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RFID Analysts Smile on Motorola-Symbol Deal

Early reactions to Motorola's acquisition of Symbol from the general business and technology press were favorable when the deal was announced last Tuesday. Since then, analysts with a closer view of the AIDC and RFID space have digested the news and issued their own comprehensive analysis of what it means, the highlights of which are discussed in this article.
Sep 26, 2006This article was originally published by RFID Update.

September 26, 2006—The Motorola acquisition of Symbol was a favorite discussion topic among attendees at last week's RFID Applications conference in Washington, D.C. The deal, announced on Tuesday of last week, represents the biggest acquisition to affect the space since Symbol itself bought its way into the RFID industry by snapping up tag and reader manufacturer Matrics for $230 million in 2004. Early reactions to last week's deal from the general business and technology press were positive. Since then, research and stock analysts with a closer view of the AIDC and RFID space have digested the news and issued their own comprehensive analysis of what it means, the highlights of which follow. (Also see What the Motorola-Symbol Deal Means for RFID.)

One of the deal aspects most commonly noted is that it will more than double Motorola's enterprise business, which stood at about one billion dollars in annual revenue last year. Symbol is an enterprise company, with proven products, a large footprint in key verticals, and a well-developed channel. But Motorola's interest is about more than that, according to Venture Development Corporation. "This deal is more than just gaining access to Symbol Technologies' channel, technology and market expertise. It is ultimately about how wireless solutions are being deployed and supported within enterprises during the next decade."

What exactly will that deployment and support look like? Most believe the trend is towards "convergence"; that is, the integration of myriad wireless and mobile devices into a seamless enterprise-wide technology platform. Says VDC, "The merger of these two firms also prepares [Motorola] for a key future market within the wireless industry -- convergence."

ARC Advisory Group agrees with this vision, but argues in its analysis that the realization of convergence is still some years away. In the near term, Symbol will need to keep executing well on business-as-usual. "The truth is that the short term plans announced by Symbol ... prior to the acquisition still do matter," writes ARC. Among that business-as-usual is following through on product promises to existing customers. "There is the need to keep Symbol's current customers happy," notes ABI Research. "They have been advised of future products; now they need reassurance that Symbol's road map will still be viable and that they are not heading into uncharted territory."

As for RFID, ARC notes that the technology received heavy emphasis by Symbol at briefings held on the day of the acquisition announcement. While most analysts agree that Symbol's leadership in RFID was appealing, it is unclear how Motorola will exploit or grow that leadership. VDC wrote: "RFID continues to disappoint in terms of actual revenues, however, given its long-term potential, Motorola will likely retain and continue to invest in this business. One interesting question: Does Motorola have its own set of as yet untapped RFID capabilities to combine with Symbol Technologies'?"

Even in the face of uncertainty around Motorola's designs on the RFID market, analysts agree that the acquisition spells bad news for historic Symbol competitors. "Standing alone in this market just became unattractive," asserts AMR Research. Such competitors, most notably longtime rival Intermec, now look like David next to Goliath, and their own best bet might be to follow in Symbol's footsteps and sell. "This acquisition will inevitably trigger further consolidation as the likes of Nokia, Ericsson, and others look to snap up someone like Intermec," according to AMR. ABI Research sees the acquisition as a threat to Cisco, calling it "a shot across Cisco's bow signifying that Motorola intends to be a major player in the enterprise market."

The different corporate cultures at the two companies will present an integration challenge, predicts VDC. "One critical concern ... will be how well Motorola and Symbol Technologies' product teams and philosophies coexist -- these are strong corporate personalities." ABI concurs, arguing that "the possibility of culture clash between Symbol's West Coast wireless group and Motorola's Mid-west senior management looms."

Whatever happens, it appears that the acquisition did little to phase Wall Street's estimation of Motorola's future. On Tuesday the 19th, the day the deal was announced, the company's stock was $24.93 at closing; a week later it was $24.98, a difference of 0.2%.
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