RFID - Griva Case study

Supply Chain Technology RFID Monthly Technology Research February 2008

Reik Read [email protected] 414.298.1030 Robb Timme [email protected] 414.298.1762 Samantha DeLay [email protected] 414.298.6215

Table of Contents

(Use the links below to navigate. To return, click on page header in the upper left corner.)

Key RFID Developments ................................................................................................................................................ 1

RFID Trends and Commentary......................................................................................................................................... 2

RFID Hardware News and Comment ................................................................................................................................. 3

RFID Software and Service News ..................................................................................................................................... 5

RFID Briefs ................................................................................................................................................................. 6

RFID Case Study: Griva ............................................................................................................................................... 12

RFID Stock Index and Comment .................................................................................................................................... 14

Table of Key RFID Providers ......................................................................................................................................... 16

Comparable RFID Valuation .......................................................................................................................................... 17

Glossary of RFID Terms ............................................................................................................................................... 20

Baird’s RFID Contacts ................................................................................................................................................. 25

(Please refer to Appendix – Important Disclosures and Analyst Certification on page 23.)

RFID Monthly Robert W. Baird & Co. February 2008 Page 1

Key RFID Developments

Encouraging level of innovation. We are regularly seeing greater numbers of innovative market-specific RFID applications in a wide variety of areas, including: entertainment, event management, construction, chemicals, automotive, textiles, office management, mining, contactless payment, animal tracking, government and many others. While many of these pilots are in very early stages or are small, we believe the growing number confirms strong interest in RFID as a tool for improving business operations, and will provide the basis for increased growth potential as many of these pilots expand. We highlight several of these applications in the “Briefs” section. Privacy remains an important issue. We continue advocate that the industry address RFID related privacy issues before legislative action potentially impedes the technology. Many in the industry continue to believe that privacy is not a key issue, and are ignoring the increases in state legislative action that could hamper adoption. The latest is from the State Legislature in California, where the Senate voted to pass SB 31 by a 36 to 3 margin on January 30. Recall, SB31, originally proposed in December 2006, makes it a crime to skim personal information housed on RFID chips, tags or cards. We certainly agree with protecting privacy, and believe the industry needs to demonstrate how the technology addresses security. We look for the industry to promote increased education of state and federal legislators, their staffs and privacy advocates so that legislative actions are informed. Metro update. Metro’s pallet level deployment is showing good progress, and the retailer continues to expand the number of RFID pilots. In the Metro and Real Hyperstore deployment in Germany, we understand that Metro is seeing roughly 40% of pallets received with tags from roughly 180 suppliers. Recall, tagging began in October. Metro reports already seeing benefit, and believes early case level tests were “successful” in providing increased visibility. Further, in addition to the Galeria Kaufhof pilot, Metro is also planning to go live with a deep freeze (-100F/-240C) distribution center pilot. Automotive increasingly in the news. This past month we have seen an unusually high level of information flow from the automotive industry, including Ford leveraging RFID for a smart truck application in the construction industry, Land Rover using active RFID for part tracability and end product location, and Chrysler finally expanding use of RFID for production line maintenance applications. Given the high asset content in the automotive market, and the need for automakers to enhance productivity, we expect to see increased closed loop RFID usage. To be placed on our RFID Monthly distribution list, please e-mail us at [email protected]. There is no charge for the publication.


RFID Trends and Commentary

As we reach the mid-point of the first quarter, we are encouraged with the increasing number of innovative market-specific RFID applications seen each week in a wide variety of areas, including: entertainment, event management, construction, chemicals, automotive, textiles, office management, mining, contactless payment, animal tracking, government and many others. While many of these pilots are in very early stages or are small, we have a positive outlook on three fronts. First, the growing number of pilots confirms the strong interest in RFID as a tool for improving business operations, and will provide the basis for increased growth potential as many of these pilots expand as a result of a proven ROI. As we have noted in past editions, we are already seeing some modest expansion from many of these pilots. Second, it is not only the number of pilots that we view as important, but the wide range of applications in differing markets. This again serves as confirmation that RFID has real value as a technology tool. We expect increased standards development in several individual markets will help enable greater usage over time. Third, we are seeing usage of many different types of RFID technology, including passive at LF, HF and UHF as well as active. The overall passive market remains small, and many end users and traditional resellers suggest they will not make significant investments until they see greater market momentum, which we believe will come as a result of expansion of these types of pilots. We expect some expansion of the more advanced pilots to occur in 2008. As we have indicated in previous editions, we believe that 90% of the market is composed of a wide range of asset tracking and closed loop pilot programs, with the remaining 10% coming from supply chain applications, both compliance and non-compliance. In the Gen 2 UHF market, we see apparel, aviation, Pharma, DVD/Books and compliance as key long-term markets. Many of the vendors are today developing solutions in one or more of these areas. In terms of overall opportunity today, we estimate less than 15% of revenue is generated in these areas. However, these markets create a strong long-term opportunity given that each has large and new volume

created each year, the products are relatively valuable, local closed loop solutions can add great value, and each as a complex supply chain with a need for increased track and traceability. These factors are conducive towards item level tagging, and several statistics illustrate the long-term potential in each of these markets. With respect to apparel and shoes, roughly 24B items are produced worldwide each year. Airlines transport between 2.5B-3.5B pieces of luggage globally, with 75% coming internationally. In the U.S., over 2B bottles/vials of drugs are dispensed each year in the pharmaceutical supply chain, and 7.1B DVDs are shipped each year. Books also represent a strong opportunity with over 4.1B total books on shelves today worldwide. We see increased solution development and expanding pilots in each of these markets over the next year. The most likely deployments will come in international aviation. We expect that apparel will see expanded closed loop pilots with greater scale. Pharma and DVD’s have the most complexities and the longest road to achieving an ROI, and we anticipate expanded, but still modest pilot activity over the next year. Pharma will likely take the most time given the lack of catalyst as we expect the California e-pedigree mandate will be pushed out to 2011 from 2009.

