Intermec Technologies Corporation Business Information, Profile, and History

Company Perspectives:

Intermec invented many of the revolutionary technologies that today make it possible for businesses to track goods and services, known as their supply chains. Intermec also developed key components integral to the current consumer and wireless revolution.

History of Intermec Technologies Corporation

Based in Everett, Washington, Intermec Technologies Corporation is a leading global supplier of supply chain information products, services, and systems. While the company is recognized for developing the world's most widely used bar code symbology, its offerings have evolved to include the radio frequency identification (RFID) technology that is quickly transforming the world of commerce and logistics. Intermec develops, manufactures, and integrates technology for RFID, mobile computing systems, and both wired and wireless automated data collection (ADC). The company markets a vast array of data capture devices including imagers, laser scanners and wedges, charge coupled devices, wands, scanners, and personal scanning devices. It also offers bar code printers, media and label supplies, as well as local area data management systems that are sold in handheld, vehicle-mounted, and stationary computer terminal form. A division of industrial technologies company UNOVA Inc., Intermec employs more than 2,700 people at six major development and manufacturing facilities. These include the company's world headquarters in Everett, Washington, as well as domestic locations in Cincinnati, Las Vegas, and Cedar Rapids, Iowa. International sites include Gothenburg, Sweden, and Toulouse, France. Intermec's customer base spans several market sectors--government, healthcare, logistics, retail, manufacturing, and field service--and includes thousands of organizations throughout the world, including 60 percent of Fortune 100 companies and 75 percent of the Fortune 500. While Intermec's customers apply its technologies in different ways, they do so for common reasons. As company literature explained: "Supply chain information systems allow companies to compile previously unheard of amounts of information from one end of an enterprise to the other. That's information companies can use to reduce inventory, cut labor costs, speed manufacturing and improve profitability."

Early Technology Pioneer: 1960s-70s

Interface Mechanics Inc. (later known simply as Intermec) was established in 1966 after the The National Association of Food Chains (NAFC) called for equipment manufacturers to develop systems that would speed the checkout process. Comprising a handful of people working from a renovated grocery store in Mountlake Terrace, Washington, the company quickly unveiled a number of "firsts" in a newly emerging technology sector. In the process, Intermec left a lasting mark on the retail industry.

The company's earliest innovations included the first hand-held order-entry terminal in 1969, as well as the first portable bar code scanner and the first on-demand bar code label printer in 1971. The following year, Intermec unveiled the first computerized cash register. This development was proceeded by the invention of "Interleaved 2 of 5" symbology, which eventually became the standard that supermarkets use to mark cardboard boxes with barcodes.

In 1973 Dr. David C. Allais, who had joined Intermec in 1968, was named company president. The following year he worked with bar code industry pioneer Raymond L. Stevens to invent Code 39, which became the world's most widely used alphanumeric bar code symbology. In April 1970, Stevens had founded TEMA, a Natick, Massachusetts-based company that ultimately became Intermec's largest and oldest dedicated distributor.

Other pioneering developments occurred at Intermec during the late 1970s, including the invention of Code 11, which was widely adopted by the telecommunications industry. Intermec also developed hand-held computers that wholesale route distributors used to perform accounting functions. By the late 1970s, Intermec employed roughly 50 people.

Explosive Growth in the 1980s

Intermec's role as a technology pioneer continued throughout the 1980s. During the decade, the company emerged as a comprehensive producer of bar code equipment. Led by President David C. Allais, Intermec's products were adopted for use in such industry sectors as government and healthcare.

In 1981 the company unveiled the first on-demand direct thermal bar code printer. The following year, Intermec invented so-called "smart battery" technology, which would find widespread adoption in such portable electronic devices as camcorders and laptop computers. A high-density barcode printer capable of printing up to ten lines of regular text was introduced to the grocery industry in mid-1982.

Intermec's sales grew from $14.3 million in 1982 to $20.7 million in 1983. In April of that year, the company acquired Ultra Print Tape & Label Corporation, which produced specialty labels and tags for bar coding and other purposes. Also that year Intermec rolled out a user program development tool called Interactive Reader Language (IRL). According to Intermec, the introduction of IRL was significant because it marked "the first time local prompting and editing could be done for bar code data entry and allowed a simple PC, rather than a large mainframe, to run an application." This milestone was followed by Intermec's 1984 invention of the removable hard drive, which found a sizable market during the 1990s and beyond as the use of servers and laptop computers skyrocketed.

