Motorola, Psion and the Shifting Rugged Mobile Landscape

On June 15 Motorola Solutions announced its all cash transaction deal to acquire PSION for a remarkable $200 million. PSION has a long history in the mobile computing industry and was behind many iconic devices - remember its Series 3 and Series 5 clamshell PDAs and the latter's revolutionary keyboard or its EPOC operating system which eventually became the platform for Symbian? More recently PSION focused on ruggedized solutions for line of business applications across a variety of supply chain, logistics and field mobility market segments. PSION's position in the rugged mobile market is a combination of its own success WorkAbout handheld device - a widely deployed value-based device - and its merger with Canada-based Teklogix in 2000. 

It is these rugged mobile computing solutions and their installed base that Motorola Solutions targeted with this transaction (PSION will be integrated as part of Motorola's Enterprise Mobile Computing business). While this transaction represents continued consolidation of this maturing market, there are several significant implications that will cause ripples through the industry:

1. Industrial warehouse and supply chain/logistics: While Motorola's rugged handheld market position spans most industries and environments, industrial warehousing and port/yard facilities have represented a larger gap in its customer portfolio. This is PSION's (read: Teklogix's) back yard. Much like Honeywell's recent acquisition of LXE (EMS) which in part was motivated by Honeywell's lack of warehouse automation solutions, this transaction substantially increases Motorola's TAM.

2. Forklift mounted solutions market.It is no secret that Motorola's position in the forklift mounted computer market has been (to be kind) uneven. Their offerings have primarily been Embedded CE solutions limiting their appeal largely to the North America retail distribution market. PSION offers a much broader forklift portfolio (although several of their products are private label solutions). PSION's forklift portfolio and especially their forklift customers represent a substantial asset to Motorola. Moreover, PSION's strong forklift footprint in Europe will be critical for Motorola.

3. Market share consolidation. Motorola - already the clear leader in the rugged handheld market - further distances is competition (and eliminates a competitor) through this transaction. Combined, both organizations represented 44.2% of the rugged handheld revenue share in 2011. The combined organization will become the clear leader in the forklift market - a title shared amongst PSION, LXE, Motorola and Intermec - with 30.6% of the rugged forklift mounted computer revenue share (in terms of 2011 shipments).

4. Rugged market outlook. On the heels of a strong 2011 the rugged market has taken a turn for the worse in 2012. The are clearly several factors contributing to this downturn - from the weak economy in Europe to competitive pressures from consumer devices (iOS) in several markets. One development worth following is that their appears to be a retrenchment of the rugged handheld market into traditional, data collection intensive, applications and environments. By acquiring PSION, Motorola is - in effect - doubling down on these markets.

5. Competitive implications. Motorola and Honeywell have been the most active players in the rugged handheld market over the past couple of years - both in terms of organic growth and acquisition based expansion. Intermec - while still the number two vendor - is in an increasingly vulnerable position, especially considering their ability to land large scale, tier I deals. The other vendor that will feel the heat of this transaction is Datalogic, a Europe-based vendor. As these markets mature and products become more standardized, the success of top tier vendors will increasingly be dictated by manufacturing, supply chain and sourcing issues - in other words scale. Mid tier players in this scenario may increasingly be marginalized as the emphasis shifts to cost of revenues. Can one succeed in this business if not a front-runner or a tightly focused niche player? Does this move force Intermec and Datalogic's hand?

There are clearly many other issues to evaluate and discuss - from PSION's innovative social media programs to the potential cultural rift between these two organizations. Bottom line, the transaction provides interesting TAM expansion opportunities for Motorola while turning the page on a mobile computing maverick.

Comments

[Ajay Mishra]

Very well thought out article. Moto's acquisition is rightly aimed at Port and VMT segment.
It will be interesting to see how Moto handles Psion rugged hand helds and merges it with its existing range of products. Models like OMNII and Workabout Pro are clear differentiators, though may compete with existing Motorola products like MC 9095, MC3190…
One more interesting thing to watch out is – How Motorola will handle direct end customer accounts. Psion had fair share of direct End Customer accounts and Motorola’s business model is 3 tier distribution.

[Alannah Dunckley]

This is a great review, thanks so much. I think that thw market of rugged Mobiles is quite spread now.