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Uncle Sam Gets Smart About Security

There couldn't be a better time to be in the smart card business. The government, principally through the Department of Homeland Security, is working on a handful of different new identification cards for transportation workers, foreign temporary workers, federal employees and Americans without passports traveling to Canada, Mexico and the Caribbean.

"There's a boatload of them. There are so many of those card programs they are overlapping," says Jay M. Meier, senior securities analyst at MJSK Equity Research.

Meier estimates the government will spend hundreds of millions of dollars on card technology not just for ID cards to cross borders and access buildings and computer networks but also on for things like integrated circuit chips placed on the cards, as well as readers, software, printers and even special door locks.

Michael Chertoff, the secretary of Homeland Security, has stated his preference that the different cards all use the same type of technology - computer chips that link to centralized databases. Such smart cards have embedded integrated circuits that act like a tiny computer, processing commands, with data stored on the card or in a separate database.

Meier wrote in a recent report, "Secure Credentialing and Identification," that the market for smart cards is "conceptually enormous." He cited a Forrester Research projection that logical and physical security applications will cost a combined $11 billion in 2008, ten times the amount in 2005, and a forecast by Frost & Sullivan that the number of contactless smart cards will reach 1.2 billion in 2010 from less than 200 million in use two years ago. Government ID cards will account more than half the total.

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