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Several times in December 2013 I was about to send SA a draft update to my original Identive Group (NASDAQ:INVE) article published on November 6, 2013. But Identive kept making announcements in line with its aggressive plan to simplify the company's organizational structure and enhance its focus on high-growth products and markets. After changing the title and content of my update several times, I decided to wait a bit until I could make sure that my article was not obsolete the next day. I am glad I did.

Identive is indeed entering 2014 leaner and meaner having sold several non-core, slow-growth assets in recent weeks. The company has not made official announcements about these transactions, but a December 26, 2013 filing provides some details and figures that suggest that the total compensation that Identive will receive could be around $12 million. I expect that when these agreements are signed, sealed, and delivered the company will make formal announcements discussing details of those transactions including the potential implications on revenues and income. The 3Q 2013 earnings release stated that revenues from the divested divisions will range from $5 million to $6 million.

In addition to making swift progress on the divestiture end, Identive has been busy streamlining its complex operations in line with Identive's key guiding principles established by recently named CEO Jason Hart: "Simplification, Focus and Growth." There is clear evidence that the management team established by Mr. Hart have the passion and energy to create long-term value for shareholders, customers, and company employees.

The latest move, announced on December 27, 2013, was the relocation of the company's corporate finance group from its Europe hub in Ismaning, Germany to its corporate headquarters in California. Along with this move, Brian Nelson has been appointed chief financial officer and secretary of the company, effective December 20, 2013. CEO Hart said, "We continue to make significant progress in simplifying Identive's organizational structure, lowering our cost base and transforming the business from a group of individual silos into a single, unified company focused on delivering identity and trust solutions for the enterprise, consumer and government markets, which is our core strength. Moving our corporate finance activities to the U.S. is a natural step that allows us to centralize all our corporate functions and bring together key members of the management team."

Another significant December announcement was confirmation that NASDAQ had granted INVE an additional 180 days, or until June 9, 2014, to regain compliance with the minimum bid price rule by maintaining a minimum closing bid price of at least $1.00 for ten consecutive business days. I believe that fear of a potential delisting was one of the reasons why the stock dipped momentarily to under 50c in mid-December. The stock price started to recover after this December 18, 2013 announcement.

After the divestitures, Identive will continue expanding its broad range of RFID and NFC readers and embedded modules, in addition to an extensive array of RFID/NFC passive transponders and tags. Identive's RFID and NFC products enable a wide range of contactless applications including access, payment, ticketing and asset tracking. Adoption of mobile phone-based point-of-sale, ticketing, security and loyalty systems based on NFC technology is accelerating while contactless technology is proliferating in new applications from closed loop embedded RFID based systems for video gaming platforms, to medical device tracking, to anti-counterfeiting, to field maintenance management and reverse logistics.

In the company's 3Q 2013 earnings report, CEO Hart stated: "Our trusted NFC consumer products enjoyed increasing demand with the popularity of NFC enabled toys for video games. We expect that this trend will continue into Q4 and throughout 2014. Our overall sales backlog has continued to increase and we entered Q4 with committed orders and accounts receivables that represent nearly 40% of our annual revenues, which speaks to the fundamental strength of our sales offerings and pipeline for our trusted solutions."

Market research firm Deloitte projects that 300 million NFC-enabled cellphones, tablets and e-readers will be sold in 2013, and Identive is a pioneer in the advancement of complementary infrastructure-based solutions. This figure is expected to triple by 2015.

Another high-growth area with a lot of promise is the company's cloud-based Identity as a Service (IaaS) offering. The company reported several new orders for cloud-based services in 3Q 2013 including a three-year contract to issue and manage trusted credentials for an international government's healthcare program and the expansion of activities with a U.S. based Fortune 100 company. Cloud-based revenues are high-margin and recurrent. Identive is one of the pioneers in this technological area.

Companies with presence in high-growth identity, NFC, RFID technological areas are being rewarded handsomely by the market, and it's just a matter of time when INVE's valuation will increase from its lowly 0.45 times sales to larger multiples. Take competitor SuperCom Ltd. (NASDAQ:SPCB) for instance. SPCB's valuation has increased by over 1000% since last year, and much of the gain was after the recent acquisition of On Track Innovations Ltd. SmartID (NASDAQ:OTIV) division. But even with the addition of SmartID, SPCB's revenues will only be ¼ of INVE's. But SPCB is a trading at a whopping 7.6 price to sales ratio or 16 times higher than INVE's. This highlights the potential significant upside of INVE's share price if management executes a successful transformation.

Value investors are starting to appreciate the potential upside of INVE's share price as reflected by the higher volumes and higher prices in the last two weeks. I fully expect that INVE will regain NSDAQ compliance before the June 9, 2014 deadline. I believe maverick entrepreneur CEO Jason Hart has the drive and passion and now the right team to take INVE to fair-valuation territory of $3 - $4 after a couple of strong quarters in Fiscal 2014.

I think it's worth repeating that INVE's CEO Hart, 42, is a 25-year veteran of the technology industry with a substantial track record of innovation and success, including more than 20 years leading security companies. Hart joined Identive in 2011 following the acquisition of idOnDemand, a company he co-founded that pioneered the delivery of smart card-based identity solutions via a cloud service. Prior to idOnDemand, he served as CEO and director of ActivIdentity, a publicly-traded provider of identity assurance and strong authentication solutions. Hart joined Actividentity in 2005 through the acquisition of Protocom Development Systems, Inc., an identity management software security business that he founded and led as CEO. He has been listed in Business Week's Top CEOs Under 40 and was named Ernst & Young 'Entrepreneur of the Year' (2002).

I believe that INVE is a compelling value at 69c/share, even with potential risks associated with facing a June 9, 2014 delisting. INVE is a moderate risk/high potential investment. Long-term, the picture is even more attractive as more and more global companies of all sizes are likely to adopt Identive's SaaS/cloud-based ID solutions. These are high-margin recurrent revenues that could turn Identive into a must-have stock in years to come. Investors considering buying INVE stock, or any other stock, should always read carefully the risks and uncertainties as spelled out in the company's 10-K and 10-Q filings.

Source: Identive Group: Entering 2014 Leaner And Meaner (Update)