Homeland Security Industry Growth through Consolidation

Homeland Security Industry Growth through Consolidation

Homeland Security Firms Evolve and Expand Product Portfolios

By: Ann-Marie Fleming February 2006

In early February, President Bush presented his fiscal year 2007
budget request for the Department of Homeland Security (DHS).
The request for $42.7 billion indicates a 6 percent increase in
funding from the 2006 budget.

Elaborating on the priorities of the FY 2007 budget request,
Secretary of Homeland Security Michael Chertoff explained in a
recent press conference, \The budget focuses on strengthening
our initiatives in protecting our borders, increasing our
preparedness, expanding our intelligence gathering and sharing,
and improving maritime and transportation security.\

This bodes well for companies operating in this arena, in
particular those with technology surrounding surveillance,
detection and identification products to assist in meeting the
needs of border, port and transportation security and overall
homeland security readiness.

Defense sector correspondent James H. Smith in his weekly
column, \The Defense Market Report\(exclusive HDS feature),
explains, M&A activity continued to be the strategic weapon of
choice for companies wanting to move decisively into desirable
market niches. Top acquirers used M&A activity to drive their
top lines far past the levels achievable through organic growth
alone. With an estimated US$38 billion in worldwide M&A activity
in the aerospace and defense sectors, 2005 was a very good year.
And the current year also looks promising.\

As the homeland security industry continues to establish itself
as a long term market, many anticipate M&A activity to become
more prevalent. Scott Sacknoff, manager of the SPADE Defense
Index (AMEX: DXS) describes, \The homeland security market is
ripe for consolidation. With so many companies offering single
solutions and products, we can expect a number of acquisitions
in the homeland security market in the coming years as firms
seek to offer a portfolio of security options under one roof.\

Building product portfolios has become a necessary strategy for
many firms working to address the growing needs within the
homeland security arena. Dore Perler, CEO of Sense Holdings, Inc
(OTCBB: SEHO) explains, \Today\'s terrorist activities are a
global religious and political phenomenon encompassing a broad
spectrum of national security threats. These threats range from
a lone aggressor covertly gaining access to a national
infrastructure asset, all the way to a organized large-scale
conspiracy by a number of well-financed suicidal fanatics. The
ubiquitous utilization of Improvised Explosive Devices (IED)
introduces a particularly difficult challenge to security forces
throughout the world. The only effective way to simultaneously
confront all of these security threats is by the intelligent
application of high technology.\

\Sense believes that the solution to this problem requires the
mass-deployment of security systems integrating Radio Frequency
Identification (RFID), Biometric Identification and Micro
Electromechanical Sensors (MEMS). These Sensors, or electronic
noses, are designed to detect infinite amounts of explosives,
chemical warfare agents (CWA), biological warfare agents (BWA)
and last, but not least, narcotics. Sense is dynamically
involved and committed to the development, integration and
deployment of all of these technologies,\ concludes Perler.

Sniffex, Inc. (OTC.PK: SNFX), a developer of a lightweight
handheld distance weapon and explosives detection device
explains their strategy for being able to expand their
offerings, \As the expenditures for homeland defense continue to
grow, the customers that we sell to through our worldwide
Representative network are asking for more and more products to
sell to their existing customer base. There is a huge demand
around the world for products and services that can be used as a
tool in fighting terror and crime. We believe that if one or our
Representatives is selling Sniffex, they should be selling every
other great tool in the arsenal of products and services for
fighting crime.\

Technest Holdings, Inc (OTCBB: TCNH) has been focused on
diversifying their product base for many years to be able to
target a variety of the nation\'s security needs. As Robert
Tarini, CEO of Technest describes, \Although significant
progress has been made against terrorism in the foreign arenas
of Iraq and Afghanistan by our combat troops, many security
problems remain unresolved domestically here in the US, in our
cities, federal infrastructures and borders. Many of these
security problems will be solved by innovative technologies that
can be delivered by fast and nimble companies with the ability
to address multiple problems through a portfolio of solutions
such as Technest Holdings.\

As the definition of homeland security has shifted to the
concept of global security, the diversity and complexity of
security and defense needs continues to grow. As a result,
companies have had to evolve and expand with many firms
understanding the strength of being able to solve multiple needs
through further R&D of existing products and by adding new
technology to their portfolios through partnerships, mergers and
acquisitions.

Ann-Marie Fleming Ann-Marie Fleming completed her MBA in the
United States, where she attended Webster University. She also
holds an Honors B.A from the University of Toronto. She has over
fifteen years of experience within the financial industry to
include retail banking and brokerage, investment banking, and
mortgage brokerage within the United States and Canada, with a
firm background in corporate research. Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp,
www.HomelandDefenseStocks.com/Companies/HomelandDefense/Disclaime
r.asp