Zebra Tech’s Great RFID Acquisition

Everyone knows Zebra Technologies (ZBRA) as the bar code king.  Some know of their efforts to get further into radio frequency identification or RFID, but tonight they are making a smart acquisition.  ZBRA is buying WhereNet Corp, and RFID asset tracker, for $126 million in cash.

The deal is subject to the private shareholders of WhereNet.  Here is the description: provides integrated wireless Real Time Locating Systems (RTLS) to companies primarily in the industrial manufacturing, transportation and logistics, and aerospace and defense sectors with more than 150 installations currently in operation helping companies locate and track high-value assets with wireless tags, fixed-position antennas and Web-enabled software.

Zebra management expects WhereNet to generate sales of approximately $50 million in 2007, up from $36 million in 2006. The acquisition is expected to be minimally dilutive to Zebra’s net income in 2007 and be accretive thereafter. Zebra will operate WhereNet as a separate business unit led by the CEO of WhereNet.  The company is actually deemed as one of the better RFID emerging companies out there and is on industry insider watch lists.

This is actually a smart component purchase by Zebra that will take some of the pressure off the company as far as its actual position in RFID compared to other companies that could have continued biting into barcoding operations.  It is not their only operation in RFID at all, but this probably isn’t their last purchase in the field.  RFID was estimated to be a $550 million sector in 2006, but is expected to grow to $6.8 Billion in 2016.

ZBRA closed up 0.2% on the day at $34.44, and the 52-week trading range is $29.23 to $47.97. Back in 2004 this stock reached as high as $60.00.  ZBRA has a market cap of $2.43 Billion and sales estimated for 2006 are roughly $745 million, plus its balance sheet is in great shape.   This used to be a huge growth stock that rose 15-fold from the early 1990’s to 2004, but newer technologies have taken out some of the steady and rapid growth of barcoding.  Zebra might be able to get its old stock mojo back if continues with deals like this.

Jon C. Ogg
January 11, 2007