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9 Things RFID Will Be Remembered for in '08, Part 2

This is the second installment of a three-part series recapping the top nine RFID developments from 2008. This article covers how the RFID vendor community was changed by mergers, acquisitions, divestitures, startups and venture funding. Yesterday's covered technology developments, and tomorrow's conclusion will identify new trends and the 2009 outlook.
Dec 16, 2008This article was originally published by RFID Update.

December 16, 2008—This is the second installment of a three-part series recapping the top nine RFID developments from 2008. This article -- with developments 4, 5, and 6 -- covers how the RFID vendor community was changed by mergers, acquisitions, divestitures, startups and venture funding. Yesterday's Part 1 covered technology developments, and tomorrow's conclusion will identify new trends and the 2009 outlook.

#6 -- Startups Broaden RFID Spectrum

Startups brought a lot of interest and innovation to the RFID industry in 2008, and helped push the industry in new directions. Startup activity was not limited to technology providers, but also included organizations that formed to promote RFID use and standards development, and end-user companies whose business models rely on RFID-enabled processes.

The startup that received the most attention was Mojix, which announced a system that allows passive RFID tags to be read from 600 feet away through nodes networked to a reader. Mojix is emblematic of how 2008 startups added to RFID's capabilities or helped take the technology in new directions.

There are plenty of other examples. DecaWave announced the first standards-based UWB chip for real-time location systems. Financial services and oil companies each formed associations to promote RFID use in their industries. Other groups formed to be catalysts for near-field communication (NFC) adoption and standards development. Startups NeoCatena Networks, Veratag and Verayo each added security capabilities to RFID systems and were among the founders of the new RFID Security Alliance. Blue Spark Technologies and Kovio made advances in printable RFID batteries and tags, respectively. And Omni-ID introduced tags that expand the types of RFID-trackable materials. As noted, two end-user companies are also building their businesses around RFID: Nick on the Go is a new joint venture service from Hertz and Nickelodeon that uses RFID tracking to deliver media players to rental car customers, while a startup water delivery service is using RFID and sensor data from AT&T to automatically plan replenishment routes.

Related coverage:
#5 -- Funding Flow Slows

The startup activity highlighted above is even more impressive considering the flow of venture capital to RFID startups appears to have slowed significantly during 2008. RFID Update identified $116+ million of venture capital invested in RFID companies through December 15, 2008 (see table below). That total represents average venture investment of $9.7 million per month, which is well below the average of $24.1 million per month received during the preceding 18 months, according to previously published RFID Update data.

Company Amount Date Technology/Market Focus
Impinj $14m January UHF tags & readers
GOLIATH Solutions $27m March Retail
RFID Global Solution Undisclosed May Integration
InSync Software $3m July Asset & inventory tracking
ThingMagic $9.5m July UHF readers
RF Surgical Systems $8.2m July Healthcare
Alien Technology $38m October UHF tags & readers
ThingMagic Undisclosed November UHF readers
Advanced ID $3m November Livestock tracking
Awarepoint $13.3m November RTLS
Total: $116+ million

The $38 million Alien Technology received from existing investors in October was by far the largest announced deal of the year and will be the last time it seeks venture funds, according to the company. The other large investment went to GOLIATH Solutions, which is heavily focused on retail promotion tracking solutions. GOLIATH's system uses passive UHF technology, a segment that attracted most of the venture investments identified in 2008.

Private equity investments in RFID companies in 2008 had slowed even before capital markets and overall economic conditions deteriorated in the fall. With no improvement in sight, 2009 could be one of the leanest years for investment the industry has experienced since early in the decade.

Related coverage:
#4 -- Vendors Position Through Acquisition

Investment in the form of acquisitions was strong in 2008, with both public and private RFID companies swinging major deals (see chart below). Although merger and acquisition activity is nothing new, 2008 was notable because several high-profile companies made deals. For example, Intel sold its RFID reader chip business to Impinj. Checkpoint Systems and Sensormatic, who collectively serve most of the world's largest retailers with in-store security and inventory management systems, extended their rivalry by each making acquisitions to boost their item-level RFID offerings. Several other firms acquired smaller software companies so they can offer more complete solutions.

Date Acquired Company Acquirer Price
March RSI ID Technologies Sirit $2.4m
April Multispectral Solutions (MSSI) Zebra Technologies $18m
May Xmark Stanley Works $45m
June OATSystems Checkpoint Systems $37m
July Intel (RFID reader chip business) Impinj Undisclosed
August TrenStar Tracking Solutions (asset management software business) Fluensee Undisclosed
October Agility Healthcare Solutions GE Healthcare Undisclosed
October Vue Technology Sensormatic Electronics $43m

There is more to the Xmark-Stanley Works deal than meets the eye. Xmark was a subsidiary of VeriChip, which gained notoriety for its controversial human-implantable RFID chips for lifetime identification. VeriChip marketed the system to patients and hospitals to provide identification for emergency patients who cannot communicate. After selling Xmark, which produced most of VeriChip's revenues, VeriChip announced the implant business was not sustainable. The company changed its focus to developing RFID tags with biosensors for medical applications, but in November VeriChip announced it might be delisted from the NASDAQ stock exchange, making its uncertain future even cloudier.

Related coverage:
A weak economy, changing adoption patterns and new technology needs could lead to more RFID companies emerging, merging or failing in 2009. Tomorrow's conclusion of this series will examine these factors and how some developments from 2008 could impact 2009 and beyond.
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