Symbol buys RFID specialist to expand enterprise software bid

Motorola’s CEO may have a tough turnaround job on his hands (see page 24), but on a smaller scale, his counterpart at WLan supplier Symbol, who took the reins around the same time, has faced an even more daunting challenge. He has been running a company still shaken by a massive accounting scandal, seeking to draw a line under that as well as set out a strong future product strategy in an increasingly cut throat market.

The latter objective is starting to come together, and the latest plank in the unfolding technology platform is the acquisition of RFID specialist Matrics, for a hefty $230m in cash, which will be financed by short term loans.

On one hand, getting serious about RFID suggests that Symbol is going back to its roots as a maker of wireless barcode scanners and their back end systems. The company has spent the past few years trying to broaden that base and use its wireless expertise to carve out a significant share in the general WLan market. Although it was the first company to announce a centralized Wi-Fi switch, and claims the market lead in this growing category, it has struggled to penetrate the most lucrative enterprise accounts or general office environments, remaining largely confined to its traditional verticals, such as retail and logistics, and to warehouse or in-store applications.

So a first glance at the Matrics deal raised the possibility that Symbol was giving up on general enterprise and aiming, instead, to grow revenue by upgrading its customer base to the new and much hyped RFID smart tagging technology, which will gradually replace barcodes.

Clearly, that is one aim, but the Matrics technology will also form part of a far more ambitious strategy to push into the mainstream through software rather than the increasingly commoditized WLan hardware route. Symbol’s recently formed software division is responsible for the key weapons, including its Mobility Services Suite (MSS) and Enterprise Mobility Manager. These use network appliances that can collate information from software ‘agents’, which gather system information in real time. These agents live on the Symbol switches, access points and there are tiny agents–around 30Kb of code–for embedded devices.

Now the Matrics technology will add the capability for information to be fed into this corporate system from RFID tags and readers–a function that larger players such as IBM and SAP are also building into their software. This expands the scope of MSS considerably–from monitoring the internal WLan to receiving real time information on a wide range of tagged items, for applications such as asset tracking, supply chain monitoring and logistics. This information can then be viewed with MSS or fed into a management information system, or into other applications such as SAP.

The most interesting aspect of MSS is that other vendors can build tailored Java applications on top of it and the company seeks to build a community of Java developers around its platform, making it a natural choice as the core WLan technology for a large enterprise, since it can be readily integrated with other applications and systems. The software already has links to IBM’s WebSphere web services middleware, which is increasingly prominent in the mobile enterprise, and will create similar integration for other architectures.

Matrics’ RFID system supports the 96-bit Electronic Product Code (EPC) standard, which can store far more information on a product’s description and location than an eight-bit barcode. The main attractions for users are more accurate supply chain management, more detailed management information on this chain, and the potential for security and fraud prevention applications. Large retailers such as the US’ Wal-Mart are accelerating the trend by insisting that their suppliers adopt RFID tagging by a set deadline.

In June, Symbol acquired Trio Security to enhance authentication and roaming facilities on its WLans. This company will also be incorporated into the Mobility Software Division

The move into software is high risk. Symbol has no experience in this sector and will be up against well established management tools, such as Computer Associates’ and Hewlett Packard’s, which are increasingly targeting mobile systems; as well as the leading mobile enterprise middleware products from Sybase/iAnywhere. However, the changes will increase the credibility of Symbol’s products in the big corporate network. Symbol hopes to recruit up to 2,000 of its 6,000 partners to the new ISV program, and the more unique and attractive applications that are tied to MSS, the stronger it should look.

Symbol is number two in overall sales of WLan gear to corporates, after Cisco, but as WLan gear prices fall, it needed a strong growth strategy. This has been a major objective for CEO Bill Nuti, who said when he was promoted from COO in January that 2004 would be the year when Symbol would move beyond its traditional base in barcode systems and gain significant market share with general purpose WLans in key vertical sectors.

Nuti formerly spent 10 years at Cisco, including a period running European operations, and is known for his close relationships with major customers and partners and his high intelligence.

He has had to contend with the lingering aftertaste of an accounting fraud scandal, referred to by the prosecution as “breathtaking in its scope”, and which has led to the indictment of eight former senior managers including a former CEO.

COPYRIGHT 2004 Rethink Research Associates

COPYRIGHT 2004 Gale Group

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