Jul 27, 2004 (12:07 PM EDT)
Symbol Scoops Up Matrics

Read the Original Article at InformationWeek

Symbol Technologies Inc. on Tuesday said it has agreed to acquire wireless tag maker Matrics Inc. for $230 million in cash for its expertise in radio-frequency identification technology. The deal is expected to close in the third quarter.

For a company with roots in bar-code and handheld-computer technology, the deal jump-starts Symbol's efforts to get into the RFID space. Symbol in the past had suggested it had planned to provide a complete data-collection infrastructure that would include handheld and fixed RFID readers and software that integrates RFID and bar-code data that flows through enterprise systems.

Symbol's acquisition may herald the beginning of consolidation in the RFID market. "We are going to see consolidation in the reader and tag industry where Symbol and [wireless data collection vendor] Intermec [Technologies Corp.] pick up the smaller vendors," says Gene Alvarez, VP technology research services at Meta Group.

Matrics has been hit with a lawsuit by Intermec, charging patent-infringement issues related to Intermec's RFID intellectual property. But that didn't deter Symbol from making the acquisition; in fact, Intermec has been paying Symbol royalty fees related to bar-code-scanning technology for years.

Analysts see the move as strategic because the RFID market is unfolding quickly as companies begin to view the creation of business processes around RFID as a competitive advantage. Companies are already seeing returns on investments for their RFID implementations, though many are reluctant to speak about them, analysts say.

Symbol said it will finance the acquisition with short-term borrowing. The company said the transaction should dilute earnings per share in 2004 by 5 or 6 cents. Wall Street analysts expect Symbol to earn 44 cents per share for the year on revenue of $1.75 billion. "Symbol has to take on debt or issue equity to make this acquisition, and it doesn't sound like they will do much to change Matrics' infrastructure, and my assumption is Matrics is currently losing money," says Reik Read, an analyst at equity research firm Robert W. Baird & Co. "Matrics isn't generating much revenue today, maybe $4 million to $7 million annually, and I don't expect a huge revenue ramp until late 2005."