Digimarc makes a splash in Retail with Walmart Partnership; Stock UP Nearly 45% in a Month

Big news for Oregon-based inventor of the ‘invisible’ barcode as Digimarc made headlines last week when Walmart’s CEO Doug McMillon posted a photo on Instagram, which shows testing of Digimarc’s invisible barcode on a packet of chips.

Since 2014, Digimarc has made great strides in its bid to make its patented Digimarc Barcode the next big thing in the retail space. Taking the traditional UPC barcode, Digimarc makes it invisible to the naked eye using digital watermarking technology and places the barcode all over the printed packaging of the product. This allows for image-based cameras that are used to scan items to quickly pick up the barcode in record time, removing the need to rotate/move around the packaging. Currently, Digimarc’s partner Datalogic offers the capability to read Digimarc Barcode on every imager across both stationary and handheld form factors, with other partnership announcements expected in coming weeks.

Since its launch, the technology was first adopted by supermarket retail chain Wegmans, which incorporated the Digimarc barcode on its private label products. Digimarc was also on the news in May, 2015 when mobile app Shazam, announced the integration of Digimarc’s patented print and audio identification technology to its app. This was followed by the announcement by SAM Group, a leading POS services provider that works with major POS vendors that it will integrate Digimarc Barcode recognition to its product offerings.

Digimarc has also continued developing its Digimarc Digital software enabling barcode scanning using smartphones and other mobile devices from home and outside the retail store. It is a highly relevant and timely technology introduction in the industry as retailers look to enhance their levels of engagement with customers at home to increase customer loyalty. As these consumers scan products at home, information including their purchase history and items they scan can provide retailers with a wealth of information on customer buying habits and trends.

Currently, the Digimarc barcode is at the proof-of-concept stage with Walmart, unlike Wegmans that has printed it on its private labels offerings. Retailers are fully aware of the ‘mixed basket’ challenge as not all products in the store will bear the Digimarc code (at least not in the near term). Products without the invisible code will have to be scanned using the traditional method, which will result in varying levels of checkout efficiency. Impacted by the declining use of traditional cash currency, expiration of licensing deals and consumers moving to electronic forms of payment, this could potentially open up a much needed revenue generating opportunity for Digimarc.

Since Walmart CEO Doug McMillon’s Instagram post last week, the Digimarc stock has climbed to $44.76 as of June 30, 2015. With one of the world’s largest retailers testing its solution, Digimarc can expect great things. However, adoption rates will depend on acceptance of and investments in new camera-based imagers by major retailers that are particularly wary about ROI implications of their technology investments.

VDC took a deeper dive on this rather interesting topic – Digimarc and its “invisible” barcode – last month. You can download the report here.


NCR puts itself up for acquisition; VDC breaks down the “retail” reasons why

On April 22nd, The Wall Street Journal announced the news that ATM-maker NCR is eyeing strategic alternatives as they face lagging stock prices and shareholder pressure. A potential spinoff, sale of assets, or a full acquisition/buyout - all seem like very viable possibilities. On June 2nd 2015, news broke of NCR asking for first-round bids from prospective buyers and on June 16th, two large private equity firms, Blackstone Group LP and Carlyle Group LP, have paired up in a $10 Billion leveraged buyout (LBO) offer for NCR, including debt.

Started by John H. Patterson in 1884, the National Cash Register Company was the maker of the first mechanical cash registers. Moving forward to 2015, the company is now known simply as NCR, and sells transaction services, automated solutions, software and consulting services to clients across a wide array of industries including financial, retail, hospitality, travel and government. The company facilitates over 550 million transactions a day. NCR divides itself into four major segments: Financial Solutions, Retail Solutions, Hospitality Solutions, and Emerging industries.

