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The anti-terrorism business
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August 26, 1998: 10:48 a.m. ET
Recent bombings put the spotlight on companies that sell scanning devices
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NEW YORK (CNNfn) - As Saudi terrorist Osama Bin Laden promises more lethal attacks on American targets, a few publicly-held U.S. companies are making high-tech devices that scan for explosives and other weapons.
And while the industry is relatively small considering the expanding tentacles of global terrorism, some analysts see a need for more mail inspection services, corporate security and car bomb deterrents.
"The market has room for growth," said Peter Castellanos, an analyst at Cruttenden Roth Inc. in Irvine, Calif.
The renewed attention comes after bombings against American targets in Kenya and Tanzania believed to be financed by Bin Laden. President Clinton ordered a missile attack on terrorist strongholds in Afghanistan and Sudan that triggered a new wave of anti-American sentiment in the Muslim world.
Most recently, a bomb ripped through a Planet Hollywood restaurant in Cape Town, South Africa on Tuesday, killing at least one person and wounding 27.
Anti-American sentiments grow
One company, American Science & Engineering Inc. of Billerica, Mass. (ASE), makes scanning equipment to fight terrorism, drugs and weapons smuggling, and trade fraud.
AS&E's revenues rose 55 percent in the quarter ending June 30, mainly because of more orders for CargoSearch, an X-ray system that inspects trucks, cars, railroad cars, and sea containers, Castellanos said. Revenues could grow at least 60 percent in the next fiscal year, he said.
Cruttenden rated the company a "strong buy." Business Week recently named AS&E in a list of the top 100 "hot growth" companies.
AS&E in June announced a $35 million contract with Egypt for equipment to detect trade fraud and weapons smuggling.
But the company's message to small investors is that fighting terrorism is a long-term prospect -- and just a portion of its operations, said Jeffrey Bernfeld, vice president and general counsel.
After TWA Flight 800 exploded in July 1996 and initial reports pointed to terrorism as the cause, AS&E stock rose more than 50 percent, from $10 to about $16 a share. (Terrorism was later ruled out).
By May 1997, AS&E's stock price dropped back down to $10. Bernfeld said he was happy the bombings in Kenya and Tanzania didn't trigger a huge spike. The stock rose from 11 to 14-1/4. AS&E was at 14 in early trading Wednesday.
Other companies are much more likely to be affected by world events, said Steve DeLuca, an analyst at Robertson Stephens & Co. in San Francisco, Calif. Their stock will rise and they'll get new business because of breaking news about terrorism, he said.
For example, Vivid Technologies Inc. of Woburn, Mass., Invision Technologies Inc., of Newark, Calif., and Barringer Technologies of Murray Hill, N.J., makers of different types of airline detection equipment, all rose after the U.S. missile strike on Aug. 21.
InVision (INVN), a major supplier of the Federal Aviation Administration, rose from 6-7/8 to 8-5/8; Vivid (VVID) jumped from 8-1/2 to 10; and Barringer (BARR), increased from 6 to 7-1/2, DeLuca said.
"These stocks come in and out of favor," DeLuca said. Buyers are mainly governments or government agencies who take action after a world event, like a bombing, he said. For example, all of the companies signed contracts for equipment in the wake of the TWA 800 crash, he said.
"For an individual investor … you've got to be a long-term believer that someday all of us will be screened for explosives when we get on a plane," DeLuca said. "Right now, we're screened for guns and knives."
Likewise, the possibility of terrorism has U.S. companies worried about potential attacks on their global operations, said Chris Marquet, senior managing director of Kroll Associates, a division of The Kroll O'Gara Co. (KROG), which makes armored vehicles and offers security services.
Marquet said U.S. companies are more worried than ever about the potential threat to their employees and their assets. (343K WAV) or (343K AIFF)
"With the war against terrorism …does that mean there will be attacks against U.S. companies? Potentially so," Marquet said.
-- by staff writer Martine Costello
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