Layoffs at Alien Technology

Rumors of massive layoffs at Alien Technology might be overblown.
Published: September 1, 2006

There has been a lot of talk among RFID companies about layoffs at Alien Technology in the wake of its failed initial public offering. In an interview, Alien CEO Stav Prodromou told me Alien would undertake cost-reduction measures (a polite way of saying people would be let go). He indicated that the cuts would balance Alien’s need to conserve cash with the need to maintain its market position. Alien has a limited amount of cash left from previous fund-raising rounds (see Alien Cancels IPO Plans).

Alien is not commenting publicly on the number of layoffs. I’ve heard rumors of layoffs of a third to half of all its employees. A source inside Alien, who is not authorized to speak publicly to the press, tells me that 50 out of 250 were laid off in Morgan Hill. He didn’t have information on others, though it appears there might have been two people let go in Fargo, where Alien is setting up a production facility. If accurate, these numbers are far fewer than the rumors suggest. But again, this is an unconfirmed number.

I know a lot of competitors would like to see the company go under. Companies always like to see competitors go under, but Alien is, I sense, disliked more than most. That’s because it was a startup with a huge reservoir of cash (it raised more than $200 million in venture capital), and it made no bones about its plans to disrupt more-established RFID companies with its Fluidic Self-Assembly (FSA)—a technique for mass-assembling RFID tags.

There have been rumors that Alien has been unable to perfect FSA (no shortage of rumors in this industry, eh?). But even if it has perfected the technology, it would not be a huge competitive advantage until the market for RFID tags ramps up. There’s no benefit to being able to assemble billions of tags cheaply if your customers only want a few hundred thousand tags a year.

It will be fascinating to watch how this plays out. Does Alien raise the money it needs to keep going? Does it put itself up for sale? However it ends, I don’t think anyone should forget that Alien played a key role in promoting RFID. It was the first (and, at one time, only) company to support the vision of using low-cost UHF tags to track pallets, cases and items moving through the supply chain. For that, all of us in the RFID industry owe the company a debt of gratitude. And I, for one, hope the company gets additional funding and soldiers on. If Alien doesn’t survive, it will only give more ammunition to those who don’t believe RFID is an important technology.