  • Financial Services provide ATM and payment systems along with software and services for cash management, digital banking, maintenance, and management.
  • Retail Solutions provide retail-oriented solutions and systems including POS terminals and software, barcode scanners, self-checkout solutions and kiosks, printer media and software – all in support of an omnichannel experience. In addition, this division provides professional services including installation, integration, device management, and maintenance for some of the company’s largest clients.
  • Hospitality provides systems and solutions for restaurant chains and venues including POS hardware and software along with professional services and printer media. 
  • Emerging Industries which is targeted towards newer industry verticals including telecommunications and technology, and travel includes maintenance and professional services for third-party hardware for certain manufacturers. It also provides small business-specific systems and solutions including comprehensive POS terminals, software and professional services.

In order to remain competitive and adapt to changing market conditions and consumer trends moving online, NCR made large acquisitions, buying companies like Retalix and Radiant Systems to strengthen its Retail Solutions division and enter the Hospitality segment respectively. However, since then, NCR has failed to integrate and generate sufficient growth from the acquisitions and now carries debt of $4 billion. In this blog, I will shine the spotlight on NCR’s acquisitions of these companies, thereby highlighting the company’s present (unenviable) position from a Retail and Hospitality standpoint.

To expand its Retail Solutions business, NCR acquired Retalix, an Israeli vendor of retail, marketing, supply chain and logistics software solutions. The company was purchased for $650 million with the aim of cross-selling to a combined, larger client base, improving margins through its software model while also leveraging R&D best practices. However, NCR did not successfully leverage Retalix’s strengths to position itself as a leader in the next-generation retail solutions segment – from a mobility and e-commerce standpoint. The division has faced challenges with slowing demand from retail customers as they increasingly embrace mobile devices to support transaction processes and cloud-based solutions for their e-commerce initiatives. Retail Solutions has seen revenue declining quarter-on-quarter since Q1 2014 with the latest Q1 2015 results showing a 9% decrease in revenues, at $445 million. This, coupled with an operating margin of 7.7% in 2014, which lowered from 10.1% in 2013, continues to negatively impact overall profitability. The company’s inability to move with the times, especially as it relates to fulfilling its retail customers’ growing focus on e-commerce and online order fulfillment, along with its increasing liabilities are significant contributors to its declining revenues and profitability.

Acquired in 2011, Radiant Systems was a specialized provider of hospitality POS software and solutions which allowed NCR to become competitive in the Hospitality segment. NCR’s hospitality segment makes up only 10% of revenues and has seen declining quarter-on-quarter revenue growth since the first-quarter of 2014. During Q1 2014, revenue growth was 14% quarter-on-quarter, which has dropped to a 1% decline in Q1 2015. The division has also seen its operating margin drop from 16% in 2013 to 13.8% today. Like retail, the hospitality segment encountered slower sales with customers moving away from traditional POS terminals to mobile and handheld solutions, highlighting the massive gap in NCR’s core product line(s). This part of the business has also been affected from the move to mobile POS, as restaurant POS vendors such as Vend and Touch Bistro use subscription-based models for restaurant POS systems to lower capital expenditures. Furthermore, the increased availability of mobile devices has led to smaller restaurants using these solutions to offer greater flexibility and varied payment acceptance, especially as restaurants begin to accept electronic wallets like Apple Pay, which is proving to be a big miss for a company like NCR.

In a positive move for the company, NCR updated its NCR Silver platform, a cloud-based POS solution for the iPad and iPhone that is aimed at serving small businesses. To stay current with evolving market trends, NCR integrated payment alternatives including PayPal, Apple Pay, Bitcoin and LevelUp along with providing enhancements to facilitate safer and more secure transactions. The company has also priced the service more competitively with NCR Silver offered at $59/month, aimed at small businesses, and a NCR Silver Pro Restaurant Edition priced at $129/month. NCR’s Emerging Industries division is also looking to introduce chip and PIN capability later in 2015. With these latest updates, VDC believes NCR is embracing change while staying competitive with offerings in the marketplace today.

