Feb 15, 2007This article was originally published by RFID Update.
February 15, 2007—RFID received attention from the mainstream financial press today in the form of three articles, one in the Wall Street Journal, the other two on investor site The Motley Fool. Highlights of the articles are recapped here.
As the top story in the WSJ's Marketplace section, Wal-Mart's Radio-Tracked Inventory Hits Static (registration required) focuses on Wal-Mart's initiative and takes a generally gloomy view of RFID adoption. The article points to a number of negative indicators, including the fact that Wal-Mart's RFID footprint is far smaller now than originally hoped (5 distribution centers have RFID today, while the company was aiming to have 12 up and running by January of last year), persistent high costs and consequent supplier complaints of elusive ROI, and privacy concerns. Much of the story will be familiar to those that follow the RFID industry on a regular basis.
The article does note some positive developments, though they receive less attention. While it may be moving forward more slowly than anticipated, Wal-Mart is indeed moving forward; specifically, the article cites plans to equip an additional 400 stores with RFID this year. Also, RFID has enabled Wal-Mart to cut down out-of-stocks on store shelves and increased the efficiency of order replenishment. These are two considerable victories, so it is a wonder the article didn't flesh out more details. Lastly, while there certainly are lingering privacy concerns, Wal-Mart has endorsed industry efforts to notify consumers when RFID tags are present.
One of The Motley Fool articles, A Tamer Zebra Looks to RFID considers RFID from the perspective of bar code and RFID printer manufacturer Zebra Technologies, which yesterday released its fourth quarter 2006 results. The article calls RFID Zebra's "wild card", saying that the technology could provide attractive growth opportunities to the company, but only if and when volumes materialize. "RFID has definite potential and sales are trickling in, but it's not yet certain how the technology will develop and if firms will be able to make much money creating related products."
What's the Frequency, Paxar? looks at one of the oft-overlooked public companies that is banking on RFID as a future growth engine. Like Zebra, Paxar makes RFID printer-encoders, as well as RFID labels and services. According to the article, Paxar sold $11 million worth of RFID products and services in 2006 and expects that number to rise to between $15 and $20 million this year.
Since the Wal-Mart mandate was announced in 2003, there has been sustained investor interest in which publicly-traded companies stand to gain from RFID adoption. Symbol, Intermec, and Zebra were long considered the three most likely candidates. Now that Symbol has been subsumed by Motorola, RFID will constitute a much smaller share of the company's revenues, so many believe Motorola stock is not the RFID investment vehicle that Symbol stock was. The situation is the same for other public companies with a stake in RFID, like Avery Dennison and 3M; they are huge corporations for which RFID will not likely "move the needle" in the short term.
The market is still waiting for a "pure play" RFID company to go public. While VeriChip did so last week, it is considered a non-traditional RFID company since its controversial products and services are not targeted at the supply chain and retail market where investors see the "hockey stick" growth opportunity. The stock price is down from its February 9th opening at $6.50.
Alien Technology is the quintessential pure-play RFID company, but its IPO was cancelled in September of last year. Gen2 RFID chip and reader manufacturer Impinj is a likely IPO candidate and fits the "pure play" bill. While the company has stated that going public is a possibility, it has not suggested a specific timeframe.