With respect to active and semi-passive, we are seeing good traction in automotive, healthcare and transportation and logistics. We expect to see increased focus particularly on healthcare given the strong opportunity and increasing solutions development. We have indicated in the past that our view is most hospitals (rightly) tend to direct capital spending towards medical equipment to serve their diagnostic patient needs, with IT spending tending to be more limited. However, we believe many of the RFID asset tracking solutions are reaching capability where hospitals can see the capability at a lower cost, and perhaps realizing through investment in improved asset tracking solutions they can allocate their capital more efficiently in the long-run (i.e., not spend on redundant assets and instead spend more on important diagnostic equipment).


RFID Hardware News and Comment

With respect to hardware and solutions news, the obvious take away is that many vendors are introducing Sam’s Club compliance solutions. We believe many of these solutions will be relatively easy for end users to adopt given the considerable development effort in the past several years from the original Wal-Mart and DoD mandates, and most recently the Metro mandate, which began last October. Many of the other introductions a focused on a wider array of generally more ruggedized manufacturing and logistics opportunities. Tags & Readers Avery Dennison introduced a new tag called the AD-908. The Gen 2 tag is designed for challenging tagging environments and comes enclosed in a case that is impact-resistant and blocks UV rays. The case may be applied to the asset using a bolt or rivet. UPM Raflatac released a new tag for near-metal applications called the Hammer. The tag is available in wet-inlay, dry-inlay and paper-faced formats. The tag has a read range of up to 4 feet and can be placed in a plastic enclosure for container and cage applications. RSI ID introduced a new tag designed specifically for bag-tagging applications at airports. The Gen 2 RSI Blade tag uses NXP UCODE G2XL and G2XM integrated circuits. As a result, the tags are orientation-neutral, which allows bag-tags to be read at any angle, eliminating one of the major problems with the current barcode technology. Confidex introduced a new Gen 2 tag designed specifically for use on wood pallets. The tag, called the Confidex Pino, is durable and can be inserted into the wood pallet, as opposed to placed on the surface. This addresses problems that include the wood warping and a variety of surface damage that can impair the tag. The company also announced that Hub Télécom, a subsidiary of Aéroports de Paris, is using the tag to track wooden pallets used by a retailer and a food company.

GE Healthcare has partnered with CenTrak to provide a battery-only powered RTLS solution for hospital settings. Because each reader is powered by batteries, the installation and set-up time is significantly reduced from six months to one week. The battery power capability substantially reduces the need for wires, which requires electrical expertise and can interrupt operations as each room has readers installed. The new system, called the DualTrak, has room-level visibility using Centrak’s GEN2IR technology and 900MHz radio frequency communications. iDTRONIC introduced a new mobile reader, the Compact Flash Reader 14443 A/B, which is best suited for PDAs and pocket PCs. The HF reader has a range of roughly 4-6 centimeters, weighs approximately 17 grams, can be plugged into a flash drive and interacts with Microsoft’s CE and Mobile 5 operating systems. An external antenna can be used to increase the read range. The reader supports the following tags: NXP Mifare MF1S50, MF1S70, Desfire and Ultralight, Sony’s Felica transponder, several 14443 B tags and the STM 176 transponder. iDTRONIC also introduced a new long range HF reader designed for logistics and tracking purposes. The reader, called the Ezscan LRM interacts with ISO 15693 transponders (Infineon my-d, Tag-it, NXP I-Code and Legic Advant ATC chipsets), can connect to USB interfaces and has four antennas. Systems and Solutions Lowry Computer announced the availability of packages designed to help suppliers meet retail RFID mandates, called Retail Quick Comply Kits. In light of recent announcements from Sam’s Club, Metro and others, Lowry has bundled a hardware and software application suited for those in need of a rapid compliance solution.

Similarly, Domino ISG introduced three packages aimed at providing compliance solutions for Sam’s Club suppliers. The most basic package, Compliance 1st, provides the essential hardware and software


RFID Hardware News and Comment

for businesses to manually apply RFID labels. This package includes printers supplied by Zebra Technologies and epcSolutions’ RFIDTagManager. The second package, Compliance NextSteps, provides suppliers with an inline automated label application system. The most sophisticated package uses HIDE-Pack technology to integrate the RFID label into the product packaging.

SATO America also announced the availability of a low-cost package geared toward suppliers under Sam’s Club new pallet-tagging mandate. The kit, which includes one SATO GL408e UHF printer, one Label Gallery 2 TruePro, a labeling software solution, one roll of 4x6 AD-222 RFID labels and one roll of T101A standard wax ribbons. The solution allows suppliers to begin tagging pallets quickly, which will be necessary to avoid the $2.00 per pallet charge that Sam’s Club will levy for pallets that do not contain an RFID tag into specified distribution centers. RF Code released an active RFID hardware and software package designed to help IT centers track inventory and servers. Because of the increasing number of hardware tools and movable assets within IT centers, taking inventory and locating assets has become a more important task. RF Code’s active solution with software allows managers to track metal-based assets like unused servers continuously.


RFID Software and Service News

Wavetrend Technologies introduced a new tracking application that offers more complete end-to-end coverage than predecessors. The solution, called GlobalEyes, uses a combination of active RFID, GRPS, GMS, Zigbee and SATCOM GPS to continuously monitor the location and status of asset via a web-based program and mobile readers. The system is targeted at cargo tracking applications, as well as mining, vehicle manufacturing, and rail car tracking applications.

