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Taser may delay orders on tests

Taser International Inc. warned of delays in orders for the first half of 2005 Tuesday, as law enforcement agencies test competitors’ products, sending the stun-gun maker’s stock down nearly 30 percent.
/ Source: Reuters

Taser International Inc. warned of delays in orders for the first half of 2005 Tuesday, as law enforcement agencies test competitors’ products, sending the stun-gun maker’s stock down nearly 30 percent.

The plunge in its stock comes after three days of declines, spurred by Taser’s announcement last week that the Securities and Exchange Commission is investigating the safety of its weapons and a recent distribution deal.

Taser stock has halved since Dec. 30, chopping more than $1 billion off the company’s market value. Taser is now the target of five shareholder lawsuits filed over the past two days, each charging that executives misled investors to artificially inflate Taser shares.

“I think we’ll probably see it (the stock) at this level for a little while,” said Joe Blankenship, an analyst at Source Capital Group. “But at this juncture I don’t see any other (rival) products that will be available near term.”

Taser, which is already grappling with slowing quarter-to-quarter sales growth, said it may see a delay in orders as law enforcement agencies, which account for most of its sales, ”evaluate potential new entrants.”

Taser faces emerging competition from rivals Stinger Systems Inc. and Law Enforcement Associates, which make similar products. On Tuesday, Stinger filed a counter suit  against Taser in a dispute over false advertising and patent marking.

Defends stock sales
Taser also said it received questions about large sales of stock by executives last year, as its shares hit all-time highs.

“We still retain a significant position in Taser International, which at year-end comprised a significant majority of our personal assets,” according to a special letter to shareholders, signed by Chief Executive Rick Smith and President Tom Smith. “We feel that the rumors about us ’bailing out’ are not fair, nor accurate.”

During the fourth quarter of 2004, Tom and Rick Smith sold an average of 22 percent of their positions in Taser, including stock and options, the letter said.

In addition, Phil Smith, Taser’s former chairman, sold the majority of his Taser stock as he retired from day-to-day duties Dec. 31, the company said.

“The Smith family, along with one other investor, provided all of the start-up capital to Taser prior to its public offering,” the letter said. “We have historically sold stock and have been straightforward with our investors that insiders would continue to diversify through continuing stock sales in the future.”

Taser shares fell $5.95, or 29.7 percent, to close at $14.10 in trading on Nasdaq. The shares hit a high of $32.59 on Dec. 30.