With the possible exception of the ten-item-maximum express lane, Symbol Technologies’ electronic scanners have done more to improve the lives of grocery store clerks and shoppers than any other invention. For 25 years, food and other retailers have been using Symbol devices to scan and record the data in those postage-stamp-size, black-and-white bar codes - not only to ring up sales, but, more recently, also to manage inventories. Shippers rely on the same technology, coupled with Symbol’s wireless communications systems, to track parcels. New York Stock Exchange floor brokers use the company’s hand-held devices and networking technology to get pricing information and fill orders.
Those multiple uses are pushing Symbol’s revenue higher - to $661 million in the first half, 24 percent higher than the same period last year. And its stock has jumped to about 35 from the low 20s a year ago.
To be sure, the technology is mature and remains rooted in the world of traditional, physical commerce. But as the ever-expanding Internet moves onto wireless networks, Holtsville, New York-based Symbol sees new applications for its data-scanning and transmission capabilities. These opportunities revolve around the rapidly emerging field of mobile commerce, or m-commerce, says CEO Tomo Razmilovic.
Symbol is contributing its bar code technology to a company it is forming with mobile communications leaders Motorola and Telefonaktiebolaget LM Ericsson. Users of wireless phones, television set-top boxes and personal digital assistants, or PDAs, would be able to scan codes from newspaper or TV ads, for example, and be connected to Internet sites to order products, find information and manage tasks. But such a radical change in consumer behavior won’t happen overnight. And traditional businesses that find it hard enough to adapt to e-commerce may not be ready to embrace Symbol’s vision of m-commerce.
Razmilovic, who had been chief operating officer before succeeding Symbol founder Jerome Swartz as CEO in July, discussed technology adoption challenges and other issues during a recent interview with Institutional Investor Staff Writer Justin Schack.
Institutional Investor: When most people think of bar code scanners, they think of grocery counters. Is the Internet going to change that?
Razmilovic: Very much so. Already, scanning alone is less than 40 percent of our business. Mobile systems make up more than 60 percent. It’s the combination of bar code technology, mobile computing and wireless connectivity that is the killer. We’ve always envisioned the bar code as a world standard for commerce and communication. It costs next to nothing to use, and it’s truly universal. It works the same way in China, Japan, Europe, Australia or the U.S. We had talked about bar codes in mobile commerce internally before the Internet, but now it’s really possible, with wireless phones having Internet access.
How do you envision m-commerce working in practice?
Wherever you are, your cellular phone or PDA will have a small scanning device so that you can scan bar codes from newspaper advertisements, from TV screens. You can enter the bar code on the Web, and it will take you right to the site where that product can be purchased.
How pervasive could m-commerce become?
I don’t believe it will be a niche, but I also don’t think it will take out PC-based commerce. It will be a combination, just as retailers won’t disappear and be entirely replaced by e-commerce. But remember that everyone, regardless of profession or walk of life, is mobile. We all move through different environments - from our offices to homes and abroad when we go on vacations, from factory floors to office buildings. For that reason, we think a combination of mobile units and “docking stations” in offices and homes is the right answer. As we speak, millions of scanners are being put into cellular phones. Think about how many cellular phones are being sold out there. It’s going to change TV advertising dramatically. The biggest obstacle now to TV ads’ leading to transactions is that the viewer has to call a number or go to a store to buy. We will provide the capability for viewers to scan a code off the screen with a very simple device and go right to the Web site on that device.
If m-commerce is to fulfill its potential, what else has to change?
Industries have to embrace what I call hybrid models. Look at the publishing business. Print media can start incorporating bar codes in their publications that would allow them to offer tailored versions of their content to various audience segments. Very sophisticated readers could scan a bar code and get more details about an article on the Internet. Other industries need to do the same, where they offer home shopping on Web sites plus the in-person touch and smell that you get in stores. But the stores need to be more specialized. There will no longer be value in displaying commodity goods in retail stores, whether it’s milk, sugar, even some kinds of clothes. Another big challenge in this realm will be that the dot-coms will have to provide delivery and order fulfillment that are as professional as those of traditional retailers. Many of them are failing there now. For our company, that’s the greatest opportunity. Many dot-coms rely on us for order fulfillment, delivery and inventory management - things that we’ve been doing for many years.
Is it an obstacle for you that some countries, most notably the U.S., lag behind in the number of mobile phones and other wireless devices?
Absolutely. The Scandinavian countries, for example, have the highest mobile-phone penetration rates in the world - 60 to 70 percent. In the U.S. it’s more like 25 to 30 percent. But I believe the explosion in the U.S. will continue. Pretty soon we will get to the point where there will be no need to have a wired phone. Personal digital assistants will take longer because demographics play a bigger role there. But the economies in that area are changing, too. As the cost points come down, penetration will go up.
How will the company you are building with Motorola and Ericsson work?
When you scan a bar code, you have a combination of numbers. But it’s useless without matching them up with a database that tells you what the product is. With this new portal, we will provide what we call a Web code. So companies can put bar codes on their products and in advertisements that lead consumers to a Web site where they can buy things. It will create a place where customers and companies interact.
You also have an alliance with Intel Corp. What is that?
It is very different. It has to do specifically with providing a new generation of wireless local area networks, using Intel’s chip technology. The new networks run on a higher frequency, and their data speeds will be up to ten times faster than the wired Internet.
What has been your experience in getting employees and managers to shift their focus from the old business to the Internet-related areas?
With some people it’s like pulling teeth. Others love it. The good news is that innovation has always been a part of our company’s genetics. We own almost 400 patents. There are always people who are a bit conservative, but they’re coming along.
Is it difficult in this market to find enough talent to sustain your growth?
Very difficult. Recruitment of people and training them properly is the No. 1 challenge for us. I’ve been very active in the community and trying to attract local graduates, but it’s just not enough. Our location limits us somewhat in that Florida is producing more graduates in computer science than New York. California is producing five times as many. So we focus very much on nurturing our own people. We have an 8 percent attrition rate. The industry average is one third. I believe we can do even better than that.
How is your business distributed globally?
We break it down into three regions. The Americas - the U.S., Canada and Latin America - accounts for about 60 percent of our business. It’s about 35 percent in Europe, the Middle East and Africa and 5 percent in the Far East - Australia, Japan, China.
In which regions do you see the biggest opportunities for growth?
In Europe you have the GSM [global system for mobile communications, a wireless protocol] standard, so wireless is really growing. And the Far East is also going to be a major growth area. But when I consider what my business will look like in three to five years, I hope that one third will come from each of our three regions. We are getting quite a bit of business from former Eastern bloc countries - Poland, the Czech Republic, Slovenia. These are the areas where capitalism was most advanced before World War II and the spread of communism, and now they’re taking the lead again.