AeroScout introduced MobileView 4.0, the next generation of its asset tracking software. Version 4.0 has the ability to process inputs from AeroScout’s active RFID technology, read through Cisco’s wireless data ports, passive RFID tags per a partnership with Reva Systems and ultra wideband frequency, through a partnership with Time Domain. MobileView 4.0 also has a web interface that allows users to monitor and track assets from anywhere, additional, industry-specific plug-ins and an alert system to notify users of backlogs or delays. As mentioned above, both Reva Systems and Time Domain have partnered with AeroScout this month to provide an integrated active/passive technology. In order to have MobileView 4.0 interoperable with passive readers, Reva Systems has incorporated the software suite onto its Tag Acquisition Processor appliance. As part of its partnership with Time Domain, AeroScout’s readers can now interpret readers from Time Domain’s dual mode (UWB & Wi-Fi) tags, allowing the data to be incorporated into the MobileView 4.0


RFID Briefs

Standards, Industry Policy, and Government We continue to be advocates that the industry address RFID related privacy issues before legislative action potentially derails the technology. Many in the industry continue to believe that privacy is not a key issue, and are ignoring the increases in state legislative action that could hamper adoption. The latest is from the State Legislature in California, which voted to pass SB 31 by a 36 to 3 margin on January 30. Recall, we have reported that since December 2006, California has been considering to make it a crime to skim personal information housed on RFID chips, tags or cards. Specifically, the SB 31 provides “…that a person or entity that intentionally remotely reads or attempts to remotely read a person’s identification document…using radio waves without his or her knowledge and prior consent…shall be punished by imprisonment…for up to one year, a fine of not more than $1,500, or both…” The bill will now move to the California Assembly. Wisconsin has a similar piece of legislation already on its books. We do not have any issue with the concept of the government protecting privacy, but we believe many of these legislative acts are undertaken with only partial knowledge of the technology, its capabilities, related standards and security features. The industry needs to devote more time and resource towards educating state and federal legislators, their staffs, relevant government agencies and privacy advocates on how privacy is being actively addressed. It is the right thing to do, and it is simply good politics. If nothing is done, the industry will have missed an opportunity to participate in the process before potentially unnecessary laws are written that begin to impede or prevent the use of RFID. Metro Update We had a chance to see Gerd Wolfram, of Metro’s MGI unit, present recently and came away with the clear impression that the retailer

continues to view RFID strategically and plans further pilot expansion. The following represent our key take aways from the presentation. First, the pallet level rollout continues at the Metro and Real stores in Germany. Metro is seeing roughly 40% of pallets received with tags, either at distribution centers or directly at the stores, from roughly 180 suppliers. Metro has in excess of 1,000 suppliers. Metro is already seeing benefit, but has not quantified any ROI. Recall, Metro began requiring pallet level shipments in October. Second, the Galeria Kaufhof implementation continues to progress. The pilot is still with one store within the Men’s department that features tracking over 120,000 items per year. Metro indicated that employees are adapting well to the system, but that the holiday season was difficult as employees in many cases reverted back to old processes. We view this as a good lesson learned. Metro indicated that the largest challenge was filtering the high number of unwanted tag reads in such a close environment. We believe Reva’s tag acquisition processor system served as a key component is solving this problem. Third, Metro is also planning to go live in the near-term with a full distribution center (DC) that is a deep freeze unit (-100F/-240C). All incoming pallets will have transponders for tracking into the facility and the high racks will have transponders to confirm bin locations. The DC is roughly 105,000 square feet, receives over 135,000 pallets per year and has 11,000 bin locations. Metro will use 15 RFID enabled forklift trucks, 30 fixed readers (75 antenna) and three printers to track goods in the warehouse. Project planning began last spring. Fourth, the company is progressing towards case level tagging, having viewed their early tests as “successful”. We take this to mean that RFID, while below 100% reads, is providing Metro with a level of visibility that is better than what exists today.


RFID Briefs

DVD Pilot Update The DVD industry and the EPCglobal Media and Entertainment Committee accomplished several meaningful milestones in 2007 and are contemplating future steps in 2008. In 2007, the committee completed important tag design and placement standards, and completed a small pilot that began in September and tagged roughly 15,000 individual DVDs. Our understanding is that many members believe that they are “directionally” getting good value, including better analytics and possible sales lift, from use of the technology, but there remain technological, cost and end customer educational issues to confront. The group is currently assessing whether or not to proceed with a larger U.S. based pilot that would last four to six months and include the major studios, key manufacturers and several larger retailers. We believe that an end of the Hollywood writers strike will be helpful in allowing such a pilot to proceed. From an equipment view, we believe tag development to meet the new industry standard will be a factor in improved performance. We also believe that mobile reader products will see advancement in 2008 a result of second generation reader silicon. These mobile readers will likely be an important component of any RFID solution for the DVD market. Passive RFID Applications We understand that Chrysler is planning to expand its use of passive RFID for tracking of automotive body carriers for maintenance purposes. Chrysler has been running a pilot at its Warren Truck Plant since 2004. By using RFID, Chrysler increased the level of automation to where carriers could be reliably and accurately tracked to determine when each carrier needed to be taken off the line for maintenance. This system reduced the labor costs and line shutdowns, and achieved a payback in just less than four months, or an ROI of 354%. The success of the system has prompted Chrysler to plan implementation of three additional plants during 2008.

