Investment Trends With...
Mr. Chris Marangi
Vice President - Research
Gabelli & Company, Inc.
Chris, thank you for joining us today. Please give our audience an overview
of your background and your role at Gabelli.
Chris Marangi: I joined Gabelli & Co, the broker-dealer arm
of publicly-traded asset manager GAMCO Investors, in 2003 after stints
in investment banking, private equity and business school. I cover stocks
in a variety of sectors, including business services, security and media,
but RFID is my baby. When I became interested in the space in 2003, we
thought supply-chain RFID would be a multi-billion industry in two years.
We are still waiting for those sales to ramp, but now it's not a question
of "if" but "when".
SecurityStockWatch.com: Which companies are you covering in the RFID
space at the present time. Can we have a brief thumbnail on each?
Chris Marangi: Unfortunately, there aren't a lot of public companies
for which RFID will "move the needle". I would start with the Big Four
of RFID (every industry needs a Big Something). They are: Intermec (NYSE:
IN), Symbol Technologies (NYSE: SBL), Zebra Technologies (NASDAQ: ZBRA)
and Avery Dennison (NYSE: AVY).
Intermec has been our favorite pick in the industry. Not only will it
benefit from sales of its own RFID tags, readers and printers, it will
also collect a royalty on virtually every piece of RFID hardware sold.
This is as the result of a very successful licensing program (know as
Rapid Start) that was concluded last year and could amount to as much
as $100 million per year in profits for the company.
Next would be Symbol, which dominates the bar code reader business and
which is leveraging those customer relationships to sell RFID tags and
readers. Similarly, Zebra is the largest bar code printer maker and it
is now selling printers that will both print bar codes and encode the
RFID tags embedded in them. Finally, Avery Dennison is an old-line label
manufacturer that is designing and manufacturing RFID tags and adhesive
There is also a group of smaller companies for whom RFID will be a driver.
In this category I would place Paxar (NYSE: PXR), an apparel tag and label
maker that is having a great deal of success supplying British retailer
Marks & Spencer with labels for its item-level tagging program, and
Checkpoint (NYSE: CKP), a competitor to Paxar. Printronix (NASDAQ: PTNX)
is in a way a "mini-Zebra" that supplier RFID printer/encoders. I also
follow Sirit (TSX: SI), a small Canadian company that has some intriguing
Finally, there are a number of large companies that participate in the
RFID business, but for whom RFID will always be overshadowed. This would
include chip companies Texas Instruments (NYSE: TXN) and Philips (NYSE:
PHG). A number of other household technology names are also playing an
expanding role in RFID. In following RFID, one also has to pay attention
to the private (and perhaps one day public) companies like Alien Technology,
Impinj and ThingMagic.
SecurityStockWatch.com: What is your perspective on the market
drivers for the RFID industry at the present time?
Chris Marangi: Not to be coy, but there is one driver - Wal-Mart.
We finally have a global RFID standard and a technology that works. Now
we need the economics to work, i.e. low cost tags. To get from the current
$0.08 to sub-$0.05 tag many believe is necessary for widespread adoption,
the industry needs increased tag volume - probably greater than 20 billion
tags per year. Wal-Mart, the world's largest retailer, handles over 5
billion pallets and cases each year. Wal-Mart has been a big supporter
of RFID and has set a number of mandates for implementation by its suppliers.
We think Wal-Mart will soon begin to accelerate and enforce those mandates,
so that by 2008 the majortity of its pallets and cases will carry RFID
tags. By that point, a number of other retailers and the US Department
of Defense should be engaging in widespread tagging. By 2010, item-level
tagging, i.e. placing tags on tubes of toothpaste, should be economical
and further drive growth.
SecurityStockWatch.com: How about any barriers to widespread adoption
and deployment. Can RFID tags be compromised? Transport viruses for example?
Is privacy an issue with RFID technology?
Chris Marangi: To the extent that perception is reality, privacy
is an issue. A number of consumer groups, and even some legislatures,
have experessed privacy concerns. The industry needs to pay attention
to this and educate consumers. The truth is there is probably little information
useful to a thief and it is not easily obtained. The retailers themselves
are probably more at risk than consumers in that there have been incidents
of hackers altering prices on or disabling RFID tags. As with most technologies,
the good guys need to stay ahead of the bad guys.
SecurityStockWatch.com: What can you tell us about your RFID Conference
coming up on September 15, 2006.
Chris Marangi: This is our second annual conference. We have nine
presenting companies: Intermec, Paxar, Checkpoint, Nashua, Printronix,
ThingMagic, ID Systems, Axcess International and Sirit. We expect to get
an update on implementation in the retail supply chain and to explore
some non-supply chain uses (sometimes called "closed loop") for RFID.
SecurityStockWatch.com: Chris, many thanks for your time today.
Are there any closing comments you would like to make?
GAMCO and its affiliates own approximately 1.7% of Intermec
and less than 1% of the other companies mentioned. GAMCO has no investment
banking relationships with the companies mentioned. The analyst owns no
shares of any of the companies mentioned.