PerSay valued at $2.9-3.7m

SFK Technologies will continue injecting capital into the voice ID company.

A valuation of PerSay by Giladi Consultants reveals that the company is worth $2.9-3.7 million. PerSay was founded in the US in February 2000 and has a fully-owned Israeli subsidiary, PerSay Ltd. PerSay develops speech verification software, a segment of the biometric market. The company currently has two main products: PerSay VocalPassword, a spoken password verification system that compares a person's speech with those stored in its database; and PerSay FreeSpeech, which verifies a speech sample within seconds during a normal conversation.

Giladi Consultants wrote in its valuation for PerSay that demand for voice identification (voice ID) products will probably come from telecommunications companies, to replace access codes and passwords to databases from telephones, etc.; banks, for information security and customer identification; call centers; and other sectors.

Giladi Consultants added, "The usual PerSay contracts is between $200,000-250,000. Since 2003, PerSay controlling shareholder Shrem Fudim Kelner Technologies (TASE:SFKT) has financed the company's current operations by capital injections. SFK Technologies has no plans to call off this support at this stage.

"Although PerSay has been active since late 2000, it still lacked a marketing breakthrough by the end of 2003. The company's business appears promising, but the sales turnover of each contract is lengthy, lasting six to eighteen months," states Giladi Consultants.

Giladi Consultants predict that PerSay will earn $1.11 million in 2004, $2.15 million in 2005, $3.73 million in 2006, and $5.65 million in 2007.

PerSay's operating profit is predicted to reach $141,000 in 2004, but an operating loss of $94,000 is predicted for 2005, before a return to an operating profit of $579,000 in 2006 and $1.2 million in 2007.

In September 2002, "Biometrics Market Intelligence" (BMI) magazine surveyed development of the biometric market. "BMI" stated that the voice ID market was new, and that there were substantial differences of opinion about its business potential. "BMI" stated that call centers in Europe (the main market for voice ID technologies) was expected to reach 18,000 call centers with $15 billion in revenue in 2004, and reach $19 billion by 2006.

The telecommunications and financial sectors generate 60% of the demand for call centers, and they are also the largest potential customers for voice ID products. Call centers can potentially save up to 0.5% in revenue by using voice ID products. Giladi Consultants extrapolates that the potential demand for speech verification products from call centers in Europe alone will reach $57 million by 2007.

IBG predicts that demand for voice ID products will grow from $21 million in 2003 to $142 million in 2007. PerSay's management told Giladi Consultants that this estimate did not include all voice ID products.

PerSay has two competitors ScanSoft (Nasdaq:SSFT) and Nuance (Nasdaq:NUAN) (the latter is considered the global leader in speech verification - H.G.)

"PerSay is presently classified as a venture company," states Giladi Consultants, "since its future is still in great doubt in matters such as ability to make a marketing breakthrough, the penetration rate of new products for the voice ID market, the company's market standing, its competitors' actions and the entry of new players into the market, and financial backing that will support the company until it can reach a cash flow balance."

Published by Globes [online] - www.globes.co.il - on April 7, 2004

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