IBM, HP, Sun Micro
Sensing Opportunity In RFID Sensor Field
October 4th 2004
By: Ken Spencer Brown



What's black and white and nearly obsolete?

The answer -- if you believe Hewlett-Packard (NYSE:HPQ - News), IBM (NYSE:IBM - News) and Sun Microsystems (NasdaqNM:SUNW - News) -- is those bar codes printed on the side of just about every product sold today.

The tech giants are betting big on RFID, or radio-frequency ID smart tags. So are about 100 other firms exhibiting at this week's EPCglobal conference in Baltimore.

"It's quite a hot market, and I think it's going to stay hot," said Richard Dean, an analyst with International Data Corp. "The more people hear and know about RFID, the more they'll benefit from it."

While RFID probably won't result in high-dollar hardware sales for the three big server makers, Dean and others see big prospects for them in services.

Fitting the different RFID pieces together could be knotty. Neither retailers nor their suppliers are eager to take on the job themselves.

That's why the big tech firms are beefing up their RFID offerings:

IBM says it will spend $250 million and hire 1,000 people over the next five years to build a new business unit focused on RFID and other sensor technologies. With a head start in RFID and a huge services business, Big Blue will be a force in the nascent field, Dean says.

Hewlett-Packard is teaming with consulting giant BearingPoint (NYSE:BE - News) to sell smart-tag systems to retailers. The Palo Alto, Calif., computer firm also will work with OATSystems, which makes software to help companies tie RFID info into their other business systems.

Sun, which this year opened an RFID test center in Texas, is releasing three products that target retailers, distributors and Sun-affiliated systems integrators.

RFID uses tiny wireless chips as a sort of smart tag, broadcasting information about itself to nearby readers.

These smart tags offer key benefits over the 30-year-old optical bar code technology.

Because they're wireless, RFID gear can read smart tags from a short distance. No more sliding and re-sliding that soup can at the grocery scanner.

And the tags send out info all the time. Code readers don't have to scan shoppers' items one by one.

Retailers can see what's in a case of merchandise without having to open it. In theory, buyers might not even have to remove items from their cart to get checked out.

Smart tags also store much more info than a bar code can. Besides knowing what product is inside, smart tags can tell when the item was made, where it's been, where it goes next and when it expires.

This will help businesses better manage inventory.

It will also create a heap of new data for vendors and retailers. Computer makers are happy to sell them the gear they'll need to manage it all.

Under HP's deal with BearingPoint, the computer seller will supply packages of hardware, software and services to help manage retailers' RFID data. BearingPoint will help the stores figure out how to best use their systems.

The two firms are longtime partners. HP officials say they approached BearingPoint because of the consulting firm's deep experience with retailers.

While both are free to seek out other RFID deals, they call this one their biggest in this arena.

"It's a fairly powerful combination," said Ian Robertson, director of HP's RFID efforts.

HP uses smart-tag technology to help manage its own inventory. And it's one of several tech firms working with retail king Wal-Mart (NYSE:WMT - News) to bring RFID mainstream.

"We've tried to be very eclectic so we could try all the various technologies and see what works best in what settings," said Wal-Mart spokesman Gus Whitcomb.

By virtue of its sheer heft, Wal-Mart is driving the adoption of smart-tag technology by consumer product makers and distributors. Target (NYSE:TGT - News) and other rivals also have embraced the technology.

Procter & Gamble (NYSE:PG - News), Johnson & Johnson (NYSE:JNJ - News) and Gillette (NYSE:G - News)are among the biggest names working with Wal-Mart on the first phase of a plan to bring the technology to three distribution centers and about 100 stores by January. In addition to its role as supplier of RFID gear, HP will use the technology in products it sells through Wal-Mart.

Initially, Wal-Mart will use smart tags to keep better track of its stock room. For now, the tags won't track individual products, and store cashiers won't have readers.

Widespread use is a way off. The industry is still hammering out standards for tagging products, a wireless version of the Universal Product Code used now for printed bar symbols. "It's still the top of the second inning," Dean said.