The Ford Motor Company has introduced new versions of its F-150 truck, F-Series Super Duty truck and its E-Series vans that have several new technology systems, including a built-in RFID inventory management system. The new vehicles have ruggedized, weather-proof RFID reader provided by ThingMagic and encased by DEWALT and come with ruggedized ThingMagic tags, allowing drivers to locate and track the status of certain parts, particularly high-asset value pieces. The system also includes a Ford Works Solutions Tool Link from DEWALT that is designed to address loss prevention. In addition to the RFID system, the vehicles also have an in-dash computer developed by Magneti Marelli that operates on Windows Auto, a navigation system provided by Garmin and Ford’s Crew Chief program that enables fleet management. Advanced ID Corporation announced that it has partnered with Patch Rubber Company to produce a retro-fit tire tracking solution. Advanced ID plans to combine its Gen 2 Tire Tag with Patch Rubber’s products in order to have its tags stay affixed to the tag for the life of the tire. Also part of the system is Advanced ID’s UHF 500 series reader. The tracking system is expected to improve monitoring of the life of the tire for tires currently in use, and to prevent counterfeiting and track inventory for stock tires. Alien Technologies announced the results of a tagging solution at Diakinsis, the largest third party logistics company in Greece. As part of the program, Alien’s Gen 2 M tags were placed under the floor to guide forklifts to the appropriate location, based on its cargo. Also, each shelf space was tagged using a specially-encased Alien Squiggle, which was designed to reduce interference from the metal shelving. Also each pallet was tagged and read using fork-lift mounted readers and mobile readers. The program at the 320,000 square foot food service distribution facility facility, began as a pilot in June of 2006 and was fully rolled out in November of 2007 and tracks roughly 350,000 pallets annually. Alien reports that benefits are encouraging, including a 30% improvement of time required to place pallets on racks, a 25%


RFID Briefs

reduction in overtime and a decrease in shipment errors by 80%. Acsis has introduced an out-of-the-box solution designed for pharmaceutical companies and distributors facing e-Pedigree compliance. The solution, called PharmaTrak 2.0, includes the ability to serialize products, cases and pallets, generates e-Pedigree documentation, and is scalable between manufacturing, distribution and sales facilities. The solution incorporates RFID and barcode equipment and the corresponding support systems. The system is designed for use with SAP systems. Vue Technology announced that New Balance has used its software to implement an item-level tracking system running from the distribution center to the company’s factory store. The solution included Avery Dennison tags and Motorola’s mobile and fixed RFID readers. New Balance achieved over 99.5% accuracy in tracking the tagged assets, enabling it to have better visibility over asset location, shipment timing, inventory planning and security.

Magellan introduced a tracking application designed for laboratory slides. Using the company’s Phase Jitter Module and StackTag technology, hospitals and laboratories can individually tag specimen slides, including those containing DNA, for archival and tracking purposes. Specimens often must be stored by facilities for an extended period of time, up to years, and slides frequently move between facilities. The StackTag, operating at 13.56MHz, allows item-level tracking of up to 1,000 slides, despite close proximity or contact.

UPM Raflatac announced that its HF tags will be used for access control at the downhill skiing World Cup in Italy. Each person with clearance to go in secure areas at the event, including athletes, trainers and members of the press, will be given an HF tag that interacts with handheld readers. The tag’s serial number will correspond to personal information, allowing organizers to better identify cleared individuals. Mobile Aspects announced that its iRISupply tracking system will be installed at Rush University Medical Center’s Center for Congenital and

Structural Heart Disease. The Center will use the iRISupply cabinet to track and record data on implantable devices, including internal cardiac defibrillators. Due to the cost of the devices, the center needed a tracking solution for security purposes, for location purposes and to more accurately bill for the use of the devices. Active RFID Applications In addition to the several passive applications in automotive, we are seeing active usage as well. Land Rover is using active RFID/RTLS from Savi Technologies and WhereNet to increase supply chain and production process efficiency at its Solihull, England plant. The entire site is 308 acres, with a 600,000 square feet assembly facility that produces roughly 150,000 vehicles each year. Land Rover is seeing strong ROI from its early implementations and is expanding use of the technology. At this point the Savi and WhereNet systems are stand-alone and do not communicate. The Savi system is a new active RFID pilot with Land Rover at Solihull along with 18 key suppliers. The project is designed to improve the efficiency of operations and to enhance communication and timing with suppliers. Key points of improvement are expected from reduced line disruptions, fewer part losses and less time in the part location process. The project uses Savi’s active technology to track stillages from departure at the supplier to receipt at the Land Rover facility. Stillages are steel conveyances that carry key automotive parts, including moon roofs, bumpers, front grills and vehicle bodies. At each transaction read point, part information is captured and location or exception alerts are sent to relevant supply/logistics personnel via PDAs or smart phones. This program is funded in part by a grant from the U.K Government via the University of Warwick. The Solihull facility has also been using WhereNet’s real-time locating system to enable a part replenishment system since 2002, and a Vehicle Tracking and Management System (VTMS) since January 2007. The PRM system allows line operators to request parts on a


RFID Briefs

wireless Kanban basis. As parts are needed, operators signal replenishment through a push button mechanism that enables a wireless message to be sent to the logistics system. The VTMS system enhances visibility into finished vehicle location. As each new vehicle comes off the production line, an active transmitter is attached to enable easy location on the 308 acre facility. Previously, Land Rover personnel spent substantial amounts of time locating vehicles for post production verification, testing and shipment. In addition to a time consuming and expensive process, the lack of inventory visibility had negative impacts on production as vehicles were not brought through the quality assurance process on a timely basis. The initial system provided a one-year payback by allowing cars to be shipped more quickly and improving the order-to-cash cycle time. AeroScout, in conjunction with reseller Tematik of Turkey, reported that myTECHNIC has selected AeroScout’s active-RFID solution. myTECHNIC is a maintenance and repair company servicing airplanes and is building a new, lean operation that incorporates active RFID. The company will track parts in an effort to improve efficiency on both the shop floor an in inventory tracking and parts orders. The system will use AeroScout tags, Cisco wireless access points and AeroScout’s MobileView visibility software. Savi Networks announced that the Department of Defense has extended its contract with the company for active RFID tracking solutions and has increased the contract ceiling. The increase was made by the US Army’s Information Technology group, the E-Commerce group and Commercial Contracting Center. The contract will now be in effect until January 31, 2009 and can have a maximum value of $483 million, an increase of $60 million from the prior amount. Contactless Payment Solutions Office Depot appears to be rolling out a contactless payment option. ViVO contactless payment scanners have recently been added to several stores in the past several months. While the number of