NCR’s retail and hospitality-focused acquisitions have not performed according to market (or even company) expectations. Ineffective strategy execution has also resulted in little-to-no organic growth while prompting the company to take on a large debt for financing these sizable acquisitions, in both the retail as well as financial services sector. NCR’s less-than-optimal performance in recent quarters has pushed its largest shareholders to look for strategic alternatives. Will it better for investors to buy parts of the company as opposed to the whole? That remains to be seen. But, for the company to re-invent itself and get back to its glory days with its retail and hospitality divisions, NCR will have to make a concerted research and development effort to introduce innovative products and solutions that align themselves well with end users’ evolving profitability goals and customer engagement initiatives. The company has a great foundation to build off of; it’s now time to change up the structure and better position its business for current and emerging growth opportunities.

VDC will explore this topic further in an upcoming VDC View. Stay tuned!

(With Richa Gupta, Senior Analyst)


Cognex sells its Surface Inspection division for $160 Million; VDC Speculates What’s Next for the Company

Cognex Corporation (CGNX), a leading vendor in the machine vision and industrial scanning markets, announced the acquisition of its Surface Inspection Systems Division (SISD) on June 8, 2015, as part of a $160 million, all-cash deal with AMETEK Inc., a multi-billion dollar manufacturer of electronic instruments and electromechanical devices. While the transaction continues to be subject to closing conditions and regulatory approvals, AMETEK expressed its enthusiasm to have the new SISD department as the latest addition to its Electronic Instrument Group (EIG) product portfolio, a leader in the design and manufacturing of advanced instruments for the process, aerospace, power and industrial markets, which amassed a total of $2.4 billion in sales in 2014. With the strategic sale of its surface inspection business, a division that generated $60 million in sales in 2014, Cognex plans to sharpen its focus on automating discrete manufacturing applications via its Modular Vision Systems Division (includes machine vision and ID products), which accounts for 84% of organizational revenues as of Q1 2015.

Cognex first introduced the SmartView® surface inspection platform in 2000 after the acquisition of Isys Controls, Inc in 1996, a small company that had developed high-performance machine vision systems to automatically detect and classify surface flaws and defects on high value-added materials. Under Cognex, this division now diversifies across verticals with image processing technology that detects, classifies, filters, and maps specific defects on area surface of metals, paper, plastics, nonwovens and glass manufacturing. In addition to the advanced line scan cameras that enable immediate defect detection in high-speed applications, the SmartView® platform also supports global customers with superior detection algorithms, a range of classification and data management software, and technical assistance spread throughout countries in the Americas, Europe, and Asia, including Japan and China. Asia-Pacific, including Japan, accounted for 40% of SISD revenues in 2014, Americas for 40%, and Europe for 20%. Cognex has installed over 1,000 of its surface inspection systems globally with its customer portfolio including names like AK Steel, USS, Bao Steel, China Steel, TATA, and ArcelorMittal.

Cognex has chosen to sell its surface inspection business despite the 29% sales growth from 2013 to 2014 and record sales levels that this division experienced in Q4 2014, particularly for applications like specialty metal inspection (for Aluminum going into car bodies). VDC believes this can be attributed to the company choosing to exclusively focus on discrete manufacturing and logistics opportunities, coupled with the surface vision division’s relatively lower contribution to overall profitability. SISD gross margin stood at 55% in 2014, which was significantly lower than that of the factory automation division (MVSD) with a 78% gross margin. The complex nature of inspection technology required Cognex to opt for in-house manufacturing at its Hayward, California facility, whereas a majority of MVSD products are outsourced to Asian OEMs (like in Indonesia). This difference in gross margins can also be explained by the high service to product sales ratio in SISD, and the lower yield in margins for service revenues in contrast to product revenues. In 2014, Cognex reported that 30% of SISD revenue was derived from service sales, which included the sale of maintenance & support, training, consulting, and installation. Only 4% of MVSD revenues were from service sales and the remaining 96% were from the higher margin yielding product sales – which include technology systems, hardware, and software.