Intermec's sales climbed to $26.9 million in 1984. In April the company loaned $700,000 to the bar code software firm Data Collection Systems Inc. (DCSI) in exchange for a 40-percent ownership stake and an option to acquire the remaining 60 percent in 1988. DCSI specialized in bar code data collection systems for the manufacturing sector. Combined with Intermec's hardware offering, it became possible for Intermec to offer a packaged data collection solution to its customers.

In early 1984 Intermec signed two long-term agreements with Sperry Corporation, valued at $10 million, to provide the U.S. Air Force with bar code equipment. The company also signed a one-year, $2 million deal with IBIS Corporation to provide equipment to the U.S. Army. Intermec then expanded into two additional buildings near its 75,200-square-foot Lynnwood, Washington headquarters. The expansion added some 50,000 square feet of additional space for engineering, manufacturing, and marketing staff. This was followed by physical expansion at Cincinnati-based subsidiary INTERMEC/Ultra Print Inc., which planned to more than double its office and manufacturing facility in Union Township, Ohio.

In October 1984 Intermec announced a public offering of 700,000 shares of common stock. The offering, at $15 per share, raised $10.8 million that Intermec planned to use for future growth. At this time, the company began to forge closer ties with its distributors and original equipment manufacturer suppliers.

In the April 8, 1985, issue of Business Week, Norwald, Connecticut-based market researcher International Resource Development Inc. projected 40-60 percent annual growth within the industrial coding market. Industry sales were expected to grow from $170 million in 1984 to $1 billion in 1990, and Intermec was in the prime position to benefit. Dean Witter Reynolds Inc. Analyst Jonathan H. Ziegler commented: "Intermec has the broadest product line and the strongest distribution network. They're the IBM of the business."

Indeed, Intermec was having a good year. The company's sales jumped to $40.2 million in 1985, and Business Week named it as one of the 100 "Best Little Growth Companies in America." Mid-year, Intermec announced that research and development costs were up 85 percent in the first quarter alone, as were costs related to marketing (63 percent) and fixed manufacturing (44 percent).

Intermec continued to expand its Lynwood, Washington, facility to accommodate growth and ended the year by acquiring Natick, Massachusetts-based TEMA, its largest and oldest dedicated distributor. In addition, the company developed the first radio data network, signifying its entrance into the radio frequency LAN systems market.

Intermec's sales reached $43.1 million in 1986. During the fourth quarter, the company encountered a variety of production problems that affected its performance. To improve profitability, it implemented a company-wide wage freeze and reduced 2 percent of its 490-employee workforce.

In August 1986 David C. Allais, then 53, was named chairman. Retaining his CEO responsibilities, Allais replaced David B. Pivan as chairman. Pivan had been associated with the firm since its inception and had served as its chairman since 1981. John W. Paxton, a 49-year-old executive from the Grimes Division of Springfield, Ohio-based Midland-Ross Corp., was hired as president and chief operating officer (COO).

In 1987 Intermec's sales skyrocketed to $65.6 million. That year, the firm invented Code 49, which it described as "the first 2D stacked bar code symbology, useful for extremely smallspace applications."

A series of leadership changes began to occur in August 1987. At that time, Phillip W. Arneson, who had served as president of Amphenol Corp., replaced David C. Allais as chairman and CEO. Allais was named chief scientist, and Paxton continued to serve as president and COO. However, in March 1988 Arneson resigned to lead Hiwood Technologies Inc., a company he had previously founded, and Paxton was named CEO.

Intermec's sales soared again in 1988, reaching $85.2 million. As the company set its sights on surpassing the $100 million mark, Paxton announced a corporate reorganization that put a strategic emphasis on marketing and sales. This strategy was reflected in the firm's acquisition of its distributors, including the 1988 acquisition of Intermec Systems Corporation, its Canadian distributor. It also led to the development of a value-added reseller program and a number of strategic alliances.

Another major development was Intermec's decision to construct a new, 300,000-square-foot headquarters and primary manufacturing facility in Everett, Washington. By late 1988, the company employed 890 people worldwide, including approximately 500 at its headquarters.

Intermec ended the 1980s by inventing the "Pocket RF" product category and winning a string of lucrative contracts. In 1988 these included a $100 million contract to install bar code systems at non-tactical Department of Defense logistics operations installations worldwide; a $6 million deal with the General Services Administration; and a separate $1.4 million contract with the U.S. Defense Logistics Agency. In 1989 the company secured a $1.4 million deal with Canada Post, as well as a $2 million contract to install bar code access control systems at soccer stadiums throughout Spain.

