Apparently TASR came out with its own press release as well: http://biz.yahoo.com/prnews/040503/lam078_1.html TASER International, Inc. Responds to Barron's Magazine Article Monday May 3, 2:24 am ET
SCOTTSDALE, Ariz., May 3 /PRNewswire-FirstCall/ -- TASER International, Inc. (Nasdaq: TASR - News), a market leader in advanced non-lethal weapons today sent an open letter to Barron's Magazine writer Rhonda Brammer in response to her story titled, "Sure as Shooting" published on May 1. The text of the letter is below:
Dear Ms. Brammer,
We are writing to respond to your recent article on TASER International, Inc. and to express our continued disappointment at your biased approach.
In your articles, you assault TASER's market valuation arguing that TASER's forward P/E of 65 (based on analysts' estimates for 2004) is "absurd." Yet, "Barron's Guide to Making Investment Decisions," teaches the following on page 116,
"Since you are buying future earnings when you buy a stock, you can expect a company that produces 40% gains in annual earnings to carry a higher price tag than one that produces 10% gains ... It isn't unusual to see these stocks carrying P-E's of 50 or higher."
If Barron's defines a P/E of over 50 as normal for companies with 40% growth in earnings, is a P/E of 65 really "absurd" for a company that grew earnings by over 1,400% in its last quarter?
The real issue comes down to TASER's future growth. In your article, you write, "TASER no longer has the stripes of a growth company." Our forward looking growth prospects greatly benefit from the fact that almost 25% of agencies have initiated a TASER program, yet only 6.2% of individual police and corrections officers have a TASER conducted energy weapon today. Further, our market penetration with the new TASER X26 is at less than 2% of the individual officer market in the United States. Since many of our customers using the older M26 are purchasing the X26 to upgrade their systems, we have yet to tap 98% of the domestic police and corrections market with our X26 technology. I think most people would agree this leaves us significant room to grow.
While U.S. law enforcement and corrections are our primary market today, we see great opportunities in the other markets as well. International police markets represent an opportunity ten-fold greater than the U.S. alone. As explained in our conference call, international orders take significantly longer to mature than orders from the smaller agencies here in a more fragmented U.S. market. Therefore, we achieved the record financial results in the first quarter without significant export sales. We do expect that export sales will increase later in the year after the United Kingdom and France complete their field tests.
Worldwide military markets offer a second market that is comparable in scope to law enforcement, and the U.S. Department of Defense is leading the way with over 400 TASER conducted energy weapons being field tested in Iraq and Afghanistan. Most military institutions will be involved in policing and peace-keeping operations in the future -- and our TASER conducted energy weapons offer a powerful capability in this new role. While we have yet to scratch the surface of the military markets, the largest single order in our company's history was for 3,500 ADVANCED TASER M26s last year for deployment by a foreign military. We believe there are similar opportunities for large orders in the future, although these larger orders are more difficult to predict and do not lend themselves to meaningful quarter-to-quarter comparisons.
We believe the private security market potentially will follow the lead of police in deploying TASER devices in the future, another virtually untapped market. There are several private security forces including a major security force with over 1,000 ADVANCED TASER M26s in the Middle East and a major U.S. defense contractor that is deploying TASER conducted energy weapons for its private security personnel. Private security companies employ roughly 2.8 million persons in the U.S., a market over twice the size of law enforcement and corrections. Similarly, there is a global market of roughly ten to twenty times this magnitude.
Then there's the gargantuan market for private citizen's self-defense systems, including roughly 35 million gun-owning households in the U.S., and another roughly 82 million that do not own firearms. We believe non-lethal weapons such as TASER can appeal to both market segments for home protection. Over the last 10 years, we have sold over 100,000 TASER conducted energy weapons to private citizens' for self-defense, with the majority of these systems sold before we shifted our focus to law enforcement in 2000. With the introduction of the X26C Citizen's Defense System later this year, we look forward to rejuvenated growth in the private citizen market.
With less than 2% market penetration of our primary market with our latest technology, and several follow-on markets that are much greater in scope, it's hard for me to envision why you concluded, "Goodbye to Growth."
