Entrust Datacard growing by increasing security for credit cards

Since buying an Internet security firm last year, Datacard has a new identity and bold plans to become a $1 billion company by creating the next generation of technology that secures credit cards and online data.

The company, owned by Germany's reclusive Quandt family of BMW fame, is already on a growth tear since buying Dallas-based Entrust in December 2013. Sales surged 30 percent to $650 million and are on track to reach its financial goal by 2020. Employment jumped from 1,600 to 2,134, with 400 workers gained from the acquisition and scores of new hires in Minnesota.

In February, the newly renamed Entrust Datacard moved its cramped headquarters and factory from Minnetonka to a 375,000-square-foot space in Shakopee that cost $30 million to buy and renovate.

"We were bursting at the seams," CEO Todd Wilkinson told the Star Tribune during a rare interview.

Now, the days of stuffing interns and new hires into conference rooms are over, and later this month a crane will hoist the company's new nameplate and logo onto the new building, where 782 manufacturing employees, engineers and software developers work full time. Another 100 workers will join them by year's end.

"It's a new day," Wilkinson said.

Datacard bought Entrust to become a bigger player in the fast-growing information security industry. Two days after Datacard announced the $500 million deal, Target acknowledged that hackers had indeed breached its systems, gaining access to data from 40 million holiday shoppers. Cyber breaches followed at businesses from Neiman Marcus, Sears and Home Depot to JPMorgan Chase.

The Identity Theft Resource Center tracked 614 data breaches in 2013 and a record 783 data breaches in 2014. With each cyberattack, U.S. banks rushed to replace millions of compromised credit cards.

"I could not have predicted what happened right after we bought Entrust," Wilkinson said.

Customers turned to Entrust in droves, wanting help detecting malware and toughening online security. Entrust President David Wagner testified before Congress about how companies might prevent future attacks. Suddenly "every CEO on the planet woke up that day and realized they had to up their game a notch," Wagner said.

The Entrust division is one of the largest firms that verifies and encrypts digital identities on the Internet. Its tools help users have confidence that corporate and bank websites are what they say they are.

Datacard is the world's largest issuer of protected, personalized ID cards, credentials and credit cards. So in many cases it was a Datacard machine that printed the replacement credit and debit cards for millions of customers affected by data breaches, Wagner said. The company makes massive printers but it also now makes desktop machines that allow banks to quickly issue new or replacement cards right inside branch offices.

Orders for the "instant issuance" printers increased 45 percent last year. The hacking scares "certainly pushed demand in our direction," Wagner said.

David Graham, security vice president for Minneapolis-based data recovery and security firm Code42, said the merger makes sense.

Entrust will "now have a channel to [more] global markets. They will have a stronger presence in these countries and be able to leverage Datacard's networks and channel."

Indeed, since joining ranks, the two entities now work together customizing software and secure ID badges for South Africa, Interpol and others. "It's so exciting," said global marketing vice president Russell St. John.

"We had a record year. With Entrust, we will grow even faster," Wilkinson said.

Analysts generally agree.

"Entrust is a good augmentation to what Datacard does," said IT security analyst Avivah Litan with Connecticut-based research firm Gartner Inc. "Entrust needed stronger management. But they had really good technology. I am sure that Datacard can take it to the next level."

Entrust Datacard's growth plan calls for faster credit-card printers, more advanced anti-hacking software and stronger tools to ensure safe transactions on mobile apps. It also means driving Entrust's Internet products into the 150 countries where Datacard does business.

Entrust's products were sold mostly in North America and Europe. Datacard's reach is worldwide. Datacard builds machines that print microchip-laden passports, employee ID cards, health benefit cards, driver's licenses, bank credit and debit cards and more. Customers include Wells Fargo, U.S. Bank, NASA and banks or governments in South Africa, Korea, Bangladesh, China, India and Brazil.

Datacard began making many more credit card printers that embed high-security microchips into credit cards. Such "EMV" or "smartcards" are widely used to prevent fraud in Europe. They are more sophisticated than the magnetic strip technology used in most U.S. credit cards. New rules that take effect in October are driving more smart card machine orders, Wagner said.

Separately, Entrust, is designing new software that authenticates websites and users over cellphones and mobile apps.

"Mobile is important for us," Wagner said. "We have the technology to allow for stronger security."

Entrust is "well known in the industry" and should benefit Datacard "big time," said Ryan Carlson, technology evangelist at the Nerdery software development firm in Bloomington. "It's like the auto manufacturer who just bought themselves a steel smelter. They are getting access to one of the required components for doing data security [and] setting themselves up to have an additional profit center."

Dee DePass • 612-673-7725