By Carrie Tait Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--Metro AG (MEO.XE) hasn't placed a purchase order for radio frequency identification (RFID) readers from SAMSys Technologies Inc. (SMY.T), although that announcement is expected shortly, SAMSys' top executive, Cliff Horwitz, told Dow Jones.
Metro, the world's fourth-largest retailing and trading group, tapped SAMSys and other companies to provide RFID products. RFID tags are placed on pallets and used for supply-chain management.
SAMSys' chairman and chief executive said this deal will serve as the catalyst behind the company reaching profitability. "This couldn't be a more important step forward," Horwitz said.
SAMSys and Intermec were the only companies selected by Metro to provide readers, he said, adding that SAMSys could deliver product "tomorrow" if necessary.
And that gives the company a big advantage, an industry observer said, because SAMSYS is the only provider of RFID readers in the European market with product ready to go.
The observer estimates the Metro order for RFID readers may be US$6-US$12 million. The observer calculated the number of readers each loading door requires and multiplied that number by the number of doors that could potentially be involved in Metro's RFID effort. The observer said the estimates are conservative because, with such a large order contract, it is likely that the suppliers - SAMSys and Intermec, a division of Unova Inc.(UNA), would have had to provide price discounts.
SAMSys should receive a larger portion of the initial orders, the observer said, because Intermec doesn't have a product ready. If SAMSys provides a significant portion of the RFID readers for Metro, the company could be closeto a break-even point in fiscal 2005, which the observer estimates represents revenues of about C$10 million.
Metro also selected companies like IBM Corp. (IBM), Avery Dennison Corp.(AVY), Checkpoint Systems Inc. (CKP), UPM Rafsec and Philips Semiconductors to provide RFID technology, according to a SAMSys press release. Horwitz called
the group the "dream team" of RFID, with no company responsible for more than two components of the overall solution. Horwitz said SAMSys is ready to deliver standardized products to the European market because it focused on Europe while many competitors looked only at the North American market. Wal-Mart Stores Inc. (WMT) and the U.S.
Department of Defense recently gave RFID companies a boost when they expressed interest in the technology for their supply-chain-management systems.
But SAMSys didn't shut itself out from the North American markets: it has a contract to provide readers to one of Wal-Mart's suppliers. By working in both markets, Horwitz said, the company is able to see which strategy works best.
Wal-Mart is opting to test RFID technology in a broad range of products but fewer facilities, while Metro will use RFID in more of its facilities, but with fewer products.
Because there is so much that is unknown about RFID, Horwitz said it will be interesting to see which approach is more successful.
He added that the company is in negotiations with two other major European retailers who are exploring RFID technology.
In Toronto Wednesday, the stock gained 3 Canadian cents to C$3.48 on about 607,000 shares. It traded as high as C$3.97 earlier Wednesday. |
