Originally created 02/11/02

Despite problems, InVision expects contracts



SAN FRANCISCO - Visitors to InVision Technologies' spacious manufacturing plant might be surprised it's not yet filled with the kind of urgent bustle and din of a wartime assembly line.

After all, this is the company that has grabbed early dominance of a market for devices that detect bombs in airline baggage. And in a jittery world where even a suspicious pair of brown loafers can disrupt an airport for hours, aviation security is at the top of everyone's minds.

But the pace figures to pick up soon. Even though critics say the technology is far from perfect, expectations are high that InVision's manufacturing plant in Newark will be humming at capacity as the Federal Aviation Administration races to meet deadlines requiring the screening of every checked bag on every plane for explosives.

Sergio Magistri, InVision's president and chief technology officer, said the company is ready to take off if and when the government issues those contracts for new baggage-screening machines.

"We all hear there is a clear commitment in meeting the deadline," Magistri said.

"We've taken the company from 180 employees to 250 employees, we're beefing up manufacturing," he said. "We've invested $3 million to $4 million on purchases and changes that improve our capabilities. Past this, we are waiting for orders."

InVision was born in response to the 1988 bombing of Pan Am Flight 103 and would briefly jump into the spotlight whenever there was a suspicious air disaster like the explosion of TWA Flight 800 off Long Island in 1996. Each time, however, interest in InVision waned as security concerns subsided.

But analysts say the nation's new resolve to tighten airport security after Sept. 11 will have long-lasting effects on InVision, which has seen its stock price soar from $1.38 in early 2001 to a 52-week high of $47.09 in mid-December.

But InVision's future depends on how well it can ramp up to meet the nation's new security demands, answer critics' charges that the technology is not fast and accurate enough, and meet increasing competition to produce other forms of airport security technology.

"There's always been talk in government that we want to have baggage screening," said Ted Cho, analyst for Banc of America Securities. "None of this came to fruition. But now there's money and now there's a law that says you have to have it by the end of the year."

InVision is one of only two companies to receive FAA certification to make explosive-detection systems for airports based on advanced computed tomography, or CT, technology that was originally developed and used for medical CAT scans of the human body. The other company is defense contractor L-3 Communications Holdings Inc. of New York.

Cho said gaining FAA certification is such a complex process that it forms a barrier for any company trying to compete with InVision or L-3.

"For companies like InVision and L-3, there's a tremendous opportunity," Cho said. "They are going to be at the core of any solution that's going to be found."

The systems use conventional X-ray images to produce a 3-D image of the contents of luggage, pinpointing potential explosives and detonators.

There are more than 160 of the CT scanners currently installed in U.S. airports. About 150 are InVision's CTX- brand machines, with the rest made by L-3.

The Aviation and Transportation Security Act that President Bush signed into law in November requires that by Dec. 31, 2002, all checked airline baggage have to be screened using CT scanners. But to meet that deadline, the government has to buy and install more than 2,000 CT machines.

Although the act set aside $1.25 billion to meet the deadlines, the actual orders for the CT machines haven't been placed. The FAA has said those orders should come after the still-forming Transportation Security Administration works out issues such as prices and delivery schedules.

InVision, which has sold about 260 machines worldwide, now produces about 10 machines per month. Magistri, though, said the firm has plans in place to ramp up production to 50 machines per month.