contactless transactions remains small, we see growing momentum given visibility at CVS, McDonalds and Mobil. Visa is also profiling contactless payment in its TV commercials. Partnerships / Orders Precision Dynamics Corporation announced a partnership with Gateway Ticketing Solutions, which produces ticketing hardware and software for public transit systems, amusement parks, and attractions. Through the partnership, PDC will market its RFID-enabled wristbands, which are capable of conducting cashless transactions, through Gateway’s customers. Gateway will also integrate a plug-and-play RFID system into its hardware ticketing operations. Savi Technology announced that it has signed a partnership agreement with AVAANA for marketing and sales efforts in India. ARVAANA, an Indian technology integrator, will sell Savi’s active RFID products and software, with an emphasis on both government and commercial clients. Corporate News Avery Dennison reported on their January 29 conference call that it saw a 3x increase in inlay production during 2007 versus 2006. Management also indicated that they expect Avery’s RFID segment to generate $50M in revenue during 2008. Avery’s RFID revenue is almost exclusively generated from inlay/tag sales, and the company only sells a very modest amount of RFID printers (assume $1M). If we assume the Marks and Spencer portion is roughly $12M-$15M, or about 175M-200M IP-X based tags, then Avery’s forecast implies the remaining $34M-$37M will be generated by roughly 475M-550M Gen 2 tags. We expect Avery will see most traction in aviation and apparel. While Avery’s stated price is $0.079 per inlay, we are assuming $0.075 in our calculations given likely discounts for volume. We are hearing of some inlays, including all providers, selling for as low as $0.06 each in quantities over 1M units.


RFID Briefs

NCR indicated that they took a write-down of $5M for RFID related software assets. The company made a small acquisition in 2005 to bolster its RFID asset and inventory tracking capability for supply chain compliance applications. Given the longer duration than expected for that market to gain momentum, NCR believed it was necessary to assign a more appropriate value to those assets. NCR’s CEO, Bill Nuti, has indicated NCR still remains a player in RFID, but that incremental investments will not be made until they see more traction in the retail supply chain.

Intermec hosted its i-Comm partner conference in Orlando during late January and our brief observation from attending is that the end user and reseller partner interest level in RFID is very good. Intermec dedicated roughly 20% of its daily breakout sessions towards RFID, and each was very well attended, including the last session of the conference. Most of these sessions demonstrated existing applications of RFID. Intermec announced that it has hired Raymond Cronin as VP and General Manager of its RFID business. Prior to joining Intermec, Mr. Cronin was the founder and CEO of Azimuth Systems, a company specializing in wireless LAN test equipment. Cronin will report to Intermec CEO, Pat Byrne. Intermec also announced that Toppan Printing Company of Tokyo has entered into the company’s Rapid Start licensing program. Toppan has an additional royalty license that will allow it and its customers to use Intermec’s patented technology. Toppan is the largest printing and communications companies in the world. EM Microelectronics announced that the company has achieved a milestone by selling 250 million EM4X22 UHF chips, a majority of which were for item-level use and tagging high-end garments. The company highlighted most of these tags would be for Marks & Spencer and its use to track all clothing at its stores. The chips are based on IPICO’s IP-X read only technology, and produced by EM Mirco; inlays are

produced by Avery Dennison. EM and IPICO are developing IP-X based Gen 2 products. Unisys announced that it won a contract to design, produce and integrate the new RFID-based ID and license plate system for the Western Hemisphere Travel Initiative. Under the new initiative the US, Canada, Mexico and Bermuda will issue RFID-enabled passports or drivers licenses that will contain a code and an image of the holder. With the system, border agents will be able to more securely identify travels as the code connects to a system providing the agent with biometric information and a photo confirmation. The first year of the contract is valued at $37.2 million, with four, one-year options available. The total value of the contract if the options are exercised is $62 million. WJ Communications provided an updated estimate of its 2007 revenue and earnings. Recall, the company provided an early estimate shortly after the end of the year. WJ Communications now expects revenue to be in the range of $10.5-$10.6 million, above its previous estimate of $10.2-$10.5 million. The increased estimate appears to be due to the resumption of a previously delayed customer order. In addition to being profitable on a non-GAAP basis, the company now expects to generate approximately $3.5 million in cash, up from its previous estimate of $3.3 million. Reva Systems opened an office in Tokyo to serve as the company’s Asia Pacific headquarters. The new facility will include engineering capabilities, business development, sales and marketing personnel and customer support services. Intelleflex announced that its RFID products are now available for use and purchase in South Korea. The expansion follows the growth of RFID pilots and programs in South Korea. Recall, Intelleflex also expanded operations into EMEA in 2007. Impinj announced that it received an additional $14 million of funding