The 1990s and Beyond

In 1991 Intermec became a wholly owned subsidiary of Litton Industries Inc., a U.S. conglomerate of defense industry businesses that had been on one of history's largest acquisition sprees. Early in the decade the company introduced FCC-approved spread spectrum radio frequency data communication technology, as well as the first high-speed, wide-area scanning technology. In March 1991 Intermec acquired two of its distributors: Reading, England-based Intermec U.K. Ltd. and Melbourne-based Intermec Australia Pty. Ltd. That year the company also introduced its Personal Area Network that enabled wireless communication between body-worn and portable devices.

In 1993 new Intermec products combined PC technology with industrial data collection capabilities. In addition, that year the company claims to have "perfected the first pen-based handheld computer with desktop PC performance." Developments in 1994 included the Janus 2020--a portable data collection computer equipped with a 386 processor, Microsoft ROM DOS, and an integral laser scanner; data collection technology that involved 2.4 GHz wireless local area networking; and what Intermec calls "the first and only product to combine a fully-automatic digital camera for non-contact image capture and decoding with an integrated computer."

In 1994 the beleaguered parent company Litton spun off Western Atlas Inc., and Intermec went with it, becoming a subsidiary of Western Atlas, a $2.5 billion petroleum company whose operations included supplying industrial automation systems and oilfield information services. In recognition of Intermec's quality efforts, ISO 9002 certification was earned in 1994, followed by ISO 9001 certification in 1995.

In 1997, Western Atlas made two acquisitions that would significantly bolster Intermec. First was Cedar Rapids, Iowa-based Norand Corporation, the industry's second largest automatic data collection (ADC) company behind Symbol Technologies. The addition of Norand, which became a subsidiary of Intermec, gave Intermec comprehensive ADC capabilities. Norand had developed mobile computing solutions for the food/beverage, car rental, transportation, and automotive sectors. Following the merger, Intermec's annual revenues reached approximately $600 million.

Intermec's status as the second-leading ADC firm did not last for long. In March 1997 Western Atlas made Intermec the industry leader, based on revenue, following the acquisition of Stockholm, Sweden-based United Barcode Industries (UBI). With roots stretching back to 1985, UBI manufactured bar code decoders, fixed-position laser scanners used in retail settings, hand-held CCD readers, fixed-position data collection terminals, and thermal bar code printers. The deal effectively pushed Intermec's revenues to $700 million, and bolstered the worldwide distribution of both firms.

By the time it acquired UBI, Intermec's sales and service reach extended to some 70 countries. In addition to its Everett, Washington headquarters, the firm had offices in Australia, Brazil, Germany, Hong Kong, Italy, The Netherlands, Spain, Thailand, and the United Kingdom.

Following the acquisitions, Western Atlas next spun off a new company, UNOVA Inc., with Intermec as a subsidiary of the new $1.5 billion industrial technology company. Intermec adopted a new corporate structure in which UBI, Norand, and Intermec consolidated under the name Intermec Technologies Corporation. The newly organized enterprise had four divisions: Labeling Systems, Government Systems, Norand Mobile Systems, and Local Area Systems.

By the late 1990s, interest was growing in radio frequency identification (RFID) technology, which involves the use of small radio tags that are able to communicate with a networked device known as a reader. These tags, which may contain a variety of data, can be affixed to or embedded within pallets, cartons, merchandise, or parts that companies and retailers need to track. In order to position Intermec as a future RFID systems heavyweight, Unova acquired IBM's RFID division in 1997. By mid-1998 the parent company announced that it also intended to acquire the Transportation Systems Group (TSG) of Dallas-based Amtech Corp., which also focused on RFID.

Intermec's sales reached $800 million in 1999. Among a number of important technology rollouts that took place that year, two were RFID-related. According to the company these included the first scanner that, in addition to reading bar codes, was capable of programming and reading RFID tags. In addition, Intermec unveiled the first Windows-based handheld ADC units that were equipped with RFID capabilities.

In late June, 53-year-old Robert G. O'Malley, formerly the CEO of Pinacor, became Intermec's new CEO. O'Malley's previous experience included a 19-year stint at IBM, where he worked in a variety of roles. Another major development took place when Intermec restructured again, replacing its divisional structure with a global one that included the following units: Strategy and Business Development, Worldwide Sales and Services, Systems and Solutions, and Global Marketing.

