July 30 (Bloomberg) — Taser International Inc., the world’s largest maker of stun guns, may cut its litigation costs in half with a video-recording system it plans to start selling by early 2010, Chairman Tom Smith said.
The Scottsdale, Arizona-based company estimates its $1.5 million in quarterly legal fees may fall over the next three to four years “just by video being present” at crime scenes, the co-founder said in an interview in New York yesterday.
Taser, whose weapons deliver an electric shock that can incapacitate and subdue crime suspects, was the defendant in 42 lawsuits alleging wrongful death or personal injury as of May, it said earlier this year.
For members of a jury, it may be hard to picture “somebody on drugs going berserk,” Smith, 42, said. “But now we’re going to give you a video image of it.”
The recording system works with the company’s Evidence.com product, which stores and processes data and video taken at crime scenes. Taser started testing it July 27, the day it introduced its newest stun-gun model, the X3. The company also plans to sell a portable recording system with a video camera worn on a headband that syncs with the Evidence.com software.
The recording system is “more likely to result in lower legal fees for police departments,” said Steve Dyer, an analyst with Craig-Hallum Capital Group LLC in Minneapolis, in an interview yesterday. “It helps in assessing where there’s a question as to whether a police officer used an appropriate level of force.”
The new products are “fantastic,” Dyer said. With a $7 price target, he recommends buying the shares and doesn’t own them. “The question is, where do people find the money to buy” the products, he said.
Law Enforcement Sales
Taser derives most of its business from sales to U.S. law enforcement, whose budgets have been squeezed in the longest recession since the Great Depression. Chief Executive Officer Rick Smith, the brother of Chairman Tom Smith, said in March that federal stimulus funds may bring in a year’s worth of revenue through police sales.
That may have been “optimistic,” Tom Smith said yesterday. “There were a lot of requirements that were kind of onerous that some of the smaller departments shied away from,” he said. He declined to provide a new estimate.
The new Taser model costs $1,799.95, the company said July 27. Taser would bring in $600 million if all users of the older model, the X26, replaced them with the new gun, Smith said. He declined to estimate how many customers may upgrade.
Weapon Upgrades
“Police want to touch it, see it, feel it, before they do anything,” he said. “But right out of the gate, we’ve already had early indications of people upgrading.”
The company is considering selling refurbished older units once customers have traded them in for new models, Smith said. “In economically challenging times, we want to try and make sure they’re affordable,” he said. The refurbished X26 units may sell for about $400, or half off, he said.
A reselling program may bring in a new set of customers, analyst Dyer said.
“If price has been the issue, I would say a sale of a refurbished one, from Taser’s perspective, is better than continuing to get told ‘no’ because they’re too expensive,” he said. “Money is the key issue.”
Taser reported second-quarter sales yesterday of $21.8 million, up 3.5 percent from the same period a year earlier. The loss narrowed to $723,403, or 1 cent a share.
Taser gained 13 cents, or 2.5 percent, to $5.37 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading. The shares have gained 1.7 percent this year.
