With Intermec, the RFID Revolution Can Begin

With Intermec, the RFID Revolution Can Begin

RFID, or radio frequency identification, is the name of a breakthrough technology in development. The capability to track goods of any kind was substantially enhanced by this technology. If you want to buy something at your local grocery store, for instance, the cashier will need to run the "bar code" you present over a scanner, which is a one-way system. Readings like these require a lot of time and effort from humans because each object has to be scanned separately. Because RFID is a two-way system, a reader in a Wal-Mart (WMT-48.14) could theoretically scan every item in the store. Then, everything equipped with an RFID tag would "chirp" in response to the reader. With the help of two-way RFID technology, one employee may do the job of several people during an in-store inventory. Each item the operator brings into the warehouse would be recorded by a reader attached to the forklift truck. With RFID, a single worker may take stock of an infinite quantity of things.

Our technique indicated that RFID will be revolutionary using our basic forecasting theory, which mathematically helps us forecast the success of innovations.

Some of RFID's various applications are listed below. tracking players at a blackjack table so the house can see who's betting big, monitoring inmates to determine who's starting fights, checking medications for fakes, checking animals for mad cow disease, and monitoring vehicles so authorities can quickly identify a stolen vehicle or one with outstanding issues. Moreover, the Department of Defense can manage the inventory of most commodities, Boeing can trace the parts it uses to construct aircraft, and Ford can do the same for its autos; these are just a few examples of how tracking technology is put to use. It seems like there is no limit to the scale and breadth of things right now.

In addition to shoes, cement blocks, frozen food, and automobiles, it may also be used to keep track of boats, airplanes, parts, and supplies.

Our theorems predict that RFID will see explosive growth similar to that of other disruptive technologies like the cellular phone, the personal computer, and the Internet, all of which had promising early trajectories.

Foresight from IdtechEx

According to IdtechEx, the RFID market will increase from $2.7 billion in 2006 to $12.3 billion in 2010. In 2016, the value is projected to reach $26.2 billion, representing a nearly 10-fold increase over the preceding decade.

The Process of Identifying the Company with the Potential to Dominate that Market

Not only is it difficult to choose the best market to invest in, but there are other obstacles as well. Finding the company that will pioneer this technology may be even more difficult. We have found Intermec to be the best fit here. When it comes to bar codes, Intermec is at the forefront of the industry. Intermec has spent the last few years prioritizing the release of devices that adhere to the new Gen 2 RFID standard over the introduction of products that supported the earlier Gen 1 and 0 Class protocols. This tactic has enabled Intermec to leverage its 149 patents to collect royalties from the entire RFID sector and make its products look indispensable while implementing the Gen 2 RFID standard. When it comes to Gen 2 RFID standards and Intemec patents, they're practically inseparable. From where I sit, Intermec is rapidly becoming the industry standard in terms of integration.

How do Monopolies Achieve Such Phenomenal Success

Successful monopolies in the past have been those like Intermec, which controlled the market and eventually had their approach adopted as an industry standard. This strategy has great value since it is analogous to holding the strategic high ground in a fight. Rarely do innovators manage to maintain command over groundbreaking new technologies. 

According to our research, dominant firms of the past often maintained their position for two full business cycles, or between nine and twenty years. Microsoft (MSFT-27.13) and Intel (INTC-19.78) in the personal computer industry, Cisco (CSCO-21.44) in the internet industry, and Qualcomm (QCOM-49.87) in the cellular phone industry are all examples of companies that have achieved success through the integration and/or control of revolutionary products. When I was a kid, IBM's 84.32 was the gold standard for mainframe computers, and AT&T's 26.81 was the king of the telephone industry. Companies with a monopoly in a revolutionary industry frequently have a high chance of becoming extremely wealthy. Several of the monopolies we identified as having the highest stock value in the world have done so.

Do We Have a New Monopoly on Our Hands With Intermec

If Intermec, or any corporation, wants to become a monopoly, it needs to exert some influence over its market. How dominant is Intermec in the RFID market?

For this seemingly straightforward but critically crucial inquiry, we developed a highly reliable test. Intermec asserts that it is a crucial component of the Gen 2 specification. To be considered the standard by all of its contemporaries is the definition of a de facto standard.

Is Intermec the accepted norm in the RFID industry?