Looking at our most recent financial data, the dollar volume of new orders grew 13% from $11.6 million to $13.1 million and our revenues grew by 22% from our previous record achieved in the fourth quarter of 2003 to the first quarter of 2004. In fact, operating income in the first quarter of 2004 is at an annualized pace to achieve $23 million by year end -- almost equivalent to our total revenue in 2003. This past week we announced that April was the best month in terms of new orders in the company's history.
By no means has growth said goodbye to TASER!
Even Manuel Asensio, one of the world's best-known short sellers, was perplexed why the Wall Street Journal (and presumably Barron's) targeted TASER, writing,
"There are hundreds of very questionable companies with undeserved market capitalizations based wholly on bold-faced lies. And then there are other pricey stocks that are not innovators and leaders in their field, with very limited competition and selling a high margin proprietary product that uses a high margin proprietary disposable. Yet the Journal chose TASER, which has all these nice things.
To us what is striking about TASER is not investors' interest but Wall Street's blindness. Can anyone point to another company that has ever surprised Wall Street so completely? In the quarter ended June 30, 2003 TASER had net sales of $4.2 million, $347,059 in net income and a $37 million market value. This valuation turned out to be a mere 2.6 times TASER's most recent annualized quarterly net income.
In the next three quarters TASER grew its quarterly net sales 314% and net income 1,023%. TASER's most recent pretax earnings of $5.8 million are greater than its net sales were before Wall Street got a clue. And as product sales rise so will sales of its high margin disposable." (Mr. Asensio's article is available at www.asensio.com)
You claim in your article that our future growth will be hampered because Japan, Hong Kong, Norway, Sweden, New Zealand, and other countries prohibit the sales of TASER devices along with the states of New Jersey and Massachusetts. But you fail to note that just two years ago, there were four states where TASERs were not legal. Now, both Michigan and Hawaii successfully changed the laws to allow their police to use TASERs. Two down, two to go. In Michigan the state insurance agency has offered to pay for up to 50% of the cost for TASERs purchased by law enforcement agencies because of the reduced legal liability and workmen's compensation claims when the TASERs are deployed. Just a few years ago, TASERs were illegal in the United Kingdom, Canada, Switzerland, and Australia. All of these countries now have TASERs in the field. While legal hurdles certainly exist in certain markets, the trend is in our favor today as many countries have already changed the laws to allow our technology.
Then, you regurgitate the "questions of safety" regarding the TASER. You question, "Have studies shown that a 50,000 volt shock to people with heart disease is harmless?" You will realize how silly this question is when you understand that a static shock from a doorknob can reach in excess of 35,000 volts. It's not the voltage that determines the medical safety of an electric shock, it's the amperage. The output of the TASER X26 is 0.003 amperes -- doesn't sound as dangerous now, does it? And yes, medical experts have performed tests on animals directing the current from the TASER directly across the heart in the presence of various drugs and have not seen adverse or dangerous arrhythmias result.
Each year approximately 19,000 people die as a result of drug overdoses in the U.S. And an estimated 5,000 or more people die in police custody each year (based on proportionate calculation from California state data). And yes, approximately 45 people have died in custody after being first subdued with a TASER. But each and every case has been caused by readily understood causes of death -- not the TASER. More importantly, your article misses the point that the TASER has saved over 4,000 lives based on actual police reports.
In the cases from your article: one death was a methamphetamine overdose, one was a cocaine overdose, and one individual had taken 20 times the maximum dose of Ephedra -- the diet supplement that has been blamed for the deaths of many people, including several professional athletes.
To place the TASER safety in context, each year there are approximately 50,000 deaths in vehicle accidents; 35,000 deaths from firearm related injuries; over 700 deaths from falling out of beds and chairs; over 300 deaths from drowning in bathtubs; and over 40 deaths from reactions to bee, wasp, and hornet stings. And in over 30 years since the first TASER was introduced, there have been exactly zero deaths clearly caused by the TASER (as opined by independent medical examiners). That's why it's so important to look into the actual cause of death, and not engage in the "guilt by association" approach promoted in your article.
Over 70,000 volunteers have been hit with the TASER. In fact, 12 of our shareholders volunteered for the TASER at our shareholder meeting last Thursday. Over 30,000 actual suspects have been hit with the TASER in the field.
Finally, you point to share sales by insiders and institutions as reason for panic. Sprott Asset management did, indeed, recently sell their 10.8% stake in TASER. They did so after achieving an almost 10x return on their investment in less than a year. Incidentally, a new institution, Citadel, purchased a 7% stake in TASER since Sprott's departure.
