RFID Update Decisions on Wal Mart and Albertsons Deals ... PART 1
04:33am EDT 10-Apr-06 Bear Stearns (Alling,Philip 212-272-6905) SBL IN ZBRA IN.
WMT WINS FOR ALIEN AND IMPINJ. Industry contacts indicate that WMT has
informed Alien Technology and Impinj that they have won deals to provide 15K
fixed RFID readers to WMT as part of the company's continued RFID rollout. Our
sources suggest that the deal was done at a per reader price substantially
below that of previous deals won by SBL and ThingMagic. Additionally, we
believe that SBL may be close to securing some handheld RFID reader business
with WMT, though size and timing are unclear. We note that the companies that
we believe were involved in the procurement process would neither confirm nor
deny specifics regarding a deal.
SHORT LIST OF VENDORS. We understand that the short list of vendors for this
WMT contract included SBL and privately-held Alien Technology, Impinj, and
ThingMagic (as we indicated in our April 6 note). We believe that SBL may have
been less aggressive in pricing this deal than competitors.
ABS WIN FOR SBL. Other sources suggest that SBL did win an order from ABS last
week. We believe that this deal was for about 5K fixed readers and that the
deal presented better pricing for SBL than the WMT opportunity. We believe
that this deal is likely to represent the largest non-WMT deal out for bid
this year and as such, is a meaningful win for SBL. Again, we note that the
companies that we believe were involved in the procurement process would
neither confirm nor deny specifics regarding a deal.
SBL IMPACT: MIXED BAG. We would be buyers of SBL on any weakness regarding the
WMT deal. We believe that the loss of the WMT fixed reader deal could put some
pressure on SBL. However, despite the WMT fixed reader loss, SBL remains a
significant supplier of data collection technology to WMT. Also, the possible
securing of RFID handheld business at WMT and the ABS win are, in our view,
signs of continued RFID traction. We think the ABS deal is likely to be at a
reasonable margin and could be for a similar aggregate dollar value as what
SBL could have won at WMT.
IN IMPACT: TWO NON-LICENSEES WIN AT WMT. WMT's apparent decision to award the
fixed reader contract to Alien and Impinj, two non-Rapid Start licensees, is a
negative for IN, in our view. With non-licensees providing the readers, IN
won't generate any IP royalty revenue from this deal. Additionally, the deal
could put pressure on IN to seek legal recourse to enforce their IP portfolio,
which could mean increased legal expenditures for IN, implying possible margin
pressure. Longer term, we still believe that IN will benefit from the
adoption of RFID via its IP royalty stream, which should grow rapidly as the
market expands.
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This is a pretty big deal, I consider the absence of these two in RapidStart as probably the only thorn in the Intermec story. Did they not license because they do not think it necessary, or was cross-licensing an issue for two small companies that are based on IPR, or some third reason? |
