Vendors Tighten Their Belts

Several companies have announced layoffs this year. In September, Alien Technology laid off about 50 people as it cut costs in the wake of its failed initial public offering. In October, Sirit let 17 people (25 percent of its staff) go and closed two locations in an effort to balance its cash flow. Sirit said the cuts were necessary to restructure the company following its purchase of TradeWind Technologies, a developer and manufacturer of RFID interrogators and technology, and SAMSys Technologies, a maker of HF and UHF RFID interrogators.

Also in October, Checkpoint Systems laid off its RFID team and announced plans to sell its RFID products through the same sales team that sells its electronic article surveillance systems. Checkpoint posted weak financial results in the second quarter and cut costs to improve its bottom line.

It's mainly hardware vendors that are affected by the lack of demand, though some middleware companies are also struggling. Systems integrators and companies that sell RFID applications are doing well because they get paid per engagement and there are plenty of companies hiring them to launch pilots.

Many hardware vendors are cutting back on marketing. But they say they are committed to the market and are still investing in the research and development of new products. Some vendors have adjusted their strategy to create products that allow end users to deploy RFID with lower up-front costs than would be required to put RFID interrogators on every dock door and every shelf (see Building Bridges to RFID).

If volumes don't ramp up soon, more companies will cut staff and some companies might go under or be acquired. Many vendors were pleased that Wal-Mart issued a press release in September reiterating its commitment to rolling out RFID to 1,000 stores by Jan. 31, 2007, the end of its fiscal year. "They are driving this market," says one RFID hardware vendor who requested anonymity. "I hope they understand that if they don't start requiring suppliers to tag more SKUs, some companies are not going to survive."

Illustration by Richard Stampori.