Will Acquisitions Lead to RFID Dominance?

By Mark Roberti

The RFID industry is experiencing a wave of consolidation that seems to be aimed at companies' achieving "gorilla" status.

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It’s commonly said that Saturday is “moving day” in professional golf tournaments, which typically start on Thursday and end on Sunday. There are varying interpretations of the term, but it is generally taken to mean Saturday is the day you need to move up the leaderboard and position yourself for potential victory the next day. It’s the day a golfer might take extra risks to try to make up shots.

Several major acquisitions, which appear to be more strategic than past deals, indicate that radio frequency identification providers are seeing the current period in a similar way. With some major retailers, aerospace companies and hospital chains seeking to deploy RFID technology enterprisewide, solution providers seem to be positioning themselves to be the gorillas in the market (“gorilla” is the term coined by Geoffrey Moore, leading expert on the technology adoption life cycle, for a dominate technology provider, such as Apple in the MP3, smartphone and tablet markets).

It started in December, when Dutch RFID transponder company Smartrac N.V. acquired UPM RFID, a division of Finnish wood pulp, paper and timber provider UPM-Kymmene. Smartrac announced it planned to leverage UPM RFID’s passive ultrahigh-frequency manufacturing capabilities to position itself as one of the world’s largest providers of UHF RFID inlays. Smartrac previously had purchased two other transponder manufacturers: Neology and KSW Microtec. The three acquisitions represent Smartrac’s interest in further penetrating the UHF RFID market by providing tags, as well as the inlays built into the transponders, and full RFID solutions.

Smartrac’s purchases position the company to compete with Avery Dennison, one of the world’s leading providers of RFID transponders. Avery has the largest market share in North America. Smartrac has penetration in Europe, and Invengo, another transponder manufacturer, has a strong position in Asia. It’s likely these three companies will be battling for market supremacy in the coming years, and there probably will be more acquisitions as each company tries to strengthen its hand.

In June, Motorola Solutions announced it had reached an agreement with Psion to purchase the British handheld computer manufacturer for $200 million. The deal is expected to close during the fourth quarter of this year. The acquisition appears, in part, to have been driven by Motorola’s desire to dominate the market for handheld and fixed RFID readers.

Psion, which sells its handheld products to customers in more than 50 countries, has a large presence in Europe. Its RFID-enabled products include the Workabout Pro series with UHF, high-frequency and low-frequency reader modules. Motorola, the leading provider of RFID-enabled handheld devices, is most prominent in North America. The purchase of Psion gives Motorola a larger client base and greater penetration of the European market.

Motorola also may have been responding to recent moves in the RFID market made by Honeywell, a manufacturer of commercial and consumer technology products. (The companies became competitors in 2008, when Honeywell purchased Metrologic Instruments, a maker of data-capture and collection hardware and software.) In June 2011, Honeywell purchased LXE, which makes mobile RFID technologies.

Honeywell recently unveiled the Optimus 5900 handheld RFID reader and mobile computer, the first device in a line of RFID hardware the firm intends to develop as it ventures into the market. The UHF reader is a smaller and lighter alternative to handheld interrogators on the market, according to Honeywell. The device is geared to apparel retailers, though it also could be used in warehouses or for reading RFID tags elsewhere along the supply chain.

Another major acquisition occurred in June, when Stanley Healthcare Solutions (SHS), a division of Stanley Black & Decker, the tool-manufacturing company, purchased real-time location system (RTLS) provider AeroScout. SHS provides RFID solutions designed to locate and protect individuals and medical equipment. AeroScout is a leading provider of Wi-Fi-based RTLS solutions.

The SHS line of wireless and electronic systems for monitoring assets, inventory and people includes the RFID-based Hugs, Pedz and Passport patient-security solutions, acquired, in 2008, from VeriChip. The company also offers fall-management solutions, such as Bed-Check, with pressure-sensitive pads to indicate unsafe movement, and HealthTrax, asset- and patient-tracking software that works in conjunction with RFID RTLS technologies. Approximately 15,000 customers, including hospitals and long-term and acute-care facilities, use SHS solutions. The AeroScout acquisition broadens SHS’s product portfolio.

The acquisition also positions SHS-AeroScout to become a dominant player in the RFID health-care market. To date, AeroScout has approximately 800 customers of its RTLS solution, including 500 hospitals that employ its active Wi-Fi tags and MobileView software platform to manage location data.

Engineers at both firms are now developing products that will incorporate Stanley’s existing RFID technology with AeroScout’s Wi-Fi-based hardware and MobileView software platform. SHS will aim to sell the AeroScout RTLS to its customers and sell the SHS product line to AeroScout customers.

The key to achieving gorilla status, according to Moore, is to achieve a critical mass of customers. When critical mass is reached, Moore says, other end users go with the largest solution provider.

Acquisitions are one way to achieve critical mass. It remains to be seen whether the acquisitions by Smartrac, Motorola and Stanley Black & Decker will lead to those vendors’ gorilla status in the RFID market. But it’s clear these are strategic moves aimed at positioning the companies to win when the market takes off—just like on moving day in golf.