Jun 24, 2008This article was originally published by RFID Update.
June 24, 2008—Checkpoint Systems of Thorofare, New Jersey announced yesterday that it would acquire OATSystems of Waltham, Massachusetts. Checkpoint is best known for its leadership as a provider of electronic article surveillance (EAS) and related anti-theft solutions to retailers; the publicly-traded company (NYSE:CKP) booked $834 million in revenue in 2007. Originally a leader in RFID middleware, OAT has in recent years evolved into a provider of various industry- and application-specific RFID software solutions.
The transaction is an all-cash one, expected to be promptly closed within the next couple weeks. An acquisition price was not published in the original announcement, but Per Levin, president of Checkpoint's shrink management division, indicated to RFID Update that a follow-up announcement might be published with more financial detail.
Levin explained Checkpoint's motivation for the acquisition as a move to fill what had been a hole in the company's RFID offering portfolio: software. Checkpoint offers a wide range of EAS solutions, including a recently-developed platform that allows retailers to upgrade an EAS deployment to include UHF RFID for inventory monitoring and visibility. It also sells a lot of portal hardware for installation in stores, distribution centers, etc. Finally, it has a worldwide network of "print shops" from which it can produce and deliver EAS and RFID tags to its clients. Taken together, that all represents a predominantly hardware focus.
"What was missing was this application layer and middleware layer between our hardware and the customer's ERP," said Levin. "Our acquisition of OAT is about filling that gap in the value chain."
Levin emphasized the concept of a "one-stop shop," the idea that Checkpoint could provide its customers with 100 percent of the necessary components for an EAS and/or RFID deployment. "It's all about making life easier for our partners and customers by being a one-stop shop supplier."
This theme has been cited before by industry analysts who worried that it is precisely a lack of one-stop shop suppliers that hurt adoption of RFID in retail and the supply chain. Historically, the hardware, software, and services might all come from different vendors, making it difficult for an end user to know which to turn to for support in the event of a problem. End users like to have "one throat to choke," as one analyst has colorfully put it.
Being a one-stop shop supplier will not only allow Checkpoint to better serve its clients, according to Levin, it will broaden the company's focus from just shrink management to shrink management plus merchandise visibility. "What we aim to do with the OAT acquisition is expand on the theme of shrink management, pushing it back up the supply chain." Now Checkpoint can sell retailers on not just "losing less" through shrink management, but also on "selling more" with supply chain visibility.
OAT has about 50 employees, which represent a "dramatic" size increase to Checkpoint's existing RFID team. The company will remain in Massachusetts and operate as a fairly autonomous division of Checkpoint. Senior management will stay on, and the company will continue to execute against its existing business plan. That means that OAT will remain active in segments like manufacturing and industrial where it has made inroads but which are outside Checkpoint's retail focus. Levin asserted that in many ways OAT will continue business as usual, only now with the financial backing of an almost one-billion-dollar corporation behind it. "We bring some financial stability, some long-term financial muscle, so they can continue expanding in all the directions laid out in their business plan," he said.
OAT has long been considered a likely acquisition candidate by industry observers. A few years ago, there were rumors it might get snapped up by IBM, with which it had a close relationship. "Middleware" as such was considered passé, and a handful of OAT competitors were either acquired or dissolved. But the company never was acquired, and instead went through a few rounds of funding. It re-oriented its focus to particular applications, like asset tracking, work-in-process, and promotions visibility, and appeared to hunker down along with the rest of the industry as RFID technology adoption painstakingly materialized. The company has somewhere in the neighborhood of 100 clients.
OAT was founded in 1999. One of the founders was current CTO Sanjay Sarma, considered an early thought leader in EPC RFID. He co-founded the MIT Auto-ID Center in 1999 and was instrumental in the formation of EPCglobal.