From VDC’s vantage point, this is a great move by Cognex, which can now focus its attention on existing and emerging opportunities for its machine vision systems and ID products portfolios. The company has experienced much success in the consumer electronics and logistics industries in the past few quarters, a momentum that it can capitalize on going forward by intensifying its product development and sales efforts in these high-growth markets. In its latest earnings call, Cognex outlined the enormous potential it sees with large accounts in these verticals, which the company is very eager to profit from. At the same time, the company will lose out on business in metals in China, which is a particularly appealing market right now because of growth in the automotive sector. That said, revenues from this division have been characteristically lumpy because of timing of deliveries and the impact of revenue deferrals.

Its sale of the surface inspection division will not only make it a more profitable company (higher overall gross margins), but also significantly boosts its cash reserves. Cognex has no long-term debt and, per its most recent annual report, does not anticipate needing debt financing in the near future. This opens up the very distinct possibility of Cognex potentially acquiring another company to achieve one (or more) of the following objectives – boost its engineering talent, grow its logistics customer base, or even build partnerships with leading global material handling systems integrators and solution providers.

(With Jenny Hai, Research Assistant)


Zebra Technologies’ Stock Pops; Company Soars to New Highs

Zebra Technologies (ZBRA) reported its Q1 2015 earnings on May 13th, beating the market consensus on EPS by 27 cents and that on revenues by $11.37 million. Net sales of $892.3 million for the quarter included the $561 million contributed by the Enterprise business unit acquired from Motorola Solutions, a 6% increase on a constant currency basis. Zebra’s legacy business accounted for $331.6 million, up 15% from Q1 2014, a remarkable increase for what is generally viewed as a stable and relatively saturated market. The company’s gross margin now stands at 45.8%, down from 51.3% for 2014; this is reflective of the change in product mix and the contribution of Enterprise solutions to the overall revenues, which tend to have a lower margin than legacy Zebra products.

Zebra also spent a substantial amount on integration-related activities. The speed with which the company has integrated the two businesses is rather impressive, especially given the size and scale of each of the individual business units. In the past few weeks, Zebra has also launched a new website and hosted its annual partner conference, all with a goal to communicate its new market messaging and value propositions.

Now, here are some key highlights of the company’s first quarter performance:

  • The data capture business unit experienced its second strongest quarter ever (following Q4 2013) – with a healthy run rate business and a number of large deals. Its camera-based bioptic scanner product line is doing particularly well, with the value propositions resonating immensely with large retailers in the US.
  • North America and EMEA continue to be the strongest regions for Zebra. With sales of $443 million and $291 million in the two regions respectively, the company is re-affirming its market leadership position, especially with its legacy printer products.
  • Retail sales were particularly strong in the US as the company saw large deals for printers, mobile computers, and data capture solutions. Healthcare has consistently been a strong performer for Zebra in the past few quarters. The trend continues with growing traction for the company’s solutions to help care providers with medication management, patient identification, and specimen tracking.
  • Perhaps the most noteworthy development in Q1 was the company’s price increase announcement in Europe in late March, effective late April (after four weeks). This is a move to counter the impact of the strengthening dollar and weakening Euro on the company’s profitability and bottom line given that the region represents about 25% of overall revenues. Zebra expects high stickiness for its run rate products like printers and data capture solutions.
  • Enterprise business unit sales in Asia are in the process of getting back on track after having faltered for much of 2013 due to issues with the sales force and other operational challenges. The company’s efforts to reengage with channel partners in the region and rebuild relationships seem to be paying off with sales in China up sharply for Q1. Overall revenues in the region were at $106 million with sales to customers in logistics and healthcare verticals offset weakness in demand in manufacturing.

The company expects the growth trajectory to continue into the second quarter especially with a strong pipeline for large deals. For Q2, Zebra expects total revenues in the range of $865 to $895 million. The price increase on Euro-dominated sales will start to have a positive effect this quarter and is expected to have a more pronounced impact in the second half of the year.

Following its earnings release, ZBRA’s stock went up more than 12%. This speaks of investor confidence in the company and the efficiency with which Zebra seems to be communicating its “One Zebra” message to its customers and partners. Zebra Technologies’ executive leadership is confident in its market standing and optimistic about market opportunities for the remainder of 2015. At VDC, we will continue to follow its progress and keep our readers updated.