Major players in the RFID industry with the scale, expertise, legal staff, and other resources to either confirm or refute Intermec's allegation include Symbol Technology (SBL-10.64), Zebra Technology (ZBRA-45.45), Philips Electronics (PHG-32.38), and Texas Instruments (TXN-30.59). If you accept Intermec's claim, you'll have to pay royalties to Intermec for years. Obviously, none of these corporations wants to do that, so they'd rather you didn't.

Intermec has secured royalty payments from all the aforementioned companies for every Gen 2 RFID product they manufacture. While everyone wants to use the Gen 2 RFID standards, nobody wants to pay Intermec a 2.5–7% fee to do so. Partnerships with industry stalwarts like Phillips, Texas Instruments, and Symbol—all of which hold significant market share—helped to lend substantial credibility to Intermec's claims.

Intermec's claims were most heavily challenged by Symbol Technologies, the company's largest and closest competitor. Symbol Technologies refused to pay and sued Intermec early on, demanding that Intermec pay royalties to Symbol for its numerous patents, as Symbol desired their own version of the standard.

Symbol has agreed to join Intermec's Rapid Start Licensing Scheme and end their legal battle. When your main rival agrees to a controlling deal in which your company pays royalties to them whenever you sell RFID hardware, you know you're in trouble. In my opinion, Intermec has validated Symbol's relationship with a high degree of control thanks to the company's partnership with Symbol.

When IBM adopted the Microsoft PC standard, many industry analysts believed it was the beginning of the end for the company. I believe history will say the same thing when Nokia (NOK-20.52), the world's largest cell phone company at the time, signed and agreed to pay royalties to Qualcomm on all Nokia 3G phones.

It's like the ancient adage, "The king is dead; long live the king": if you can impose your will on the most influential corporations, you're in charge.

Roof vs. Gutter Protection

With its RFID control, Intermec is building what I like to call a gutter company. Since Oregon receives a significant amount of precipitation, roofs are the only thing most residents have experience with. Roofing rainwater drains into a downspout. Gutters and shingles may be interdependent on one another for the health of a roof. The first gutters can bear a lot of weight.Second, you might assess the potential water flow or gutter leverage by counting the shingles or measuring the roof's square footage. In our opinion, investing in a business that operates in the gutter is a far smarter move. How about putting your cup under a shingle or a gutter to catch rainwater? However, I feel that the gutter business model, which makes use of and leverages the shingles, has a considerably greater potential for profit growth.

Under certain conditions, all the shingles could fit into a single gutter. One of the best business models is a roof with a single gutter, or monopoly, because it can use the entire industry to increase its earnings.

Intermec is probably creating this type of business model and has awarded the flagship clients of Cisco and IBM while having alliances with Microsoft, Oracle, and SAP. Member companies of Intermec's Rapid Start Program are obligated to pay a royalty on all sales of RFID hardware products.

Accu-Sort, Avery Dennison, AWID, Datamax, EM Micro, Feig Electronics, Hand Held Products, LXE, Metrologic, Paxar, PSC, Psion Teklogix, SAMSys, Sato, Symbol Technologies, Texas Instruments, ThingMagic, Toppan Printing, and Zebra Technologies are all companies that produce labeling and scanning equipment.

All of these agreements were made in 2005, when the new Gen 2 RFID specifications were created at the beginning of that year.

If our research is correct, Intermec will have exceptional and accelerated growth for the whole Gen 2 RFID standard business cycle, which is expected to span around 9 years.

Risk

It will take a long time for the Gen 3 RFID standard to establish where Intermec fits in and how much influence Intermec has.

Intermec's legal stance could be challenged by another corporation. Intermec has the largest IP portfolio in the RFID sector, consisting of over 149 patents, but a single business may sue and render all of them invalid. Given that a well-funded and dominant player in the RFID business, Symbol Technologies, has already tried and failed at this, it's hard to imagine a smaller, less-funded company taking such a risk.

Intermec appears to restrict participation in the Rapid Start Program to a select group of licensee companies. Potentially devastating to Intermec's reputation in the legal system is the possibility that it will one day be ruled a monopolistic enterprise. Intermec needs to treat each business with respect.

Intermec has not yet shifted its primary focus to RFIG Gen 2, and there is no assurance that RFID will spark a technological revolution. RFID Gen 2 will most likely have the same long incubation periods as other emerging technologies before reaching widespread use.

Although it may be many years before royalties become the primary source of revenue, in my opinion, that is when the investment will have achieved its greatest value.