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Summary of Baird RFID Monthly for October

Baird has released its October report. The 18-page document is a worthwhile read for anyone requiring an overview of the industry's last 30 days. For those without time to do so, we have reprinted here the report's summary.
Oct 21, 2008This article was originally published by RFID Update.

October 21, 2008—Wealth and asset management firm Robert W. Baird & Co. has released its RFID Monthly for October. Baird has given RFID Update permission to reprint the Key Developments section (below), which offers the report highlights. For those wanting more detail, the complete 18-page document is available free here.

The standard matrix of primary RFID providers is on page 15 and following are the Key Developments:
  • Pilot progress. We continue to hear increased projects or pilots moving on to "Phase II." Increasingly, players are looking at more than one use case in determining an overall business case. The primary concern remains scalability and we are seeing a high level of investigation by end users and system integrators to understand the issues and what software and hardware platforms are well suited to achieve scale. We are particularly encouraged by some of the activity discussed in this edition, including Medtronic, Staples Canada, Spanish Postal Carrier Correos and expansion within the U.S. Department of Defense. Each pilot seems to be generating good value add.
     
  • Economic concerns not yet apparent. Most of the players we have asked regarding a potential slowdown indicate not seeing any real change in RFID projects. We don't view this as surprising given that most of the financial impacts are yet to be felt economically, and that most RFID projects are still small and likely have escaped serious scrutiny. However, our recent surveys of barcode resellers suggest weakness and given increased turmoil in the credit markets, we expect further concern. History suggests a weakening environment will lead to project delays. We see some potential offsets in the RFID industry.
     
  • More acquisition activity. Sensormatic announced its acquisition of Vue Technology for $43M (see Sensormatic Buys Vue for $43M). We have heard that Sensormatic paid roughly 10x revenue for the acquisition, which we believe was driven by the company's view that RFID will be an important component of retail, particularly apparel. We believe many retailers lack back end store visibility, which leads to poor inventory management, shrink and out of stocks, and in our view, they will increasingly turn towards RFID as a solution. Sensormatic has a strong position in the retail apparel market and has several European and Latin American pilots underway. The recent acquisition of OATSystems by competitor Checkpoint likely created the catalyst to move forward with Vue (see Checkpoint Buys OAT to Become One-Stop RFID Shop).
     
  • California e-pedigree law pushed back, but still sees progress in Pharma. California updated its e-pedigree requirements with a new law on September 30. The new law pushes back pharmaceutical e-pedigree compliance requirements for manufacturers until January 1, 2015, for distributors or repackagers until July 1, 2016, and pharmacies until July 1, 2017. We had spent a good amount of time with manufacturers, distributors and pharmacies, and we agree that it would have been difficult for these industry participants, as a whole, to meet the January 1, 2011 requirement. We view the delay as necessary given the complexity of the supply chain and the early stages of solution development, including integration into existing packaging equipment. Nonetheless, we are seeing a good amount of pilot programs continue to advance, not only to meet the requirements, but also to improve internal operations.


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