Cognex - Consistently Breaking Records, Exceeding Performance Expectations

Cognex announced its Q1 2015 earnings after market close on Monday, May 4th. The company reported quarterly revenues of $113 million, 84% (approximately $95 million) of which was attributed to its factory automation segment. Cognex reported that this year-over-year revenue increase occurred despite the global currency exchange rate fluctuations, which constituted a negative impact of approximately $7 million. RD&E and SG&A expenses reportedly grew faster than revenues this past quarter due primarily to growth investments including new product development and sales initiatives. Legal fees related to Cognex’s recently-resolved patent dispute with Microscan also contributed to this rise in expenses.

Cognex performed well on a year-over-year basis. Revenues increased by 25% since Q1 2014, which was attributed primarily to a 26% year-over-year increase in factory automation sales. This division also saw a 2% increase from Q4 2014. Sequential increases such as these are not typical of Q1, which is usually Cognex’s weakest quarter. Overall revenue and net income decreased sequentially by 3% and 23%, respectively. Operating expenses increased by 9% since Q4 2014 due to growth investments in both engineering and sales.

CEO Rob Willett reported that Cognex well exceeded its long-term target for factory automation revenue growth in Europe, which was 20%. 38% of revenues this quarter came from Europe, more than any other geographic region including the Americas. Asia, excluding Japan, was Cognex’s best-performing region this quarter in terms of percentage growth; factory automation revenue grew more than 50% year-over-year, which came primarily from increased demand for machine vision from factories in Greater China. Severe pricing pressures, escalating labor costs, and slowing economic growth are all prompting Chinese manufacturers to ramp up their investments in automation solutions to enable them to sustain their competitive edge. The struggling factory automation market in Japan is also dwindling due to the weaker yen; revenue in this region declined in the low teens as compared to Q1 2014.

Cognex reported a 75% gross margin and 21% operating margin, down from the 77% and 25% respectively, in Q1 2014. The decline in gross margin was attributed to volume pricing discounts on large orders and a shift in revenue mix to relatively lower margin maintenance and support services. Operating margins are expected to improve as the year progresses.

On Thursday, April 30th, a New York federal jury decided that Cognex owes Microscan $4.4 million for infringing a barcode patent, a year after a different jury awarded Cognex $2.6 million for Microscan’s alleged infringement of another barcode patent (see here). With this latest dispute, Microscan alleged that Cognex’s DataMan imagers (7500, 8500, and other variants) infringed upon one of Microscan’s existing patents, titled, “Optical symbol scanner with low angle illumination.” The jury found that Cognex infringed on all three asserted patent claims despite Cognex’s assertion that these claims were invalid. Microscan collected royalty damages for past infringement. Cognex spent a total of approximately $1 million this quarter in relation to this lawsuit.

Cognex’s outlook for the remainder of 2015 is positive. The business has generated substantial momentum, generating large orders from consumer electronics manufacturers (like Apple), large retailers, and logistics service providers. From where the company stands today with respect to its sales pipeline, Cognex does expect Q2 and Q3 2015 to be the largest revenue quarters. The company expects a 30% sequential revenue increase in Q2 amounting to $152-157 million. Gross margin is expected to stay in the mid-70% range, only slightly lower than Q1. Operating expenses are expected to increase by approximately 5% sequentially to support further investments in growth areas. However, revenues are projected to grow at a much faster rate than expenses for the full year, which could lead to potential improvement in operating margins for 2015.


Taking a Wide-Angle View of the AIDC World in 2015 – VDC’s View on Themes that will Pave the Way for the Future

In the past year, VDC has undertaken some rather interesting projects, helping our clients identify new target markets (regional and vertical) and exciting new opportunities to help promote business growth both now and in the future. Our April 2015 VDC View highlights some of the most interesting and pressing opportunities for AutoID technology vendors, distributors and end users.

