Less than two years ago, Checkpoint Systems laid off several employees focused on the radio frequency identification market, prompting some publications to erroneously report that the company was pulling out of the RFID market to focus on its core electronic article surveillance (EAS) business (see Checkpoint Refocuses RFID Effort).
Some industry watchers, therefore, were surprised two weeks ago when Checkpoint announced it was snapping up OATSystems, a provider of RFID software (see Checkpoint Systems Acquires RFID Software Company OATSystems). But Per Levin, Checkpoint’s worldwide president for shrink-management and merchandising solutions, says the acquisition—an all-cash transaction, recently closed—was a strategic move that positions the firm well for the future.
“We have had a new CEO since the start of the year, and we undertook a strategic review of our business,” Levin says. “We looked further into the future and realized we needed to be a one-stop shop in the retail space for our customers. As retailers scale up their RFID operations, they are going to look for one company that can take responsibility for a national—or even global—rollout.”
Levin believes Checkpoint Systems, with the addition of OATSystems, can do just that. Checkpoint is strong in RF hardware and services, he says, and deploys and maintains RF-based EAS systems for retailers worldwide. OATSystems provides software enabling companies to employ RFID data for promotions management, replenishment, electronic proof of delivery and other applications.
Checkpoint maintains a strong retail customer base, Levin says, and can now offer these customers the hardware, software and services they require to begin using RFID to achieve businesses benefits. “We want to broaden the scope of what we are doing,” he states. “Shrink management is still our core business—but RFID gives us the potential to take it to the whole store, and to the supply chain, by providing visibility as products move through the supply chain.”
At the same time, Checkpoint plans to allow OATSystems to continue operating as a separate business unit, and to maintain its office in Waltham, Mass. OAT had expanded its software offerings and market focus beyond retail and consumer packaged goods, and has been working with several major industrial manufacturers, including Airbus.
According to Levin, OAT will continue to serve the industrial manufacturing market. “We want [OATSystems] to execute on their business plan,” he says. “To a significant degree, the success of that plan depends on the industrial side. We’ll add value in retail, but we will not interfere with their current business plan.”
“Most industrial manufacturers sell goods in a retail environment, so it’s not like there is a bad fit,” says Michael George, president and CEO of OATSystems. “We’ve done work with pharmaceutical manufacturers, but we’ve also done things with Target and others on the pharmacy site. Our software is a platform for manufacturers and retailers to collaborate to drive business benefits.”
Levin and George both claim that Checkpoint, which reported $834 million in sales in 2007, brings financial stability and strength to the much smaller OATSystems. Checkpoint also offers OAT an opportunity to expand globally more quickly.
“Our companies tell us, ‘We love your technology, but you are a small company. We would like you to be a strategic partner that has the global capacity to help us scale our RFID initiatives,'” George says. “That’s always the challenge of small companies. It’s great to be fast-moving and innovative, but you need to also serve your customers’ needs globally. This allows us to stay fast-moving and innovative, but eliminates one of our customers’ concerns.”
OATSystems, George says, will continue to rely on IBM and other partners to install its software in the United States, and will also continue to work directly with some of its larger customers, including Best Buy, Target, CVS, Kimberly-Clark and Procter & Gamble. But in Europe, it doesn’t have the same partner ecosystem established. Since Checkpoint has a strong presence throughout that continent, OAT can now take advantage of its new parent company’s resources to expand throughout the region.
Over the next few months, the companies plan to integrate their financial systems and operations, and to develop a plan to drive retail sales of RFID systems faster than either could have accomplished individually. Checkpoint also intends to explore how radio frequency identification can be employed to enhance its shrink-control business, and to add supply chain visibility for its customers.
“UHF brings the ability to do a better job in shrink management,” Levin says. “Every retailer will want to test, pilot and validate and build their own business case for RFID. It’s going to take a while to go from something small to something big. Migration is key. We want to make sure that we are several steps ahead of our customers, so we can lead, rather than follow. That’s why we secured OAT, because we think they are the leaders in RFID applications and item-level tracking.”