Stunning future ahead for Taser

David Parsley
London Times
Sunday September 23, 2007

TOM SMITH has been called a killer, he has received death threats and has had to wear a bullet-proof vest. But the worst the chairman of stun-gun maker Taser International has experienced was when the company he co-founded was facing collapse.

The threats and body armour were part of everyday life for Smith and his brother Rick in 2005 when the American authorities were investigating whether the high-voltage Tasers used by police caused permanent injury. As the informal investigation by the Securities and Exchange Commission (SEC) got under way, Taser’s share price plummeted.

“You certainly find out who your friends are at a time like that,” said Smith during a recent trip to Europe to drum up investor support.

In April 2005 Taser opened its head office and manufacturing centre in Scottsdale, Arizona. “It wasn’t your average HQ launch,” recalls Smith. “We had to move the opening from outside the front door to the open space of the car park after receiving death threats. Flanked by police, we cut the ribbon and my wife hugged me. She burst into tears as she felt the bullet-proof vest under my shirt.

“But that wasn’t the worst time of my life as we were 100% confident we would win. We knew our safety claims were accurate.”

When the SEC made the probe formal two years ago, the Smith brothers, against legal advice, called the SEC investigators to say they were on their way to New York to see them. They took 100,000 pages of evidence, answered anything and everything thrown at them and were cleared of all allegations three months later.

“I know it sounds awful, but it wasn’t as bad as the situation in 1999,” said Smith, referring to the product that almost destroyed the business.

The Auto Taser was a steering-wheel lock that sent a powerful electric shock through a thief trying to remove it. When the product won the Innovations Award at the Consumer Electronics Association Show in 1998 the Smith boys thought they had a certain success on their hands. But even slashing the Auto Taser’s price by 20% to $199 (£99) didn’t make it a winner. The product could not compete with cheaper, simpler alternatives.

“That was the toughest part of my life,” said Smith. “We were living in a small condo, driving a small Kia car and we were about to lose all our money, our mum and dad’s money and heading for failure. We had always lived month by month since launching the company, but now we were living day by day.

“The Auto Taser was like the bearded lady. Everyone wanted to look at it, but nobody wanted to take it home.”

Indeed, Taser has not enjoyed the steadiest of financial rides at any point in its history. Smith revealed the company had enough money in the bank to cover its monthly payroll on only two occasions between 1993 and 1999. Yet the group was able to raise $12m for its float in 2001.

This was largely due to dumping the Auto Taser and focusing on production of its first stun gun, the M26. It wasn’t long before the police began to take an interest, with the New York Police Department becoming the first to try it. Now, 11,000 of the 18,000 American police agencies use Taser’s latest 50,000-volt X26 model.

Taser stands for Tom Swift’s Electric Rifle. It was invented by former Nasa chief scientist Jack Cover, who was a fan of the Tom Swift adventure novels. Cover created the first gun almost 40 years ago but it wasn’t until the Smith brothers went to him in 1993 that the technology was developed to create a Taser effective enough to be viable in the real world of law enforcement and self-protection.

In April 2003, the Taser arrived in Britain. Initially, it was tested by five police forces. Now Tasers are used by every force in the country and, since the beginning of this month, unarmed officers carry them.

Smith believes that convincing the British police of the Taser’s worth will help the company sell it to more cautious forces overseas. Australia, New Zealand and Singapore are three target territories and Taser has just won an order for 1,249 guns from the French interior ministry.

After its flotation Taser made a small profit in 2002 of $361,591 on sales of $9.8m. Both 2003 and 2004 were better, with profits of $7.6m and $30.5m respectively. At the beginning of 2005 the company was valued at $2 billion. Then the SEC inquiry hit the shares and orders. Profit slumped to $1.5m in 2005 and the after-effects caused a loss of almost $7m in 2006. By the end of the SEC probe, Taser had lost 87% of its value but it bounced back this year and is now valued at $985m, up 115% in 12 months.

In July Taser announced its most successful second quarter, recording sales of almost $26m. Smith is cautious, but points out that analysts have forecast Taser’s sales will reach $90m this year, a 30% increase on its best postfloat performance.

Smith, however, is aware that investors, the public and potential clients still have one question - is the Taser safe? Smith, who has been “tasered” 15 times, has no doubts. Taser’s slogan is “saving lives every day” and the firm has won all 52 lawsuits brought against it. “In my opinion it’s the greatest advance in human rights,” he said. “We’re seeing injury reduction in America by between 40% and 70% to both suspects and officers. The evidence overwhelmingly shows lethal force is being reduced.”

The latest product to hit the American market is the C2, or Lady Taser. Despite the nickname, its resemblance to the Star Trek phaser has ensured a market among security-conscious men as well as women. The gun fires two electrical probes that stun a person for 30 seconds.

Other products in the pipeline include the Remote Area Denial system, which isa bank of Tasers piled together to protect areas such as airport boundaries and military bases. A Taser robot is being developed to be sent into situations to incapacitate the target before anyone goes in to face the danger. Finally, there is the wireless X-REP Taser, under trial by police in Britain, which has a range of up to 40 metres compared with a few feet for the existing stun guns.

Smith is seeking institutional investors in Europe and there is even talk of a dual listing in London. “A float in London is something we’re thinking about,” he said, “but it’s only a thought right now. If anything happened it would be in 2008, but we are a way off making that decision.”

One thing is for certain. Smith is happier than he has been since he launched the company almost 15 years ago. The bullet-proof vest has gone and his family has plenty of food on the table.