In early 2000 O'Malley told Material Handling Management that integration was a key strategy for Intermec, as the company sought to build a unified marketing organization. In the publication's February 2000 issue, he explained: "Marketing had been product by product, segment by segment, country by country. We're pulling all these into one marketing organization. ... What we've done organizationally is put together all the elements that produce hand held and vehicle-mounted products, along with wireless communications and some underlying software, and have created one organization."

Despite these efforts, more than a year later Intermec was still perceived by some observers as a disjointed organization. For example, in its August 2001 issue, Frontline Solutions reported that the company's attempt to offer "one-stop shopping" had not been executed flawlessly: "Intermec hasn't yet come to terms with how to integrate its varied technology offerings into a cohesive marketing message and sometimes appears to be operating as four or more different companies."

Intermec's sales totaled $665 million in 2001. A new CEO, Larry Brady, was brought in, and noteworthy developments in 2002 included Intermec's introduction of an RFID tracking system that U.S. tire manufacturers could use to track new car tires through the processes of production, assembly, and distribution. The technology also benefited consumers, in that recalled tires could be identified quickly. By the mid-2000s RFID continued to grow in importance. Subsequently, Intermec joined EPCglobal--a non-profit standards organization founded by the Uniform Code Council and EAN Intl.

With its 40th birthday on the horizon, Intermec found itself embroiled in a legal war with its rival, Symbol Technologies. The dispute, which centered on a number of intellectual property issues, began in June 2004 when Intermec sued Rockville, Maryland-based Matrics Inc. over alleged RFID patent infringements. Symbol acquired the lawsuit in September 2004, when it bought Matrics. Failed attempts to reach a cross-licensing agreement resulted in Symbol suing Intermec in March 2005 over alleged patent infringements related to the wireless communications standard 802.11. Symbol also terminated a supplier agreement with Intermec, under which it provided Intermec with laser scan engines for bar code scanners.

Symbol, which supported a royalty-free RFID interface standard, claimed that Intermec was slowing the industry's adoption of RFID. Other observers have agreed. For example, in the May 13, 2005, issue of the Long Island Business News, writer Ken Schachter noted: "Intermec has faced criticism for stifling RFID development because companies feared running afoul of its patent portfolio. Intermec sees its patents yielding a river of income as the RFID industry matures."

Despite this criticism, Intermec called Symbol's suit groundless and reactionary, and claimed to have offered a number of its RFID patents for free or at reasonable rates. A few weeks after Symbol's suit, Intermec sued Symbol over alleged patent infringements related to Wi-Fi, wireless handheld devices, and technology used to electronically capture signatures. Intermec was led during this time by President Tom Miller, who came to Intermec from Norand in 1997. While the outcome of the litigation remained uncertain, Intermec was clearly positioned for continued growth during the second half of the decade.

Principal Competitors: Symbol Technologies Inc.; Fujitsu Ltd.;

Zebra Technologies Inc.; Hand Held Products Inc.

Chronology

• Key Dates:
• 1966: Interface Mechanics Inc. (Intermec) is established in Mountlake Terrace, Washington.
• 1971: The company develops the first portable bar code scanner and the first on-demand bar code label printer.
• 1972: Intermec unveils the first computerized cash register.
• 1974: President Dr. David C. Allais works with bar code industry pioneer Raymond L. Stevens to invent Code 39, which becomes the world's most widely used alphanumeric bar code symbology.
• 1983: Sales reach $20.7 million.
• 1984: Intermec announces a public offering of common stock.
• 1985: Sales jump to $40.2 million and Business Week names Intermec as one of the 100 "Best Little Growth Companies in America."
• 1988: Sales climb to $85.2 million; construction of a new, headquarters and manufacturing facility in Everett, Washington, is announced.
• 1991: Intermec is acquired by Litton Industries Inc.
• 1994: Intermec becomes a subsidiary of Western Atlas Inc.
• 1997: Western Atlas acquires United Barcode Industries (UBI) and Norand Corporation, creating the industry's largest automatic data collection (ADC) company; the company becomes a subsidiary of UNOVA Inc.
• 1999: Sales reach $800 million.
• 2004: Intermec sues Rockville, Maryland-based Matrics Inc. over alleged radio frequency identification (RFID) patent infringement.
• 2005: Intermec and rival Symbol Technologies engage in a legal battle over intellectual property issues.