RFID Briefs

from the following technology companies: Inventec Appliances Corporation, LS Industrial Systems, Samsung Ventures America and YFY Group. The company has now received $110 million in private funding. We view this funding as more strategic given each of the players extends Impinj’s partner network in Asian tags, industrial equipment and NFC. We also understand that Impinj is looking at options with respect to its non-RFID Aeon intellectual property. IPICO announced its intent to hold an initial public offering for the Toronto Stock Exchange. The offering is being underwritten by Wellington West Capital Markets and syndicate will includes Desjardins Securities. The number of shares and the price per share will be determined when the securities are priced. Axcess International announced that its Dot micro-wireless technology was open for developers. The company announced that no royalty fee would be used, but that registered third-party developers could use the technology to create enterprise solutions. Recall, Axcess’ Dot technology revolves around battery-powered microcomputers that are used in tracking and counting applications; the microprocessors can also be paired with sensing technologies. Manhattan Associates reported 4Q07 and 2007 financial results. Fourth quarter revenue increased 12% to $85 million, or 10% without the impact of foreign currency exchange benefits. The company noted that service revenue increased 14% while license revenue declined 2%. Pro forma operating income increased 1% over the prior year’s quarter while adjusted EPS increased 19% to $0.37. Upcoming Events

IDTechEx will host the Smart Labels USA Conference and exhibition in Boston on February 19-21. The event will feature user experiences and implementation case studies as well as an assessment of all RFID technologies. The conference is expected to feature an overview of upcoming industry orders, where the RFID profits lie and opportunities. The event will feature an investor forum on February 19, an overview of end-user experiences on February 20 and a technology

assessment on February 21. To learn more about the event, visit www.idtechex.com/USA.

The 2008 DoD RFID Summit will be held February 26-27 at the Hyatt Regency Crystal City in Arlington, VA. This year's event will focus on RFID implementation and provide workshops on RFID education for DoD personnel and the supply base. Learn about the latest emerging RFID technologies and best practices. Visit with both RFID and UID vendors in the exhibit hall. To learn more, visit www.DoDRFIDsummit.com.

RFIDJournal Live! will be held April 16-April 18 at the Venetian in Las Vegas. This event is one of the key RFID shows of the year and will provide an overview for investors and end users. The event features several industry tracks, including retail/CPG, healthcare/pharma, defense/aerospace, manufacturing and transportation/logistics. The conference will also feature eight pre-conference seminars. We expect a wide array of exhibitors and industry participants. Robert W. Baird & Co. will be presenting at this event. To learn more, visit www.rfidjournal.com/live/.

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RFID Case Study: Griva Overview Textile manufacturers continually look for innovative ways to streamline their processes and manage inventory and production given the specialized and competitive environment. They rely on automated manufacturing systems to increase profitability and maintain the lowest possible logistical costs during manufacturing. One such manufacturer is Griva S.p.A. Based in Torino, Italy, Griva is one of the world’s leading high-volume textile manufacturers and produces more than 300,000 rolls of fabric each year. It distributes 500 rolls of fabric, equal to 20,000 meters, each day. Its textiles are used for upholstery and drapery and sent to leading European retailers. Griva also produces fabric for the “Hello Kitty” line of sheets and pillows. In addition to a wide variety of products, the traceability challenge is amplified as the fabric rolls undergo multiple treatment processes as they move through Griva’s operations. Fabric is woven and then rolled on to cardboard cores. These rolled cores move to various operations are unrolled and re-rolled several times as they undergo repeated processing, including exposure to high temperatures, water and high humidity, and chemicals used in the dying process. In addition to these processes, the fabric and the core rolls are subjected to machine cutting and sizing, transporting, and shrink wrapping. With high diversity among its fabrics and associated operations, Griva must maintain accurate inventory control to ensure proper processing, beginning with the initial raw thread material to woven fabric, storage and distribution of the fabric rolls. Given the high value of the products, their associated bulk and weight, any processing and shipping errors are often costly. For years, Griva used a traditional bar coding system to track its fabric rolls through its operational process. However, the bar code system was not accurate given the mechanical and environmental stresses

placed on the bar codes lead to an approximate 10% read rate failure, which compromised Griva’s ability to accurately track its products. So when Griva was ready to open its new automated warehouse in 2006, it elected to use RFID due to its durability and automation capability to help solve its fabric roll tracing dilemma. Implementation Griva partnered with Italian RFID integrator Simet, who implemented a complete RFID textile tracking solution 18 months ago. Griva places a Gen 2 EPC-complaint RFID tag on each roll by the operator when the fabric is wrapped on the cardboard cylinder roll support. There are five reader points to track the product at key points from manufacturing to shipping; these include the initial weighing station, on the conveyor between production operations and to the warehouse, in the picking location and at final wrapping just before shipment. Griva also has a separate reader station for manual packaging done on an exception basis. Simet began the process with Alien Gen 1 products, but converted to the Gen 2 solution using the Alien ALR-8800 reader product and squiggle tags. Each tag supports global operation at 860 to 960 MHz and is compliant with the European Telecommunications Standards Institute (ETSI) EN 302-208 specification. Each tag is durable enough to withstand Griva’s harsh manufacturing operations. Simit also built a reader-to-ERP interface using a middleware application that interfaces with Griva’s existing software systems and with the Alien Reader Protocol, which controls the readers. This step provided a full solution offering that ran side-by-side for an initial six month period with Griva’s existing bar code system. By comparing the results from the bar code system to those from the RFID solution, Griva and its implementation team concluded that RFID offered greater automation and increased tacking accuracy.


RFID Case Study: Griva Benefits and Next Steps With RFID, Griva can efficiently track rolls in the production process and that are wrapped and ready for delivery, which saves time and also provides its customers with the most accurate information about the finished fabric. The RFID tags also allow Griva to sort its fabrics automatically in the warehouse. By associating ID information to each roll, such as product type, weight, and diameter, the roll can move efficiently through operations and the warehouse to its next checkpoint. By having readers at various checkpoints, automated systems and human operators can decide instantly whether a roll should be processed further, moved into a storage facility or prepared for immediate shipping to a customer. As a result of the enhanced efficiency to the process, Griva was able to ship 600 rolls per day in two eight hour shifts versus only 400 rolls per day in two ten hour shifts. In the ending stages, the automated system uses the RFID tag information to determine final packaging and the most cost-effective transportation options for each roll on an automated basis. Using the fabric’s weight and destination information, warehouse operators can build customized shipping boxes and prepare each roll for its final distribution and transport by designated carriers. This process previously contained a significant amount of manual steps. These logistical efficiencies in the warehouse have given Griva an ROI on its RFID system of 30% by reducing expenses, using less time, and improving customer satisfaction with finished products. The next phase of the project will include installing more readers in the warehouse, so the operators can check inventory counts overnight. Griva may also implement portable readers in the warehouse to account for rolls outside of the typical conveyor process and to enhance exception reporting.


