Feature Company

Interview with Larry Ciaccia - President, AuthenTec
September 2006

FB
First of all congratulations on your recent appointment as President of the company. What are some of your goals as you take on your new responsibility?

A
Thank you Peter. My primary goal as President is to continue the momentum in market penetration that we have had in the past -- especially in the PC, cell phone and access control markets. The market is starting to adopt now. The numbers speak for themselves in terms of the growth we have seen over the last 18 months, and it is important as the market starts to really take off that we have a structure in place that allows us to continue the momentum we have had.

We have changed the organizational structure -- bringing marketing and sales together -- to help take us to the next level in the biometrics market. One of my goals is to make sure as we move forward that we have a team of marketing and sales people that are going to continue to define our strategies and implement them, and be very customer and market focussed. Bringing the sales and marketing groups together allows us to do that in an optimal fashion.

FB
Just to follow up on one of those points, Frost & Sullivan and a number of other research firms have recently put out reports indicating that indeed the Biometric marketplace is growing and will continue to grow at a fairly healthy clip over the next 3-4 years. We have heard this in the past before, what do you feel are the drivers now that are making this a reality?

A
I can talk really specifically on the two largest markets that we address -- PC and Wireless. What we are seeing on the PC side is increased awareness and need for improved security. The security aspect led the way initially in PCs with commercial enterprise class notebooks. But just as important is the fact that we offer security with convenience. The security story raised the initial awareness in the commercial market, and we are seeing it now moving to consumer notebooks as well. So the idea of being able to do password replacements, easy file encryption and to a degree, touchpad emulation with a backdrop of a very secure environment at a very attractive price, has come together to gain the attention of many notebook manufacturers. Nine of the 10 notebook manufacturers now offer models with biometrics, and we think industry-wide in 2006 1 out of every 10 notebooks will have biometrics installed. That means that attach rate is starting to get material. History has shown with other features that started out as options or add-ins on the notebook, once you start getting over a 10% attach rate, it starts to accelerate after that. In the cell phone arena, the driver was always a combination of security and convenience. In Asia, where all 4 million existing biometric cell phones are today, service providers were looking to protect the information stored on the phones, but needed something that was convenient at the same time. Today, the fingerprint sensor not only protects the on-phone information, but all of the mobile commerce and financial transactions that you can make with your phones there. This makes biometrics even more important and appealing. As those applications spread to other continents, the opportunities for growth are tremendous as well.

It is a market potential of almost a billion units, so even a small adoption rate in some of the upper tier segments is just a tremendous opportunity, and we are convinced that market is going to happen. It is going to be driven by m-commerce (mobile commerce) as one of the primary factors.

FB
You ship more sensors than any company in the industry. What makes you so successful?

A
To date, we have shipped more than 10 million sensors. One reason for our success is that we have been doing it as long, or longer, than anybody else out there. Along with our experience, the foundation technology we use -- TruePrint® and TrueMatch -- really differentiates us from any other company out there. TruePrint® and TrueMatch not only give us world class biometric performance, which is always critical, but allow us to build sensors that are smaller than anybody else out there. That is because with our pattern matcher, the density of the information we are able to effectively use is much much higher than competing technologies. So as a result, even with a much smaller slice of your fingerprint image, we are able to actually obtain, in a more accurate fashion, a better biometric match versus some of the other technologies out there. The small size of our sensors in turn allows us to offer a lower price than others. I think all of these factors have come together and put us in a very good position.

FB
In a recent survey that you had conducted the results showed that a vast majority of Florida PC users want security convenience of biometric fingerprint sensors. Can you elaborate a little bit on that for us?

A
We conducted a survey of people in Florida and some of the questions asked were... If you had access to this feature would you use it? Why do you think it would help you? Do you want to secure your data? Are you concerned about security? The overall thing that we learned is that the overall biometrics industry probably has some work to do creating a more widespread awareness of what biometrics can do for people, and to also expand the channels that allow people to get access to the technology. It is clear when we talk to individuals, initially there is not a huge awareness of biometrics, but once they understand the concept and even more important once they try it, the response is, "this is so obvious... How can I get it? When can I get it? Where do I get it?" Of all the little nuances in the survey, our take-away was that the consumer market is ready for this, and it is really our job now to increase the awareness and enable people to go and get this technology easily through multiple sets of channels.

FB
So therefore ease and convenience were some of the drivers that surfaced up in your survey?

A
Absolutely! When you talk to the average consumer, security is surely a concern, but it is a security concern based on the headlines -- identity theft, cell phones and notebooks being stolen. It is not the same sort of security that an IT manager is going to have when they really get into the nuances of security. So the high level IT says, "Yes I am worried about protecting my data", but what really grabs most PC consumers is when you showcase applications like password replacement. Just about everybody has a multitude of passwords they are trying to carry around or worse; they have one simple password they use on 30 different accounts! So the idea that you can use biometrics and apply it to an application such as password replacement in a very secure and ultra convenient fashion, really resonates with the average consumer.

FB
Frost & Sullivan in May of this past year named AuthenTec the world's best sensor technology, and actually went as far as to say that, "TruePrint is a breakthrough technology and is far and away the leading fingerprint sensor solution in the market to-day." Very high praise from a top end research company! Can you please elaborate on this?

A
That award is particularly important because it provides an independent validation of what we always believed ourselves. It is always good to hear that from a respected third party. We do strongly believe that our approach is unique. That fact we can look below the surface of the skin to the live fingerprint layer, and use very complex pattern matching algorithms to allow best-in-class biometric performance, in the world's smallest sensor, with the added kicker of what we call The Power of Touch -- we really do think we have unique and breakthrough type technology.

FB
Where do you see AuthenTec growing beyond the PC, Wireless area? Do you see the consumer marketplace in doors and safes and products like that growing?

A
I think the access control market will grow in the future, and we offer the broadest portfolio of sensors for that market -- with everything from large touch to small swipe sensors. We will be in position to take advantage of those market opportunities as they expand, but in the near term our focus remains on wireless and notebook markets.

FB
Just in summary, what would you say are the challenges facing the industry now versus maybe three or four years ago?

A
I believe as an industry we have a little more work to do to create the awareness I talked about earlier. I am absolutely convinced that if people really understood the level of convenience and security that you can get for a small addition to your cell phone or notebook, this market would be huge! So I think that the industry reaching out to the market as a whole and trying to evangelize -- that is a challenge! I also think moving forward there will be this balance of security versus privacy, and finessing the line between being able to operate on someone's fingerprint image -- even though it is not the image per so as it is in most people's minds -- doing that and alleviating concerns about privacy will be a challenge.

FB
Well, Larry, thank you very much for taking the time to speak with us. Congratulations again on your appointment and I wish you the best in your new responsibilities!

A
Thank you. I enjoyed speaking with you Peter!

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