (800,000) that was United Airlines. If you take
that out, we only did two million (2,000,000) last year in the fourth quarter. We will do
as the guidance says, somewhere around 40% above that, as much as 70% percent above that
this year in Q4” Dr. Smith: “I think this is a huge opportunity long-term. I think we can do almost everything you can do with a gun except kill you. In the next five years, we will be able to do multiple-shot and longer range if you want to incapacitate somebody. We think there is a big market for electronic weapons out there, the problem is they haven’t worked until now. We are doing a lot more biomedical research right now. Predicting the quarters is tough and it always is with a young start-up business. The business is there however, and we dominate it. We are not planning to give that up. Cops love us and we love them.”disclaimers |
