This article was originally published by RFID Update.
July 2, 2007—Intermec last week announced the deployment of its products as part of the major RFID deployment ramp-up by German retailer METRO Group (see METRO Moves RFID Pilot to Production, Taps Reva). The Everett, Washington-based RFID hardware manufacturer expects that 130 of its reader portals will be installed at METRO Cash & Carry locations and distribution centers before the end of the year. Also, METRO has approved two preconfigured RFID “starter packs” from Intermec to be offered to METRO suppliers. Investment advisory firm Raymond James & Associates has published a report on these developments and how they might affect the company in the near and medium term.
Overall, the news is clearly good for Intermec; the question is how good. Raymond James quantifies the revenue potential for the starter pack opportunity in the millions. If Intermec is able to sell a single starter pack to 85% of the approximately 650 METRO suppliers affected by the RFID ramp-up, the company could see five to ten million dollars in new revenue in the near term. Raymond James expects that orders could start coming in this calendar year.
As for the 130 reader portals, Raymond James estimates that the company will see about one million dollars in revenue from that. Important to note, however, is the potential for additional portal orders as METRO equips more receiving locations. With 20 to 100 loading docks apiece, distribution centers especially represent a volume opportunity.
In addition to quantifying the financial potential of the METRO business, Raymond James makes a qualitative assessment: “The Metro announcement could represent a meaningful revenue opportunity, but more importantly, serves to validate Intermec’s position as one of the leading manufacturers of RFID readers and printers.”
Raymond James also notes that METRO’s escalation is a clear positive indicator for RFID adoption in retail and the supply chain generally. “From an industry viewpoint, METRO’s progress serves as a promising indication that despite numerous mandate-related disappointments over the past several years, mandates are still moving ahead.” Recall that due to the royalty streams stemming from its powerful RFID intellectual property portfolio, Intermec is well positioned to benefit from RFID adoption even when it doesn’t actually sell its own product.
Aside from the RFID deal with METRO, there are other positive indicators for the company. Specifically, Intermec channel partners indicated to Raymond James in recent interviews that new Intermec products like the CN3 mobile computer are seeing good traction in the marketplace.
Overall, Raymond James reiterated an “outperform” rating on Intermec stock, which means it expects the stock to appreciate and outperform the broader S&P 500 over the next twelve months.
Download Raymond James’ Intermec report