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Cisco Backs ThingMagic

The networking company has increased its stakes in RFID technology by funding ThingMagic, bringing the RFID reader manufacturer's total funding to nearly $21 million.
By Mary Catherine O'Connor
Feb 01, 2006ThingMagic announced today the closure of its first round of funding with investments by Internet networking giant Cisco Systems and Massachusetts Institute of Technology (MIT) professor Nicholas Negroponte, as well as a line of credit from Silicon Valley Bank. ThingMagic would not divulge the breakdown of the investments and credit, but they total $6 million, with Cisco supplying the majority. This additional money, combined with two rounds of funding in 2005, brings ThingMagic's total financing to nearly $21 million.

"I think the fact that Cisco is investing in a small RFID company like ThingMagic signals that the market has turned, in terms of maturity," says Christine Overby, a principal analyst at Forrester Research. "Very large technology companies, like Cisco and Intel, are making investments in RFID and really putting their money where their mouth is."

ThingMagic's Tom Grant
Last year, Cisco announced it would begin embedding RFID middleware from ConnecTerra (since purchased by BEA Systems) into its data-center switches and branch-office routers. At the time, the company said this type of integration of RFID data processing within an existing network infrastructure would lower the cost of deploying RFID systems, making the technology less disruptive and easier to scale (see Cisco Embeds RFID Apps in Network).

In a statement, Mohsen Moazami, vice president of retail-consumer products distribution for Cisco Systems, said his firm is partnering with many companies that "specialize in networked RFID solutions," ThingMagic among them. He called Cisco's investment in ThingMagic a "natural fit" for Cisco's RFID strategy.

"From our perspective, [Cisco's funding] is a great endorsement from what we consider to be a good partner," says ThingMagic's chairman and CEO, Tom Grant. "For RFID technology to work, it has to play into the network infrastructure of major corporations. Cisco is a leading provider of that infrastructure, so it is going to be inheriting and dealing with all the data that our reader systems will be collecting at the read point."

While he could not confirm any of Cisco's plans, Grant says the notion of embedding an RFID reader and middleware into a Cisco network appliance is not out of the question. "In our mind, a reader is very much like a router. It's managing data and passing it through the network infrastructure for manipulation. Sometimes that happens right there at the read point, and sometimes it happens further up into the IT infrastructure."

According to Overby, Cisco's investment in RFID technology signals a move toward enabling corporate networks to handle RFID and other sensor data, without having to deploy a separate RFID infrastructure and find a way to finance it. She says these have been among the biggest inhibitors to RFID market growth.

"Our efforts are very much to advance the design and development of RFID networks and have them seamlessly integrated into existing [network] infrastructure," says Grant.

MIT's Negroponte says he invested in the company to support its research and development efforts. His relationship with its five founders extends back to when they were graduate students working under his supervision in the MIT Media Lab. Negroponte is a professor of media technology at the lab, which he helped found.

In September, ThingMagic announced an initial $10 million in funding, led by The Exxel Group, a private equity group in Argentina (see ThingMagic's First Funding Round Yields $10 Million). An additional $5 million, raised in October (see ThingMagic Receives $5 Million, Closes First Funding Round), was supposed to close the company's series A investment round, but the firm decided to reopen the round after being approached by Cisco.

"This was a strategic opportunity that was too good to miss," explains Kevin Ashton, ThingMagic's vice president of marketing. "Cisco was a very natural fit for us. I don't think there's an RFID company in the world that would have passed on this opportunity."

ThingMagic was founded in 2000 and operated for five years without outside funding. The company says it is using its investment funding to expand its technology development, as well as its strategic and organizational growth. The firm's ongoing operations will continue to be funded by revenues and profits.

The company also announced this week that three resellers, Creek Systems, Quest Solutions and WAN/LAN Solutions, have joined ThingMagic's Reseller Program. Based in Irvine, Calif., Eugene, Ore., and Roseville, Calif., respectively, the three resellers will help ThingMagic expand sales of its Mercury4 RFID interrogators to companies located on the West Coast. They will also recommend, implement and maintain the devices for their customers.
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