RFID Stock Index and Comment

On February 12, Baird’s RFID Index increased 1.77% versus January 15, 2008. The index outperformed both the S&P 500 (-1.92%) and the NASDAQ (-3.39%). Of companies under Baird Supply Chain Technology coverage, ScanSource (+35.34%), Intermec (+18.22%), Avery Dennison (+4.53%) and NCR (+4.38%) outperformed all thee indices. Note, ScanSource, Intermec and Avery’s earnings reports exceeded analyst’s expectations. Zebra Technologies (-1.90%) underperformed the RFID Index, but outperformed the NASDAQ and the S&P 500. Stocks that outperformed the indices included Digital Angel (+20.07%) and Sun Microsystems (+12.82%). Big movers that underperformed the indices included ID Systems (-22.83%), Motorola (-18.38%), Sirit (-18.18%), Infineon (-15.59%), and WJ Communications (-14.08%).

RFID and Major Stock Indices

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RFID IndexS&P 500NASDAQ


RFID Stock Index Table

2/12/08 % change 52 weekCompany Name Ticker Price vs. Last Month vs. Last Year High Low3M MMM 77.18 2.86% 3.22% 97.00 72.05Accenture ACN 33.50 4.63% -9.64% 44.03 31.91Atmel ATML 3.41 5.28% -37.89% 6.08 2.83Avery Dennison AVY 48.35 4.53% -26.50% 68.98 44.06Axcess AXSI 1.30 7.69% -7.89% 1.96 0.91Brady Corporation BRC 31.52 -4.82% -13.37% 44.46 28.40Cisco CSCO 25.85 -8.57% -14.24% 34.24 21.77Digital Angel DIGA 0.55 20.07% -74.05% 1.89 0.41IBM IBM 101.83 5.04% 8.13% 121.46 88.77ID Systems IDSY 9.90 -22.83% -51.31% 16.63 7.50Infineon IFX 9.88 -15.59% -48.04% 18.74 7.89Intel INTC 22.69 -8.18% -2.23% 27.99 18.05Intermec IN 19.32 18.22% -8.68% 30.16 17.53Motorola MOT 14.31 -18.38% -39.29% 19.68 9.43NCR Corporation NCR 21.69 4.38% 1.05% 29.01 15.07Philips PHG 39.30 -2.52% -1.95% 45.90 34.91Printronix PTNX 15.95 0.00% 27.40% 16.25 11.02SAP SAP 48.85 -0.66% 2.56% 59.86 43.00ScanSource SCSC 26.06 35.34% 20.54% 39.50 22.61Sirit SI.TO 0.22 -18.18% -25.00% 0.41 0.17STMicroelectronics STM 12.29 -3.58% -38.06% 20.84 11.39Sun Microsystems SUNW 14.98 12.82% 167.83% 26.04 14.20Texas Instruments TXN 29.72 2.86% -1.89% 39.63 28.00UPM Rafsec UPM 17.91 -7.61% -37.66% 27.08 16.35Verichip CHIP 2.24 2.68% NA 10.62 1.76WJ Communications WJCI 0.71 -14.08% -60.90% 2.00 0.40Zebra Technologies ZBRA 31.07 -1.90% -23.78% 42.50 27.50RFID Index 774.81 1.77% -7.76% 822.24 685.58S&P 500 1476.65 -1.92% -7.02% 1576.09 1270.05NASDAQ 2581.66 -3.39% -6.46% 2861.51 2202.54


Table of Key RFID Providers

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3M Company MMM X X X X Nashua NSHA XAbeTech Private X NCR Corporation NCR X XAccenture ACN X OATSystems, Inc. Private XAcsis Private X X Odin Private XAeroscout Private X X X X Omron Corporation OMRNF.PK X XAlien Private X X X Oracle ORCL X X XAmbient ID Private X Panatrack, Inc. Private X XApplied Wireless Private X NXP NXP XAssetPulse Private X X Power ID Private X X XAtmel ATML X PLITEK Private XAvery Dennison AVY X Precision Dynamics Private X XAxcess AXSI X X X Printronix Private XBrady Corp BRC X X Provia Software Inc. Private XBlueStar Private X Red Prairie Private X XBlue Vector Private X X X Reva Systems Private XCheckpoint Systems Inc. CKP X X X RF Code Private X X XCIM Bar Code Private X RF Technologies Private X XCisco CSCO X Rfid, Inc. Private X XComputer Sciences Corp. CSC X RFID Global Solution Private X XConfidex Private X RFTechnologies Private X X XDanaher (Accu-Sort) DHR X RSI ID Technologies Private X X XDatalogic DAL X X Rush Tracking Systems Private XDover (Datamax) DOV X SAP SAP X XDigital Angel DOC X X Sato Japan X XDomino-ISG Private X SAVR Communications Private XEkahau Private X X X X X Lockheed (Savi) LMT X X X X XEM Microelectronic Marin UHR.DE X ScanSource Inc. SCSC XFeig Electronic Private X X Siemens SI X XFluensee Private X X SimplyRFID Private X XGlobe Ranger Private X Sirit SI.TSX XGoliath Solutions Private X X SkyeTek Private XHewlett-Packard HPQ X Sovereign Tracking Sys. Private X X X XASSA-ABLOY (HID) ASSA X X STMicroelectronics STM X XHK Systems Private X Sun Microsystems SUNW X XIBM IBM X X System Concepts, Inc. Private X XID Systems IDSY X X X Tagsys Private X X X X XIdentec Solutions Private X X X X Texas Instruments TXN X XImpinj Inc. Private X X ThingMagic Private XInfineon IFX X Toppan Printing 7911 X X XIntel Corporation INTC X X Toshiba TEC Japan X XIntelleflex Private X X X Roper (TransCore) ROP X X XIntermec IN X X X X TrenStar Inc. Private X XIPICO RFD.TSX X X X Tyco (Sensormatic) TYC X X XLexmark LXK X UPM Raflatac UPM XLowry Computer Private X X X X Venture Private XKennedy Group Private X X X X Verichip CHIP X XMagellan Technology Private X X X Verisign VRSN X X XManhattan Associates MANH X X Vue Technology Private X XMARKEM Private X X Wavetrend Private X X X XMiles Technologies Private X WJ Communications WJCI XMoore Wallace RRD X Xterprise Private X XMotorola (Symbol) MOT X X Zebra Technologies ZBRA X X X X X


