More than 9 months after Honeywell declared its intent to acquire Intermec, the Federal Trade Commission announced its decision to place conditions on this proposed merger. The FTC took issue with the competitive impact on the 2D scan engine market rather than challenge the more obvious areas that industry observers believed to be behind the delay (and request for additional information) – Intermec’s rugged mobile device and RFID business divisions. While a relatively small market in revenue size, the scan engine component itself is critical to the barcode scanning function. VDC believes this product category is of growing strategic importance today. Technology advancements are making it possible to integrate the power of professional-grade scanning into everyday mobile devices. This, in our opinion, has made it imperative for the Commission to ensure that Motorola and Honeywell are not, essentially, the only vendors competing in the US market. By affording Italy-based Datalogic the choice of licensing Intermec’s 2D scan engine patents for the next 12 years, the FTC is making a concerted effort to lower barriers to entry and encourage competition in the high-volume, high-growth market for 2D imagers in the US.
While this $600 million deal was approved by the EU in June, the “anticompetitive” conditions put forth by the FTC in the US will particularly benefit Motorola Solutions (MSI) and Datalogic in the near-term. Our speculation is grounded in the following:
- MSI continues to retain exclusive use of its 2D engine portfolio, giving it a distinct competitive edge over its peers in the space.
- Datalogic, which has an enviable portfolio of scan engine-related patents in Europe that allow the company to sell its 2D imager products, now gains immediate access to a new set of patents in the US. This removes the company’s biggest barrier to competing more effectively in the US and provides a rapid path to product development based on licensure.
We will keep a close eye on market and competitive landscape evolution as a result of these licensing stipulations. More to come.
Update (09/17/13): Honeywell has completed its acquisition of Intermec, as announced via this press release on the company website.