Zebra Technologies (Nasdaq: ZBRA ) , which develops product identification systems, is betting that RFID (radio frequency identification) will eventually dominate barcode technology. Its recent $126 million deal for privately held WhereNet will provide Zebra with a strong RFID platform -- and hopefully help spur growth.
Founded in 1969, Zebra has built a strong position in the barcoding business, selling bar code printers and their assorted batteries, printheads, and self-adhesive labels. Despite industry-heavyweight rivals such as Hewlett-Packard (NYSE: HPQ ) , Lexmark International (NYSE: LXK ) , and Xerox (NYSE: XRX ) , the company has been able to remain competitive over the years.
Zebra's products serve myriad purposes, including inventory control, baggage handling, warehousing, and employee time tracking. Their benefits include security, reduced costs, and improved customer service. Zebra's proved effective in establishing alliances to distribute its products, teaming up with firms such as IBM (NYSE: IBM ) , Oracle (Nasdaq: ORCL ) , and SAP (NYSE: SAP ) .
Zebra's current line of RFID products is for passive applications; the tiny, inexpensive chips can be detected by an RFID reader only within 10 feet or so. In contrast, WhereNet's system employs active RFID, which can be detected within a 1,000-foot radius. These chips can be used to track products on assembly lines, railroad loading docks, and at seaports. The technology can even track people; for example, a chemical plant could use WhereNet's systems to monitor employees in the event of an emergency.
Active RFID's prospects look promising. A study from IDTechEx forecasts that sales will grow from $550 million in 2006 to $6.8 billion in 2016. Meanwhile, WhereNet is getting a nice piece of that business, with sales expected to increase from $36 million in 2006 to $50 million in 2007.
Track on
Through its history, Zebra has been particularly thoughtful with its acquisitions. Its mission has been to either focus on its core, or expand into adjacent markets.
Zebra has not veered from its approach with the WhereNet deal. It's a nice complement to Zebra's core business, and it should be a catalyst for growth. With WhereNet hitting profitability in the fourth quarter of 2006, the deal should be shareholder-friendly as well.
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Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 1,623 out of 19,864 in CAPS.
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