Alien Still Tagging Investors for More Money
By Don Clark
Wall Street Journal
November 8, 2011, 11:20 AM ET
Alien Technology is 17 years old, smaller than it once was and pursuing a different strategy. But the company is still acting, and raising money, like a startup.
The closely held company–a pioneer in the field known as RFID, for radio frequency identification–on Tuesday announced yet another infusion of capital. The amount this time is $15 million, contributed by Advanced Equities and other existing shareholders.
Alien Technology An Alien RFID inlay
Alien’s announcement marks an extraordinary 11th equity funding round since the company was founded in 1994, raising a total of about $303 million over the years, according to Dow Jones VentureSource, an arm of Wall Street Journal owner News Corp.
Investors are betting on a new management team and the possibility that the once-ballyhooed RFID market can still be lucrative, if not quite in the way Alien originally envisioned.
The technology, a more-sophisticated alternative to the bar codes used on just about all products, uses electronic tags or labels with circuitry that respond to radio signals to help identify and track objects. Wal-Mart Stores pushed RFID for its suppliers, and proponents once envisioned that the technology would be ubiquitous on many goods sold in U.S. retail stores. It hasn’t turned out that way.
Alien, based south of Silicon Valley in the city of Morgan Hill, was particularly wedded to the possibility of heavy sales volume for its products, which include components called inlays and reader devices. Indeed, the company’s original invention was a high-volume manufacturing technology that it subsequently decided to apply to RFID. Its management bet that it could manufacture at a competitive cost in the U.S., building a factory in North Dakota for that purpose.
It didn’t work, says Peter Green, a veteran of Intel and other tech companies who was named Alien’s CEO in November 2010. The company has closed the North Dakota plant and now outsources much of its manufacturing to China, like many other high-tech companies–in large part, he says, because products that will end up with RFID tags will have them applied in that country.
“Manufacturing these kind of products in the U.S. never made sense,” Green says.
RFID tags also aren’t being applied on every box of detergent, like some people predicted, but more commonly on high-value products whose origins are important to track, Green says. In China, for example, RFID is a way to ensure against counterfeit brands of cigarettes. In India, it will be used to track manufacturers of new generic drugs, Green says.
One encouraging sign, Green says, is that the prices for RFID labels have dropped to more practical levels of six to seven cents each. “A year ago they were 12 to 13 cents,” he says.
Alien in 2006 tried to go public but withdrew the offering, later following up with more private funding rounds. Green is optimistic the latest will carry the company–which once had more than 200 employees and now has less than 50–to self-sufficiency.
“I do think this is probably the last,” Green says.
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