A Symbol-ic Move to RFID

Wireless systems maker Symbol Technologies has bought into the
radio frequency Identification industry, buying Matrics for $230 million in cash.

The deal is expected to close in the third quarter, pending regulatory approval.

The acquisition gives Symbol a presence in a hot technology area that uses wireless chips to relay
inventory quantities at the individual-item level directly to store owners
and warehouse managers. Currently, major retailers like Wal-Mart are in field
tests
to figure out the best way to implement the technology, which
promises to cut down on supply chain management (SCM)
inefficiencies.

Several factors inhibit RFID’s use by retailers, governments and other
institutions. One is a standard method of data collection between
different RFID systems, though electronic product code (EPC) has started to
emerge as a de facto specification within the retail industry. The standard is
being used by companies like Wal-Mart, Target, Home Depot and Procter &
Gamble.

Symbol, which styles itself as a mobility enterprise solution provider,
targeted Matrics for its EPC-compliant line of products, which range from
RFID chip readers to antennas to the chips themselves. To date, the only
RFID technology in the Symbol portfolio is bar-code scanners that can also
read RFID tag information.

The Matrics line will be incorporated into Symbol’s Capture, Move, Manage
(CM2) strategy combining data capture, mobile computing, wireless
infrastructure and systems software for the enterprise.

However, RFID is only a part of that CM2 strategy, not the end-all-be-all,
said Todd Hewlin, Symbol senior vice president of global products.
Customers are looking for a product line that provides a complete enterprise
mobility system.

“I think the big thing you’ve been seeing in the market so far is that RFID
has been in a lot of field trials, where customers are getting comfortable
with the standards, comfortable with the [returns on investment],” he
said. “What we see from our customers is that an inflection point is coming
where we believe the market is going to tip towards full-scale deployments
that contain capture, move and manage.”

The acquisition is the second announced merger since the company cleared
itself of charges levied by the Securities & Exchange Commission (SEC),
which was investigating the company’s accounting since May 2001. Last month, Symbol bought up Trio Security, a mobile user
authentication and single sign-on software developer.

On June 3, Symbol announced they had settled with the SEC and the New York
U.S. Attorney’s Office, agreeing to pay $37 million to resolve a
class-action lawsuit filed by Symbol shareholders and $3 million to the U.S.
Postal Inspection Service Consumer Fraud Fund. Separately, but part of the
class-action lawsuit, the company agreed to pay an addition $98 million
(mostly in stock) to the members of the class-action lawsuit.

The agreement closed a trying period for Symbol, which saw many of its
founding executives resign last year. In July 2003, Jerome
Swartz, the company’s founder and chairman of the board, left the
company
to be replaced by Richard Bravman, the CEO. Five months later,
Bravman
was out
, resigning to “facilitate a favorable conclusion” to the SEC
investigation.

During that time, the company was also embroiled in a patent infringement
case with rival Proxim Technologies. A judge ruled in Symbol’s
favor
and awarded the company roughly $23 million.

With many of its patent and legal troubles behind them, expect Symbol to
continue its expansion into areas that fill out its CM2 strategy of
providing software, hardware and services.

“We’re constantly making the evaluation of ‘Do we build it internally, do we
partner for it or do we buy it?’ ” he said. “So you’re going to see us
continually making those decisions.”

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