I received several calls last week from radio frequency identification solution providers wondering why Motorola decided to sell its enterprise business to Zebra Technologies (see Zebra Buys Motorola Solutions’ Enterprise Business and Motorola Exits Stage Left). A common question is whether the top guys at Motorola see something about the RFID market that the rest of us do not.
It is possible, of course, that Motorola Solutions’ CEO, Greg Brown, has access to some information that the rest of us don’t have. But I don’t think that’s the case. I think he just didn’t see RFID’s potential. Here’s why I believe that.
There are only three reasons you would sell a business that has the market share and brand awareness that Motorola has in RFID readers. One is you simply fail to see the potential, the second is you see a threat from a competing technology, and the third is you see a threat from a competing RFID company that you don’t think you can address in a timely manner.
First, let’s consider the latter two scenarios.
I don’t see another technology that can compete with RFID. Bluetooth low-energy beacons, ZigBee-based tracking devices, ultrasound and infrared are all useful and can be used in some automatic data-capture solutions. But each requires a battery, making it too expensive for apparel items and millions of other low-cost objects that companies and consumers want to track and manage. 2-D bar codes are also a great technology with many applications. But the problem with bar codes is they require line of sight, and usually a person to orient the scanner to the bar code. There is nothing out there that is low-cost, non-line-of-sight and truly automatic, other than passive RFID.
A threat from another RFID systems provider? That’s possible. Overhead readers could make Motorola’s handheld and fixed models less attractive if the market were to embrace overhead readers. But Motorola could buy a company that already has such devices, or develop the technology itself. I sincerely doubt the top brass at Motorola threw in the towel because of the threat from overhead readers.
That leaves the belief that there was not much growth potential in RFID. This doesn’t make the top brass at Motorola stupid. They certainly are not. They have invested a lot in RFID, but it’s a small part of their business, and they don’t live and breathe RFID every day, so they are not as focused on it as those of us in the industry are. Motorola’s RFID team is very bullish on the technology and has argued, I’m sure, that RFID can be a revenue driver for Motorola.
So the top executives did a strategic review. The expected synergies between the government and communications side of the business and the enterprise business (bar codes and RFID) did not materialize after the firm’s acquisition of Symbol Technologies in 2006 (see Motorola Acquiring Symbol).
The bar-code business is growing slowly, or shrinking. In-store systems are facing competition from the likes of Apple, as retailers put iPads in the hands of staff members. RFID has potential, but no one knows when it will take off. So, I believe, the senior executives examined the situation and decided it made more sense to sell. This was an entirely rational decision—though one, I believe, they might come to rue.
So what are they missing that I see? I believe they don’t understand that the growth of any new technology remains slow until certain market conditions are met, and then it explodes. Take PCs as an example. During the first 10 years after the first personal computer—the MITS Altair 8080—was released in 1975, cumulative sales of PCs totaled a little more than 17 million units. Over the next decade, cumulative sales were nearly 194 million units. And in the 10 years after that, sales expanded to 1.15 billion units. Very few people expected that kind of growth.
Moreover, I think, companies do not understand how one player can dominate a new technology. In 1980, there were more than 100 manufacturers of personal computers. At the time, IBM was not yet one of them, but within a decade, IBM PCs and clones accounted for 90 percent of all personal computers sold.
The market conditions for this kind of growth and dominance do not yet exist in the RFID market. There is still no whole product available for retailers (Motorola’s primary market). That is, you can’t go out and buy a complete retail solution. You have to buy readers from one company, tags from another and software from another, and then get someone to put it all together. That might be changing, however, given the partnership between Checkpoint Systems, which offers software and integration services, and Mojix, which provides overhead readers that deliver real-time visibility (see Checkpoint Partners With Mojix to Offer Passive RTLS in Stores). The other thing the market lacks is critical mass. But within the next few years, a whole product will emerge and we will reach critical mass, and then sales of RFID readers will explode—just like PC sales did.
Time will tell if I am right, or if they are right. Clearly, the folks at Zebra believe there is a lot of potential in the RFID market. If I were a betting man, I’d put my money on Zebra.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog, the Editor’s Note archive or RFID Connect.