Sirit gets bigger by acquiring SAMSys, but the philosophy stays the same

Radio frequency identification (RFID) technology provider Sirit Inc. has once again made waves in the market by acquiring competitor SAMSys Technologies Inc. slightly more than a month after buying TradeWind Technolgies LLC. of Tennessee. The purchase was announced on April 6. While the motivation behind the TradeWind purchase was primarily to incorporate its line of plug-and-play RFID readers into Sirit’s product offerings (RoW, March 9/06), acquiring SAMsys has broader strategic implications. "We’ve been competing for a long time, we know each other and respect each other," Norbert Dawalibi, president and CEO of Sirit tells Report on Wireless. "Clearly from our perspective, when you look at the opportunity, what you see is two companies that do have products and some of those are complimentary in terms of going after different areas of the marketplace." The acquisition should help to substantially expand Sirit’s customer base, and Dawalibi adds that combining the two Canadian public companies, and some of their similar offerings, will result in operating cost savings by eliminating some of the duplication. "All around when I look at it, it is a transaction that makes a lot of sense for us," he says. Mississauga ON-based Sirit has been designing, developing, manufacturing and selling RFID technology for more then 12 years and currently offers solutions for a number of markets, including electronic toll collection, physical access control, logistics management, supply chain management, healthcare and pharmaceutical, asset control and product authentication. SAMSys’ purchase comes after the company announced on March 26 that it was exploring strategic alternatives for enhancing shareholder value. Five days later, on March 31, the board of directors said the best possible alternative would be seek an outright sale of the company. Less than a week after that, Sirit agreed to buy SAMSys. By combining its assets with a major competitor, Sirit has better positioned itself to compete in a market that is expected to explode over the next decade. Indeed, research firm Research and Markets reports that the worldwide RFID market, including systems and service, is estimated to increase from about US$2.7 billion in 2006 to US$12.3 billion in 2010, rising another US$13.9 billion by 2016. Where will Sirit fit into this marketplace? Report on Wireless sat down with Dawalibi to talk about Sirit and the future of RFID. The following is an excerpt from the conversation: Report on Wireless: Where is this market right now in terms of opportunity versus competition? Norbert Dawalibi: The RFID market is a sizeable, high-growth market in a number of application areas, including tolling, asset management, cashless payments, asset control and product authentication. The timing of deployments across the industry is still a question mark because it’s a fairly complex type of environment where you have to get everybody agreeing on standards, everybody operating their infrastructure, everybody implementing the technology. We’re starting to hear about some of the market leaders wanting to start to deploy in larger numbers, which I think is fantastic news for everyone in the industry. RoW: Can you talk about other industry sectors that might give an indication of how the RIFD market will play out? ND: A good example that people always look at is the barcode industry and how long it took before people were starting to test the technology to make it work. It actually hit a very similar inflection point where people realized that ‘yes, this technology works, this technology delivers benefits’, and then you saw an explosion. RoW: Who was RFID for two years ago, who is it for now, and who will it be for two years from now? ND: Two years ago, I would venture to say you were already carrying two or three RFID tags. I would assume that you have an RFID tag in your car, either to access your parking or to pay your toll. In the future, supply chain is one area to get excited about. Another one that we see lots of potential in is product authentication, with the big example being pharmaceuticals. The number I’ve heard is every year ,there’s something like $35 billion worth of counterfeit drugs in the marketplace. This is an opportunity here to get some return on investment through the implementation of RFID. If you look five years down the road, people will take it for granted that there’s RFID tags everywhere. RoW: Numbers-wise, what is potentially the single biggest application for RFID? ND:If you’re looking long-term, supply chain is absolutely the biggest. Today, security, asset management and tolling are the other big ones. RoW: What areas of RFID can Sirit be in? ND: We can’t be specialists in every single vertical out there, but what we do best is we understand the technology. Our perspective there is we do have the skills to work with other market leaders who are in those specific verticals that we’re going after. For instance, we do have a partnership with LXE Inc. that is building RFID readers that go on forklifts. We don’t pretend to know or be experts in what’s the best way of operating in a warehouse environment or what’s the best way of running technology on forklifts, but LXE is a leader in that environment so what we do is provide the RFID experience. RoW: Are there any areas that Sirit will choose not to enter? Why?ND: We’re not a huge company, so we can’t be everything to everyone. We want to be focused on what we do best and a very good example here is there are lots of big companies already working on delivering tag technology for supply chain. This is the kind of environment where size and capabilities become very important because you’re talking about potentially billions of tags and this is where you see big players like Texas Instruments and Philips Electronics involved. Clearly we’re not going to go and compete trying to build a five-cent tag, that wouldn’t make any sense for us. RoW: A few years ago there was an IBM commercial on TV showing a purchasing type of application where RFID tags are embedded in the products. Can we expect to see something like that in the future? ND: Absolutely. That one is still a little further away, but you will see RFID in the supply chain at the multiple levels. You will see the tagging happen at the palate and the case level first. You will see item-level tagging on high-value items, or items where counterfeiting is an issue because if you have something that’s worth a hundred dollars it’s worth putting the tag in there. But if you’re trying to tag ten-cents items then that wouldn’t make much sense. RoW: As well, using the cell phone as a wallet is starting to get some traction. How far away are we from seeing this type of application start to take hold in Canada? ND: I believe that is absolutely a scenario that will happen in the future because there’s a big push right now for Near Field Communications, where you would have an RFID tag and RFID reader that essentially will be integrated in cell phones in the future. How fast will it happen? Again, it’s one of those huge types of opportunities that will see pilot tests with people starting to try the technology and then make sure that they understand it and know how to deploy it. Looking at my own kids, though I will tell you that it’s a model that will work in the future. RoW: How important is consumer knowledge of RFID to its success? ND: It will be very important. In a way it’s funny because people use RFID today and they don’t even notice it. So think of tolling or think of access control and parking, they don’t wonder, ‘what technology am I using?’ At the end of the day it does the job, it delivers a service for them. I know there’s some issues in terms of privacy around RFID, especially in the supply chain. I think the industry has to make sure that they address those concerns up front and deal with them. Like any technology you can use it in lots of different ways, but we have to make sure that as an industry we deal with those issues and show how the technology can actually be used to the benefit of consumers.

Sirit gets bigger by acquiring SAMSys, but the philosophy stays the same

News | April 19, 2006

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