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.