  • The warehouse of the future – An explosion in e-commerce sales volumes has retailers and service providers scrambling to get their technology infrastructure up to date. The ability to enhance supply chain efficiencies and lower costs associated with product shipment and delivery will drive increased investments in warehouse automation with a strong focus on newer data capture technologies like camera-based imagers, wearable devices, and augmented reality solutions.
  • Big data-driven decision-making – Big data is a topic generating significant interest among AIDC industry veterans. Information vital to accurate business decision-making can be found not only in transactional data collection methods but even more so via data capture solutions like scanners, imagers, machine vision systems, and disparate sensors. In many ways, these data capture solutions today are facilitating the big data and Internet of Things (IoT) phenomena that then help streamline operational processes. VDC believes AIDC vendors with the ability to provide their largest customers with guidance and direction in analyzing and presenting big data in a meaningful way will be most successful in the future.
  • Mobile scanning transforming AIDC market – Vendors such as Honeywell (Captuvo sleds), Infinite Peripherals, KoamTac, Scandit, Socket Mobile, and Zebra Technologies (CS companion scanners product line) are taking the necessary steps toward building software-based data capture platforms or hardware-enabled solution sets that are fueling the mobile scanning revolution, particularly in retail and logistics environments. In 2015 and beyond, VDC expects success in the data capture market to be determined by these vendors’ ability to be adequately agile in their sales and marketing strategies, especially as enterprise-wide solution consistency, low TCOs, and higher ROIs become necessary.
  • China, an opportunity not to be missed – China is primed to become the world’s largest consumer market in 2015, taking the top spot from the United States. The country has seen remarkable growth in e-commerce with online shopping now accounting for 10% of total retail sales (transaction value upwards of $450 billion) and posting high double-digit growth rates, especially in tier-1 cities. Warehouse and logistics automation is now a key focus for retailers and service providers, which bodes well for AIDC vendors despite the bureaucratic challenges associated with such significant transitions. VDC strongly recommends data capture industry participants to initiate a relationship-building process with local Chinese systems integrators and service providers in order to adequately begin to serve this burgeoning market.

This past year has brought about some exciting developments that are altering the AIDC space as we know it. For a fuller grasp of these AutoID industry themes, read the entire VDC View here.


Digimarc Barcode - The Next Big Thing for Retail?

Word about Digimarc’s digital watermark for consumer products or the “invisible barcode” as they’re calling it, is starting to get around. A technology company based in Oregon, Digimarc is renowned for its digital watermarking and identification solutions used in global currency, government IDs, television, and publishing. The company is now focused on expanding its presence into the retail front-of-store with its barcode alternative. Without getting too technical, Digimarc takes a traditional UPC barcode, makes it invisible to the naked eye, and puts it all over the packaging of a product. The camera-based imager being used to scan the items at the front-end of a retail store quickly picks up this imperceptible digital information and allows the check-out process to be completed in record breaking times. Digimarc claims that this new technology not only clears up space on the product label, but also increases check-out efficiency thereby enabling retailers to significantly increase revenues and enhance operational efficiencies at the front-of-store. Digimarc is committed to transforming customer experience at the retail front-of-store. At the starting price of $400 per SKU (with an additional maintenance fee of $50 per year), they look to provide outstanding ROI to any retailer deciding to use this new technology.

At the 2014 NRF event, Digimarc announced its partnership with Datalogic, the global market leader in the stationary point-of-sale scanner segment. Datalogic first integrated the technology to scan Digimarc’s invisible barcodes into their Magellan 9800i multi-plane imager. Since then, Datalogic has extended the ability to capture information off Digimarc barcodes onto every imager they currently sell across both stationary as well as handheld form factors. When retail companies purchase these imagers from Datalogic, utilizing the features to scan Digimarc barcodes will be as easy as “flipping a switch.”

Wegmans, a popular large-scale grocery store chain, was Digimarc’s first retail customer. Being a Datalogic customer, Wegmans has started by incorporating the Digimarc barcode onto its private label brands, which its in-store imagers are now fully equipped to read. Although the retailer won’t release specific statistical performance data, it claims that it has added “a lot of value” to its front-of-store operations. At the 2015 NRF convention, the Digimarc booth had a representative from Wegmans endorsing Digimarc’s technology – a clear indication that Wegmans is satisfied with the performance of these invisible barcodes, and that it is adding value to the grocery stores.

