A new life for Taser, this time with less controversySeptember 6, 2011: 12:17 PM ET
The maker of the handy defense weapon is putting a focus on its new video-surveillance system for police officers.
By Daniel Roberts, reporter
FORTUNE -- "Don't tase me, bro!" The phrase is familiar to pretty much anyone that was alive and consuming news in 2007: Andrew Meyer, a senior at the University of Florida at the time, shouted it before campus police shot him with a Taser ECD (electronic control device). A video of the incident has been viewed nearly 6 million times on YouTube.
The Scottsdale, Ariz.-based manufacturer of the device, Taser International, now enters something of a rebranding period as it begins to sell its newest product, Axon, a video surveillance system that records police officer response calls. The footage can then be securely stored online for reference.
The Taser device -- available both to law enforcement and consumers -- continues to be the company's main source of revenue, and will bring in $73 million of Taser's $90 million revenue for 2011, according to Merriman Capital estimates. There are 600,000 of them in use by 16,300 law enforcement agencies in 107 countries.
Taser (TASR) was founded in 1991 (originally as "Air Taser") and, according to CEO Rick Smith, was "your usual startup story" until it joined with police forces in 1999. Controversy has surrounded the non-lethal weapon, which shoots two darts that create an electrical current and incapacitate a suspect's muscle function, but police departments swear by it.
"The negative stories tend to get more attention," says Smith, adding that police surveys show the device has saved 75,000 lives. "Occasionally, sadly, someone gets hit by a Taser and dies, and that becomes the whole story. The Hangover and other salacious headlines paint the wrong picture." (One scene in the movie shows a violent, cruel use of the Taser for comic effect.) According to a 2009 Police Executive Research Forum study, officer injuries drop by 76% when a Taser is used for protection.
The company went public in 2001 and its stock soared, peaking in 2004, when it yielded a 360% return over the year before. The stock's success brought positive attention, but also more scrutiny, says Smith. It now trades at about a third of the value at its peak.
There have been 12 deaths caused by Tasers and the company has been sued 170 times. In the cases of serious injury or death, Smith says the cause is typically a state called "excited delirium" and involves a suspect that is on drugs and hyper-agitated.
Smith likes to put the injury rate in perspective by comparing it to the injury rate of other forms of violence: Two out of every 1,000 exposures to a Taser result in serious injury. According to an LAPD study, that number for a kick is 450, for a punch is 780, and for exposure to a gunshot it's 500 (the other 500 are deaths).
As for the University of Florida incident and claims that it amounted to police brutality, Smith would only say, "We don't enter into debates about policy, we just make the equipment. Once the agency makes the decision to use force, it's in their hands."
Taser's new Axon system was first sold for use in March 2010, to the Aberdeen, South Dakota police department. Since then, it's been used by 16 police departments, and has generated $300,000 of Taser's $87 million revenue in 2010. In other words, it's still very small. Axon is a small camera clipped on a headband similar to a Bluetooth. A cartridge on the officer's belt shows what is being recorded. Later, the footage can be uploaded to evidence.com, a cloud database that Taser built.
Axon's selling points are not just the ability to film everything the officer sees (which, Smith says, has an effect on the conduct of suspects and officers alike) but the use of the footage as a protective tool in court cases later on.
Sgt. Paul Nonnast, of the Johnson County Sherriff's Office in Kansas, likes it for that very reason. After a testing and evaluation period in January, he purchased five units in March and has had "an extremely positive response from officers." His department has deployed the units in the county jail and out on the street.
"To me this is a game-changer for law enforcement," he says. "The idea of an officer having the ability to store video evidence, regardless of where they go, is something I have never seen before. From a liability standpoint, the video you capture often saves you against claims down the road. So we like to think we're spending money now, but saving money in the long run."
But not every district can afford to spend money now. Eric Wold, a Merriman analyst who covers Taser, cites the struggling economy as an obstacle to Axon's success: "Adoption has been hampered somewhat by budget constraints. What's keeping Taser's numbers [for sales of both Axon and Tasers] neutral right now is that even if a police department wants and loves the product, they're still viewing it as something nice to have, a luxury. If it's a choice between having that or hiring a few new officers, they're going to hire new officers." In terms of cost, Axon runs a police department $1500 per unit, plus $1200 a year for data storage on the site.
Taser "has been evolving away from a Taser-only story," says Wold. Though Tasers will continue to be the company's bread and butter, expect to see them pushing their new product for law enforcement and even military.
Whether you'll begin to see the small Axon cameras on every local cop in your city is uncertain, but Smith isn't placing any limits on its potential: "We believe the Axon and evidence.com business could end up five times the size of our core business."