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Focus: RFID and Automated Identification and Data Collection (AIDC)

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From SCDigest's OnTarget e-Magazine

- Jan. 8, 2012 -

RFID and AIDC News: Honeywell's Plan to Acquire Intermec Largely Brings Wireless/RF Terminal Market to Duopoly Status

After Spate of Acquisitions, Honeywell and Motorola Solutions are the Two Giants Left Standing; What is the Impact on End Users?

SCDigest Editorial Staff

In mid-December, industrial giant Honeywell, which has been aggressively growing its data collection business of late, shook up the auto ID and wireless markets with news that it would acquire Intermec, one of the oldest data collection providers left, in a deal for some $600 million.

Intermec's share price had tumbled of late, and in November announced it had retained investment bankers to help explore strategic options, after its CEO resigned. The Honeywell deal happened about a month later.

SCDigest Says:

The deal adds three important components to the Honeywell product portfolio: a solid and successful line of bar code printers (and media), the Vocollect voice business, and RFID systems.

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While there have been a number of important mergers in this space, notably Motorola's acquisition of Symbol Technologies in 2006, this deal is especially impactful because the move effectively takes the market down to just two primary providers: Honeywell and Motorola Solutions.

That now puts the technology for users in the hands of two very large companies (though Motorola is a bit smaller now after its split in 2011 into two companies, one focused on cell phones and later acquired by Google, the other on its traditional network related technologies). As a result, customers will see the options for wireless gear and systems in distribution, manufacturing, retail, healthcare and more drop by more than 50% in the last year or so, from five main players to now just two.

The real consolidation in the wireless terminal industry arguably started all the way back in 1997, when Intermec acquired what was then Norand, a rival of sorts in distribution applications but with a dominant position in applications and terminals for route accounting/direct store delivery requirements.

In 2000, Symbol Technologies made big news by acquiring fierce rival Telxon, giving it a dominant position in the wireless industry. In the same year, Europe's Psion acquired Teklogix, a Canadian specialist in very rugged devices in distribution generally and terminals for freezer applications more specifically in North America.

Honeywell, a $36 billion company with huge automotive and aerospace businesses, got into the auto ID market in 2007 when it acquired Hand Held Products, bringing it the Dolphin line of data collection terminals.

After a bit of a lull after that, several more major deals have occurred over the last two years.

In 2011, Intermec acquired voice technology and device provider Vocollect. A few months later, Honeywell acquired EMS Technologies, primarily for its presence in various areas of aerospace and electronics, but along with that deal came LXE, long a strong provider of wireless systems for distribution and ports.

Then earlier this year, Motorola Solutions acquired Psion, to be followed by the new Honeywell acquisition of Intermec.

Got all that? In the end, the key point is the same: the wireless market is down to two main choices, Motorola and Honeywell, with Datalogic still out there as a much smaller third alternative, albeit with little market share in the US versus its presence in Europe. Gone from the market since 2011 are LXE, Intermec, and Psion, plus Vocollect, as independent companies.

Dynamics of the New Playing Field

With the Intermec acquisition, Honeywell to an extent simply adds more redundant wireless terminal products into its existing Dolphin-LXE product line, but gains a substantial customer, channel and market presence with the move. Intermec was around at the very start of the auto ID industry, and though it has been bought and sold several times since then, it remains one of the industry's most powerful brands.

(RFID and AIDC Story Continued Below)

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Intermec had 2011 sales of about $848 million.

It also adds three important components to the Honeywell product portfolio: a solid and successful line of bar code printers (and media), the Vocollect voice business, and RFID systems.

Motorola does not have a bar code printer portfolio. It partners with voice technology providers such as Voxware and Lucas Systems to provide voice software capabilities. Whether this deal will put any pressure on Motorola to acquire a printer manufacturer such as Zebra Technologies is too early to tell. The benefit would be to provide a more complete solution to end customers and channel providers, as Honeywell has now assembled.

So will end users of wireless gear and other AIDC products be impacted?

"I don't think it will have any short-term impact on users. And if we look at what happened to the LXE acquisition by Honeywell, there really hasn't been any long-term impact," said Ken Boyd, direct of marketing for Supply Chain Services, a major reseller and integrator of wireless and AIDC systems. "However, LXE filled some big holes in the Honeywell product line related to cold storage. Intermec fills a hole for Honeywell in terms of bar code printers. This is big for Honeywell. However there is overlap in the scanners and rugged mobile computers. Only time will tell if Honeywell plans to support the entire Intermec product line of scanners and rugged mobile computers."

At one level, it is possible there will be some potential gain for Motorola, especially among software providers that sell wireless systems as part of a total solution. For example, say a WMS provider splits its business today three ways roughly evenly between Motorola, Intermec, and Honeywell/LXE. It could be that in the end, the software company splits the business evenly between Motorola and Honeywell, giving a net gain to Motorola.
SCDigest editor Dan Gilmore, however, says the move is probably not a good one for users.

"There is a lot of evidence in any business segment that having a third competitor in the market is critical to maintaining a competitive pricing environment," he said. "Having just two dominant providers I believe will tend to reduce level of price competition and push prices higher."

Gilmore notes, however, that the additional competition in the end may come from smart phones that can act like data collection terminals.

Gary Morgan, a vice president at software provider RedPrairie (which is merging with JDA Software) and which has been a big reseller of wireless systems in distribution for decades, thinks that the Honeywell acquisition will be good for end users.

"This clearly shows that the market is becoming very mature," Morgan told SCDigest. "From a JDA/RedPrairie perspective it was a great move by Honeywell. We think Honeywell will take voice technology, for example, to the next level with the resources that they have to invest and make voice a main line business. The two giants of the industry will have to "duke it out," and that is always good for the market and users in the end."

The deal is expected to close in Q2. When concluded, the Intermec business will become part of Honeywell's Scanning and Mobility division, headquartered in Fort Mill, South Carolina. That division reports to Honeywell's $15.5 billion Automation and Control Solutions (ACS) Business.

Any thoughts on this latest merger in the AIDC industry? Does the market need a third strong player? Let us know your thoughts at the Feedback button below (email) or the Feedback section (web form).

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