From Disaster to Profitability : Fingerprint Specialist Printrak Survives Own Identity Crisis

ANAHEIM —  For a company that sells computer equipment designed to pick people out by the arches, loops and whorls of their thumbs, Printrak International Inc. has gone through a few different identities of its own since 1981.

The company, originally a division of Rockwell International Corp., was sold to London-based De La Rue Group 13 years ago. Printrak’s profits slowly sank and by 1990 the company had lost more than $90 million. De La Rue, a currency-printing company, considered shutting it rather than face continued losses, which had risen to $2 million a month.

“It was a managerial mess,” says Richard Giles, an Englishman who had been a financial manager for another De La Rue division, a printing company in Colombia, before arriving as Printrak’s chief financial officer in 1989.

The next year, Giles and another executive, Charles Smith, assumed control of Printrak’s obligations from the parent company and began a restructuring campaign that eventually slashed the total number of employees from 425 to 150. Many who lost their jobs were engineers hired to work out technical problems for specific customers, which further strained customer relations. Annual revenues declined 33.8% to $14.5 million in 1991.

“I agreed to come (to Printrak) because even though it was a huge mess on one hand, there was some opportunity,” said Giles, who is now president and chief executive. “They had a real technical base, and not all the money that had been spent was wasted.”

Financially, the cuts paid off. Printrak had profit of $600,000 in 1991, and expects to post its third consecutive year of about $4 million in profits. Revenues are expected to reach $32 million for the fiscal year ending next March 31, said Dan Driscoll, Printrak’s marketing director.

Printrak customers--law enforcement agencies, including the FBI and the New Scotland Yard--also say they are happier than they were three years ago with Printrak’s equipment and service. Back then, annual customer conferences degenerated into “bitch sessions,” according to Debbie Benningfield, an officer with the Houston Police Department.

And in June, Giles won a “Turnaround of the Year” award by a panel of Orange County executives. One of the judges, Melinda Masson, owner of Merit Property Management Inc. in Mission Viejo, said she was impressed that Giles kept the company going despite the layoffs.

“When you cut staff to that point, a lot of companies don’t come back because morale is so far down,” she said. “When you’re a company facing things you can’t control, what makes one stand apart is having the tenacity, the vision to stay with what you’ve decided to do . . . and we think that’s what Giles has done.”

But how far back has Printrak bounced? Though it is back up to 230 employees, Printrak failed to win a pair of large law enforcement contracts earlier this year. And a new market it wants to enter--sales to social service agencies, such as those handling welfare and immigration--has been slow to develop.

Printrak and its rivals--including Indentix Inc. of Sunnyvale and Cogent Systems Inc. of Alhambra--are slowing beginning to make sales to social service agencies, such as those that administer immigration, welfare programs and gun licenses in some countries.

Even if such agencies overcome the social resistance to using fingerprints to confirm the identity of their clients, present systems meant for police work aren’t easily modified for confirming the identity of welfare recipients or for use at borders.

Fingerprint experts divide fingerprint-comparison tasks into two types: identification of an unknown person and simple verification of a person’s identity. Police fingerprint systems usually involve the former type, requiring a computer system to compare a suspect’s prints against a large database of wanted individuals or those who have been previously arrested.

“On the street, you want to see if you have stopped somebody who’s wanted. They may not want to tell you that,” said Steve Ferris, an industry consultant in Albany, N.Y. Therefore the “cold searches” used by police agencies may involve the comparison of a print to hundreds of thousands of others within a few minutes, where a false-positive identification could result in an arrest.

Verification systems, on the other hand, are used where clients have an incentive to identify themselves correctly with their fingerprints on file and their names can be used to match their prints with those in a database. The difference makes service-agency work easier than, for example, analyzing prints left at the scene of a crime.

“Whenever you’ve got a live person in front of you, you’re better off from a technical point of view,” said Vance Bjorn, a Cal Tech graduate student who is also working on designing security systems, such as door locks, that use thumbprints.

However, social service agencies won’t merely buy modified police-tested equipment, said Peter Higgins, an FBI deputy assistant director for engineering who helps administer the bureau’s system.

“You’re going to see social service providers going through the same search process when they buy their systems in the next few years that the local law enforcement community did,” Higgins said. “And it’s going to put the same demands on (manufacturing) companies to go everywhere they think they’ll find buyers.”

“All of the competitors are trying to differentiate themselves according to price, service and accuracy. Certainly none has done all three,” Higgins said.

A widening market would probably only help Printrak, which has suffered from increased competition and didn’t make the final cut in two recent, large competitions:

* A group including Printrak was eliminated from an FBI contract competition to design the bureau’s automated fingerprint identification system. Instead, design contracts worth about $10 million each were awarded in May to three different groups of competitors, including Unisys, Martin Marietta and TRW Inc.

* Printrak was also part of a group that lost out on a bid to build a similar system for the state of Ohio. While Printrak’s system performed well, its group, led by Harris Corp. of Melbourne, Fla., “priced themselves out of the competition,” said Gregory C. Berquist, deputy director of the state’s bureau of criminal identification and investigation. An $8.8-million contract went to Cleveland-based TRW Inc. instead.

Those out-of-the-money finishes won’t kill the company, Giles said. “I’d have rather won than not, but we dusted ourselves off. It doesn’t impede what we’re trying to do now.”

Observers trace Printrak’s difficulties to the late 1980s, when it began to face competition from several new rivals in addition to its traditional foe, Nippon Electric Corp. The company was also having problems with system performance.

When he arrived, Giles said, he found Printrak “had a lot of different contracts and engineers, and every customer had a slightly different demand.

“Their solution had been to throw larger and larger numbers of people at each problem, and the cumulative result was massive losses.”

Ed Ricord, a senior management analyst at the Florida Department of Law Enforcement, which bought a $9-million Printrak system in 1987, said his department’s dealings with Printrak under De La Rue’s ownership were “very tumultuous.” Florida’s system could not complete the 2,000 searches per day that the department required, and the company eventually cut its bill by more than $2 million as part of a settlement with the state.

“I know that for a while after that period, Printrak wouldn’t sign contracts with states that wanted the highest level of performance,” Ricord said. “I think that was a good thing . . . they would no longer commit themselves to doing things they were uncomfortable doing.”

Like Benningfield of the Houston police, Ricord praised Giles for refocusing the company on engineering needs as opposed to raw sales totals in recent years.

“Especially a few years ago, vendors would do anything, promise you anything to get the contracts. Now I think that’s changed, and I can see where their (Printrak’s) experience in Florida pushed them to make those changes,” Ricord said.