Chuck Burton  /  AP
Bob Gruder, CEO of Stinger Systems, Inc., holds his company's new stun gun at their headquarters in Charlotte, N.C., earlier this month. Compared to rival Taser, Gruder said, “Our guns are less expensive, more accurate and they offer better safety features.”
updated 4/21/2005 8:38:00 AM ET 2005-04-21T12:38:00

Entrepreneur Bob Gruder earned millions selling Y2K compliance software in the late 1990s before that business turned sour. Now, he's taking aim at Taser International's virtual monopoly in the stun-gun market.

Gruder is chairman and chief executive of Stinger Systems, Inc., a startup that has been in business less than a year. This month, the Charlotte-based firm began shipping free samples of its dart-firing stun guns to police departments, prisons and military users, giving them an opportunity to try the products.

Some analysts worry that Stinger's sales pitch may be more sizzle than stun. Even before it has brought a single gun to market, the company has been involved in lawsuits with Taser and lost its president.

"There's always room for competition, but so far I've not seen where Stinger has sold a single gun," said analyst Joe Blankenship of Source Capital Group in Scottsdale, Ariz.

Stinger's samples are going to more than 1,000 law enforcement agencies that expressed interest. Gruder hopes they turn into orders for the device, which he aggressively promotes as preferable to the more familiar Taser, which is the subject of a federal probe of its safety claims.

Taser wars

"Our guns are less expensive, more accurate and they offer better safety features," Gruder said in an interview last week.

About 7,000 law enforcement agencies worldwide use Tasers, which Scottsdale-based Taser International has been selling to law enforcement since 1998. In its most recent filing with the Securities and Exchange Commission, Stinger reported a net loss of $8.5 million and sales of $63,306 in the period ended Dec. 31, and also said it had ordered production of 10,000 stun guns in anticipation of sales.

In its most recent earnings report, Taser International posted earnings of $168,000 for the three months ended March 31, down from $3.6 million a year earlier. Revenue was $10.2 million, down 22 percent but above the $10 million in sales estimated by Taser in early April.

Taser International spokesman Steve Tuttle warned that it takes more than just deep pockets to succeed in an industry his company created.

"They're in a tenuous position," he said of Stinger. "This is a difficult market to get in."

But there may be room for competition. The U.S. Securities and Exchange Commission is in the midst of an inquiry into Taser International's safety claims, which has caused Taser's stock to plummet. In a recent SEC filing, Taser International said it has been sued 18 times since April 2003 for personal injury or wrongful death.

The human rights group Amnesty International has called for studies of how Tasers affect patients with cardiac problems, epilepsy or multiple sclerosis, and many police departments across the country have said they intend to re-examine whether Tasers are a necessary part of officers' arsenal.

John Weir, chief executive of St. Petersburg, Fla.-based law-enforcement supplier SRT Supply Inc., is one of the customers both companies are targeting.

"We evaluated it (Stinger) a couple of times, and so far everything looks good," he said. "The Taser is a good product and it works well, but here in America we love competition. We believe it brings out our ingenuity."

Stinger Systems markets the Stinger as a lower-voltage alternative to the Taser, with a manual trigger instead of the Taser's automatic five-second burst. While a Taser delivers 50,000-volt jolts, the Stinger delivers about 8,000 volts in short bursts, according to the company.

Dick Ryan, a research analyst who follows Taser International for Feltl & Co. in Minneapolis, predicts Stinger Systems faces an uphill battle, particularly since the company will face the same safety scrutiny as Taser.

"The biggest thing Stinger needs to overcome is the hue and cry about Tasers and safety," he said. "Any competitor will need to jump through the same hoops that Taser had to get where they are."

Priced at about $600, the Stinger will only be sold to law enforcement agencies and the military, not untrained civilians, said Gruder. Taser sells stun guns to civilians as well as law enforcement, with prices for civilian models ranging from $400 to $1,000.

The Stinger shoots two to four electrically wired darts in a tight cluster up to 31 feet, according to the company. The Taser fires two darts about 24 feet.

Gruder peppers his sales pitch for his stun gun with criticisms of Taser.

"We had 1,100 different departments sign up for the evaluations" of the Stinger guns, he said. "There's a strong drum beat about their (Taser's) monopolistic ways, poor customer service and poor quality. "They (law enforcement agencies) are looking for alternatives."

He also criticizes Taser for selling its product to civilians.

"I find this incredible how they want to sell this product on the Web to consumers and expect them to use it responsibly," he said.

Tuttle scoffed at Gruder's criticism, saying the only reason Stinger isn't selling its guns to the general public is because the devices use a small amount of gunpowder to fire the darts. A Taser's blast is powered by nitrogen.

Blankenship confirmed that because a Stinger uses gunpowder instead of compressed nitrogen, "it is more restricted as a firearm."

Along with their marketing battle, the two companies are fighting in court. In December, Taser International sued Stinger Systems, accusing the upstart of false advertising and infringing on its patent. Stinger fired back with a countersuit, alleging libel and slander. Both cases are still pending.

Analyst Ryan notes that Stinger has had a hard time just getting its first stun gun to market. Last month, the company announced the departure of president Roy Cuny, who was being groomed to take over as CEO from Gruder.

Gruder said he will assume Cuny's duties and he has not indicated whether he planned to look for a new CEO.

Both companies' stocks are trading near 52-week lows. Stinger has been trading at about $8.60, while Taser traded just under $8.

Gruder, who has taken a couple of accidental hits from his own product, knows from personal experience that it packs a wallop. Now, he can only hope it has the same impact on the marketplace.

"Taser has 100 percent of the market right now because we just started manufacturing our guns," Gruder said. "We view this as a huge opportunity and we've got plenty of money in the bank."

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