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Symbol Technologies Buys Matrics, Accelerating Its Move Into Radio Tags
July 28, 2004
By BARNABY J. FEDER
Symbol Technologies, which has been burdened by the fallout
from a long-running accounting fraud under previous
management, tested the patience of its investors yesterday
by announcing an acquisition that is likely to cut into
earnings for the next two years at least.
Symbol, the nation's leading producer of bar-code systems,
said it would pay $230 million to acquire Matrics, a
developer of electronic identification tags and wireless
devices that read them. Analysts said that the deal should
sharply accelerate Symbol's push into the promising field
of radio-frequency identification, or RFID, but that
Matrics and many other RFID pioneers still faced
significant hurdles to becoming profitable.
Radio-frequency identification has long been used to allow
drivers to pay tolls wirelessly, and to track valuable
assets like missiles, rail cars and cattle. Matrics is in
the vanguard of a new form of the technology that is
expected to sharply cut the costs of using it. As the newer
technology matures, analysts expect billions of the tags to
be attached to - or embedded in - goods that retailers,
manufacturers and institutions like hospitals want to
track. Purchasers of the technology will also need readers
to collect the data, software to analyze it and in many
cases consultants to put it all together.
Symbol, which is based in Holtsville, N.Y., said it struck
its deal with Matrics after 18 months of exploring
radio-frequency identification and experiencing growing
pressure from customers to expand its capabilities.
"It's a huge step for Symbol," said Michael J. Liard, an
analyst who follows RFID for the Venture Development
Corporation, a market research company in Natick, Mass.
"They're definitely a contender now."
But in announcing the deal yesterday morning before trading
began, Symbol, which had more than $1.5 billion in revenue
last year, warned that the deal would slice 5 to 6 cents a
share off its earnings this year and that accounting
charges had not yet been determined. Symbol said that it
expected a smaller dilution next year but that the drag on
earnings would be depend on how fast the demand for RFID
hardware, software and integration services grew.
Investors sent Symbol's shares down more than 15 percent in
heavy trading during the day before rallying to close down
10.5 percent at $12.48. William R. Nuti, Symbol's chairman
and chief executive, brushed aside that reaction, citing
the generally supportive assessment of analysts.
"If you take a long-term view, you'd be very bullish," Mr.
Nuti said.
Matrics, a privately held company based in Rockville, Md.,
with 64 employees, was founded five years ago by William
Bandy and Michael Arneson, former wireless computing
researchers at the National Security Agency. It is a
leading designer of wireless tag and reader systems in
which the reader's scanning signal provides the power
needed for the tag to send a return signal identifying
itself.
The technology, which is known as passive RFID, has been
embraced by Wal-Mart Stores and the Pentagon to track a
wide range of goods they receive from suppliers. That in
turn is forcing nearly every major manufacturer to get
involved and raising alarm among privacy advocates.
Passive RFID has the potential to be substantially cheaper
and more compact than active RFID systems like those used
in automatic toll collection because the tags do not need
batteries. But, like active RFID, it can provide far more
data than bar codes and much faster data gathering.
The deal, which is expected to close by the end of
September, would be Symbol's largest acquisition under Mr.
Nuti, who was recruited two years ago from Cisco Systems to
help the company recover from an accounting scandal that
turned out to be much deeper than he had anticipated. Last
month, Symbol agreed to pay $138 million in penalties and
compensation to settle both private class-action lawsuits
and a complaint brought by the Securities and Exchange
Commission.
http://www.nytimes.com/2004/07/28/technology/28scan.html?ex=1092045711&…
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