From a quick glance at Digimarc, it looks like the company is on its way to success and profitability. However, VDC sees the company facing some challenges as well along the road. A sharp decline in one of their largest sources of revenue (licenses) has had a significant impact on Digimarc’s financial performance. 2014 was also the year when Digimarc spent more than 50% of its overall revenues on R&D to enhance and the support the launch of its Digimarc Barcode product, among others. This had a material impact on the company’s share price, which has gone down more than 30% from a year-ago period. VDC believes the company will alleviate these financial challenges in time as revenues from Digimarc Barcode and other products offset the decline in licensing sales. In the near-term, a bigger challenge for the company is the relative under-penetration of camera-based imagers at the retail POS for facilitating check-out within high-volume environments. For the moment, Digimarc has only one large scale retail customer, which brings to the forefront the challenges associated with bringing to market a potentially revolutionary product identification solution. In addition, VDC also expects numerous retailers to ask the question “Is there a need for this technology?” Sure, it has been proven that this technology will offer a good ROI overtime but large retail and CPG companies, and even packagers have to run their own cost benefit analysis to figure out if the invisible barcode is worth the investment.

As with anything, it is definitely possible to overcome these above-mentioned challenges. Digimarc has to continue to prove that their technology is revolutionary and that it will transform, perhaps forever, the front-of-store experience. It will gain increased consideration once retailers and CPG companies (and their packagers) are able to quantify the value that the Digimarc Barcode will add to their business. Until then, Digimarc has to continue to play the waiting game.

Stay tuned for VDC’s deeper dive on Digimarc and its Invisible Barcode, which will be published next month.

With Alex Bailey, Research Assistant


Zebra Technologies 2014 Earnings Snapshot

Yesterday, Zebra Technologies announced its 2014 Q4 and full year earnings. It was notably the first quarter since the acquisition in which Motorola Solutions’ Enterprise business unit was integrated with the company. VDC’s qualitative analysis of the most compelling comments made by the Zebra leadership team in the earnings call can be found in yesterday’s blog. This post will discuss some of the key AIDC-centric highlights from the call.

  • The company reported total GAAP sales of $791 million, $315 million of which was attributed to Zebra Technologies and $476 million to the company’s new Enterprise segment during the two months of 2014 that Zebra owned it. Treasurer and VP Investor Relations Douglas A. Fox reported high gross margins and an adjusted EBITDA margin of 18.2% for Q4. Fox also stated that high operating expenses could be largely attributed to $66 million in acquisition and restructuring costs from the Enterprise segment. Zebra expects Q1 2015 net sales to fall within the $870 to $890 million range.
  • Zebra’s CEO Anders Gustafsson stated that this quarter brought a 14% sequential increase in pro forma sales from the Enterprise segment. The company’s printer segment also grew substantially, with increases in mobile and tabletop sales as well as record shipments of desktop printers. The supplies segment, which includes media consumables, also experienced record sales.
  • Gustafsson notes in the call that 2014 was a year of expansion for Zebra’s data capture business segment, penetrating the market for 2D imagers in addition to laser scanners. The MP6000 bioptic imager is specifically mentioned as a popular product among customers for its productivity and cost savings. 2014 also brought an addition of 12 new printer offerings dedicated primarily to mobility, healthcare and RFID encoding.
  • Gustafsson concluded his prepared remarks with Zebra’s business direction and goals for 2015. Such objectives included further penetration into the supplies segment and integration of the Enterprise segment to ultimately achieve $150 million in cost synergies. A notable 2015 business opportunity highlighted by Zebra leadership was cross-selling; for example, Zebra was able to provide one large printer customer in North America with an additional 1,600 mobile computers and over 500 scanners.
  • In the Q&A portion of the call, the transition from laser to 2D imager was discussed. Gustafsson noted that the acquisition of Motorola’s Enterprise segment does not change Zebra’s views on scanning technology. According to Gustafsson, 1D laser will continue to be the historical, traditional scanner; however, demand for increased functionality has been influencing a migration to 2D imager in all vertical markets. This migration is reflected in the growth of Zebra’s imager segment.
  • Integrated solutions stood out as a key takeaway in the Q&A segment. Senior VP of Sales Joachim Heel noted that the Zebra sales force will this year begin intensive training to effectively integrate Motorola Solutions’ Enterprise products with Zebra printers. Heel is confident that this level of cross-selling would have a positive impact in 2015.