Further, you point to insiders "unloading" in the past nine months. Our response is straight-forward on this issue. We have invested our efforts and our own personal money in this company over the past decade. We were not financed by any outside source during the first 7 years when all the high-risk capital was provided by the Smith family and Bruce Culver (a director). Insiders have made and held these investments over the past 11 years and we have been selling incrementally since the company went public. Even now, the majority of insiders hold the significant majority of their personal portfolios in TASER. How many investments have you held for 11 years Ms. Bremmer? Does any one stock make up over 50% of your portfolio? As a "financial analyst" would you recommend that people like my 66 year-old father continue to hold a largely single position portfolio? (Hint: check out the advice of Barron's Guide to Making Investment Decisions before you answer) Is it possible that insiders at TASER are following a reasonable investment strategy by diversifying their portfolio rather than the doomsday scenario you paint?
In conclusion, we apologize if we have offended you. But you continue to assault the well-intentioned work of ourselves, our dedicated coworkers, our supportive shareholders, and the growing number of law enforcement officers that depend on our equipment every day. And your behavior leads us to believe it is intentional, that you are not interested in learning the balance of facts about TASER, but that you are bent on portraying a highly biased, negative, destructive point of view for some personal motivation we can not understand.
After your first article a few months ago, we responded with surprise that you would undertake such extensive research without so much as a phone call to the company for meaningful information. In your article of May 1, you self-righteously claim your calls to the company were not returned. Yet, you waited until the last day before your article went to press, called our office late in the afternoon on the day management was occupied with our quarterly board meeting, our annual shareholder meeting, and groundbreaking ceremonies for our new building. Then, you left a single voicemail in Phil Smith's mailbox without evening hitting "0" for the receptionist. Sounds more like positioning for your story than a legitimate attempt to contact us.
In the future, we have set up a special media hotline for you at 480-444-4000. And please call us well before the night your story goes to press. In fact, we would be happy to buy you a plane ticket to Phoenix so you can come and see the company for yourself and meet the people whose intentions you question. If you come to learn the other side of this story, we will look forward with great interest to your next article on TASER.
Thank you,
Rick Smith Tom Smith CEO President TASER International TASER International
About TASER International, Inc.
TASER International, Inc. provides advanced non-lethal weapons for use in the law enforcement, private security, and personal defense markets. Its flagship ADVANCED TASER® M26 product uses proprietary technology to incapacitate dangerous, combative, or high-risk subjects that may be impervious to other non-lethal means. Its latest product, the TASER X26 is 60% smaller and lighter than the ADVANCED TASER M26 and reduces injury rates to suspects and officers, thereby lowering liability risk and improving officer safety. TASER® technology is currently in testing or deployment at over 4,400 law enforcement and correctional agencies in the U.S. and Canada. Call 480-991-0797 or visit our website at www.TASER.com to learn more about the new standard in non-lethal weapons.
Note to Investors
This press release contains forward-looking information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the safe harbor created by those sections. The forward-looking information is based upon current information and expectations regarding TASER International. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results could materially differ from what is expressed, implied, or forecasted in such forward-looking statements.
TASER International assumes no obligation to update the information contained in this press release. TASER International's future results may be impacted by risks associated with rapid technological change, new product introductions, new technological developments and implementations, execution issues associated with new technology, ramping manufacturing production to meet demand, litigation resulting from alleged product related injuries, media publicity concerning allegations of deaths occurring after use of the TASER device and the negative impact this could have on sales, product quality, implementation of manufacturing automation, potential fluctuations in quarterly operating results, competition, financial and budgetary constraints of prospects and customers, international order delays, dependence upon sole and limited source suppliers, fluctuations in component pricing, government regulations, dependence upon key employees, and its ability to retain employees. TASER International's future results may also be impacted by other risk factors listed from time to time in its SEC filings, including, but not limited to, the Company's Form 10-QSBs and its Annual Report on Form 10-KSB.
For further information contact Steve Tuttle, Director of Communications, at Steve@TASER.com or call 480-444-4000. Visit the company's web-site at www.TASER.com for facts and video.
It will provide for additional volatility and thus, possibly some trading profits in TASR, watching it challenge $30 here....and in here at $30.50 (TASR) a nice penta discount to last sale...
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