Motorola Acquiring Symbol

Sep 19, 2006Murmurs surfaced over the weekend, from The Wall Street Journal and others, that Symbol Technologies had put itself on the sales block, with Motorola being its most likely suitor. Those murmurs were fleshed out Tuesday morning in a conference call hosted by the two companies. Motorola has agreed to acquire all outstanding shares of Symbol for $15 per share in cash. The deal, expected to close late this year or early 2007, is valued at $3.9 billion.

Motorola says it is acquiring Symbol to bolster its enterprise mobility business offerings, part of the company's Networks and Enterprise business unit, through which it offers handheld computers and other rugged mobile devices that enable enterprises to extend network connectivity and computing outside of the conventional office environment. Enterprise mobility is currently Symbol's core business focus, and RFID is a major technology application within the firm's enterprise mobility offerings.

In the late 1990s, Motorola began developing what it coined BiStatix technology—a patented process for printing an antenna using conductive carbon ink and attaching a microchip to it—to create cheap, flexible, passive RFID labels. Needing to invest millions more in research-and-development work to bring the technology to market, Motorola closed down its BiStatix project in 2001. In 2004, Motorola participated in a field test of RFID-enabled payments by partnering with MasterCard on a pilot program in which testers used Motorola cell phones containing near-field communication (NFC) RFID chips to make electronic payments. Motorola, however, has not yet brought to market the prototypical NFC-enabled phones it developed for that trial.

"I think Motorola looked at this [purchase opportunity] and said, 'Between mobile computing, RFID and access to [Symbol's] customers, there are some pretty good opportunities that we can fulfill,'" says Reik Read, senior analyst with Robert W. Baird, a provider of investment banking, wealth-management and other financial services. "Symbol also has some intellectual property that Motorola would really like to have, in the mobile computing and RFID space," he adds.

Symbol has more than 900 patents in the areas of bar-code scanning, RFID, laser projection displays, mobile computing technologies and wireless technologies, according to its Web site, which further notes that 7 million of its mobile computers and scanners are in use today.

Read believes Motorola is interested in acquiring Symbol's key RFID customers in the retail space, such as Wal-Mart, Home Depot, P&G, Nestlé and Sylvania, because it would likely want to provide these firms' mobile computing products and services, as well. He noted that package delivery and logistics services provider UPS uses Symbol bar code technology to track parcels, and is another obvious potential user of Motorola's mobile computing services.

Presently, the RFID tags and interrogators Symbol sells make up less than 2 percent of its total revenue. In the Form 10-Q Symbol filed with the SEC on Aug. 2, the company said it generated $8.4 million in revenue from RFID products during the three-month period ending June 30 of this year. It generated $453 million in total revenue during that same time period. Best known in the retail industry for its handheld bar-code scanners, the 30-year-old firm entered the RFID market in 2004 with its purchase of privately held RFID hardware provider Matrics, which it purchased for $230 million (see Symbol Acquires Matrics). The company suffered a major accounting scandal and the replacement of most upper management in 2004. It was also embroiled with RFID hardware rival Intermec in a number of lawsuits over intellectual property, starting in 2004. All of the suits have since been resolved (see Intermec, Symbol Resolve Outstanding IP Disputes).

In the SEC filing, Symbol said its RFID-related revenue had dropped 2.7 percent for the April-to-June 2006 quarter, compared with the same quarter in 2005, from $8.7 million to $8.4 million. Furthermore, it had dropped 7.9 percent for the six-month period of January to June 2006, compared with the same period in 2005, from $16.9 million to $15.5 million. Anthony Bartolo, vice president and general manager of the Symbol Wireless Infrastructure Division, told RFID Journal in August that the revenue drop-off was linked to the institution of RFID tagging mandates from major retailers Wal-Mart and Target. Hundreds of suppliers to these retailers had purchased RFID gear in preparation for the mandate deadlines starting in January 2005 and were holding off on purchasing more hardware. However, he said, Symbol had gained a number of new RFID customers between the first and third quarters of this year. Most of these companies are not under a mandate to use RFID for tracking product shipments to retailers, he added, but rather are interested in deploying the technology for their internal benefit—either for tracking consumable goods to increase supply chain visibility, or for tracking reusable assets.

Just yesterday, Symbol announced its newest RFID product, a mobile RFID EPC Gen 2 interrogator that can be mounted onto forklifts (see Symbol Releases New Gen 2 Interrogator). Symbol has also, in recent months, discussed plans to release what it calls Wireless Next Generation (Wi-NG), a new hardware and platform for consolidating different types of RF networks—Wi-Fi, RFID, VoWLAN (Voice over Wireless LAN), mesh and WiMAX—so businesses could deploy and centrally manage wireless voice, data and infrastructure devices throughout the RF spectrum. The company says it plans to debut the Wi-NG platform by the end of 2006.

According to a Symbol press release, the company will, upon completion of the transaction, become a wholly owned subsidiary of Motorola and the "cornerstone" of Motorola's Networks and Enterprise business. Motorola says it intends to maintain Symbol's Holtsville, N.Y., headquarters.