The call ended in a positive tone, reflecting Zebra leadership’s confidence in its market standing as well as optimism about business opportunities for 2015.


With Kelly Brown, Research Assistant


VDC Research-Loftware Present Joint Webinar on Enterprise Labeling

On Thursday, March 26th, VDC’s Richa Gupta will co-present a webinar with Loftware’s Josh Roffman, Vice President Marketing and Product Management, where they will discuss why labeling is a strategic imperative in today’s global supply chains. This presentation is a follow-up to the comprehensive white paper co-authored by the two firms in December, titled “Enterprise Labeling – A Supply Chain Strategic Imperative”. You can download this special report here.

Webinar attendees will have the opportunity to learn about the many benefits associated with enterprise labeling including the ability to easily address organizations’ diverse and highly variable labeling requirements, comply with complex labeling mandates and regulations, and provide the speed and scalability to support global supply chains.

Topics discussed in the webinar include:

  • What is Enterprise Labeling?
  • How has labeling become a mission-critical component in today’s global supply chain?
  • Approaches for addressing global labeling challenges

REGISTER NOW for this informative webinar.

Thursday, March 26th – 1pm EST (12noon CST, 10am PST)


Here’s what makes Datalogic’s latest partnership with NCR interesting

On February 3, data capture industry veteran Datalogic announced that it has entered into a multi-year agreement with retail solutions behemoth NCR Corporation for the supply of its Jade X7™ Automated Scanner. I have seen these at the NRF show – designed to facilitate automated scanning and checkout at high-volume retail locations. The products are placed on a moving conveyor belt in any orientation, and are then scanned by multiple array imagers as they move through a “tunnel,” easing the checkout process for both the attendant/cashier as well as the customer.

NCR will be integrating Datalogic’s Jade X7 into its ScanPortal™, which will be showcased at EuroCIS in Germany toward the end of this month. With an aim to free the cashier from having to scan individual items, this option is expected to yield significantly higher checkout speeds while also promoting extensive customer engagement. NCR brings its integration and POS solution design expertise into this partnership, and also leverages Datalogic’s credentials as the leader in the fixed-position or hands-free POS scanner market. The fully integrated solution’s launch at the European retail technology-centric show also lays emphasis on the region’s continued need for technology enablers that will help trim down high labor-related costs and thereby have a positive impact on overall profitability margins. That said, this solution is also generating interest in the US market as well.

What makes this announcement especially interesting to me is its potential impact on the competitive landscape for stationary POS scanners, if any. While the two companies are essentially neck-and-neck when it comes to bioptic scanner hardware revenues per our most recent report on the POS scanner market (download Executive Brief here), this partnership could open the doors for a deeper and more comprehensive collaboration in the future that extends beyond barcode scanning and data capture. Datalogic has a very strong relationship with one of NCR’s biggest competitors, European retail automation solutions provider Wincor Nixdorf – a company that has already designed checkout stations around this “tunnel” scanner.

I believe NCR will benefit from this partnership with Datalogic especially as it looks to better address the in-store automation demands of its retail customers in US and Europe (including Tesco), as discussed earlier. Although Datalogic and NCR cannot necessarily share a rapport similar to that between the former and Wincor, there is significant opportunity here for the two organizations to collectively redefine the retail point-of-sale, particularly in the Americas – with NCR capitalizing on Datalogic’s imaging expertise, and Datalogic leveraging NCR’s proficiency in designing and building the ultimate checkout experience for retail customers.


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