Comparable RFID Valuation

Price Market

Fiscal Latest Per Share Value of Enterprise Book Ticker Company (1) Year End Quarter Shares (2) 2/12/2008 Equity Debt (3) Value Value Low High

Wireless Infrastructure:RIMM Research In Motion Ltd. 2/28/2008 11/30/2007 557.6 $94.47 $52,677.7 7.5 $51,408.3 3057.0185 $42.93 $137.01GRMN Garmin 12/31/2008 12/31/2007 216.1 $66.13 14,290.6 0.6 13,583.8 1920.6142 $50.01 $125.68ELMG EMS Technology (LXE) 12/31/2008 12/31/2007 15.3 $26.92 412.6 13.7 304.5 224.36735 $18.00 $33.23NVTL Novatel Wireless Inc. 12/31/2008 12/31/2007 29.7 $14.21 422.6 0.4 337.3 167.56495 $11.61 $29.14IDSY ID Systems Inc. 12/31/2008 12/31/2007 11.3 $7.62 86.1 0.1 21.1 77.422803 $7.53 $16.63

IT Solutions/Software: ACN Accenture Ltd. 8/31/2008 11/30/2007 595.9 $34.16 $20,356.7 8.5 $18,502.6 2063.3324 $31.91 $44.03IBM International Business Machines Corp. 12/31/2008 12/31/2007 1506.5 $105.14 158,391.6 35,274.0 164,006.3 18555.2 $88.77 $121.46MANH Manhattan Associates Inc. 12/31/2008 12/31/2007 27.6 $22.61 624.3 0.0 500.4 219.14573 $21.31 $31.63SAP SAP AG 12/31/2008 12/31/2007 1218.3 $47.97 58,441.2 34.5 53,401.3 7995.0518 $43.00 $59.86SUNW Sun Microsystems Inc. 6/30/2008 12/31/2007 883.5 $16.81 14,851.6 1,274.0 11,154.5 6636.162 $14.20 $26.68UIS Unisys Corp. 12/31/2008 12/31/2007 345.4 $4.11 1,419.6 1,262.7 1,877.3 -2.171402 $3.04 $9.70VRSN Verisign 12/31/2008 12/31/2007 243.8 $35.32 8,612.6 1,265.3 7,813.1 2521.2092 $23.78 $41.96

Data Capture: ZBRA Zebra Technologies Corp. 12/31/2008 12/31/2007 68.8 $30.18 $2,077.3 0.0 $1,754.0 939.04611 $27.50 $42.50IN Intermec, Inc. 12/31/2008 12/31/2007 60.3 $22.74 1,371.6 100.0 1,221.7 425.5295 $17.53 $30.16AVY Avery Dennison 12/31/2008 12/31/2007 98.3 $50.14 4,929.4 2,255.8 7,112.5 1825.696 $44.06 $68.98BRC Brady Corp. 7/31/2008 10/31/2007 54.1 $29.30 1,585.9 500.0 1,906.4 891.01225 $28.40 $44.46CKP Checkpoint Systems Inc. 12/31/2008 12/31/2007 39.3 $23.76 933.3 16.5 790.0 505.4997 $18.40 $30.50PTNX Printronix Inc. 3/31/2008 12/31/2007 6.7 $15.95 106.5 0.0 77.4 72.257179 $11.02 $16.25

Components/Semi-Conductors: IFX Infineon Technologies AG 9/30/2008 12/31/2007 749.7 $8.31 $6,230.2 2,732.2 $7,591.2 7003.8993 $7.89 $18.74PHG Koninklijke Philips Electronics NV 12/31/2008 12/31/2007 1106.9 $37.70 41,729.9 5,194.3 32,596.7 30430.669 $34.91 $45.90STM STMicroelectronics NV 12/31/2008 12/31/2007 897.4 $11.56 10,373.9 2,220.0 9,805.2 8896.0283 $11.39 $20.84WJCI WJ Communications 12/31/2008 12/31/2007 67.3 $0.64 43.1 0.0 18.7 23.035341 $0.40 $2.00CHIP Verichip 12/31/2008 12/31/2007 3.5 $2.10 7.4 14.0 25.9 10.926395 $1.76 $10.62TXN Texas Instruments Inc. 12/31/2008 12/31/2007 1450.0 $30.16 43,732.9 0.0 37,587.3 11662.467 $28.00 $39.63

Networking/TelecomINTC Intel Corporation 12/31/2008 12/31/2007 5766.0 $20.68 $119,240.9 2,122.0 $107,468.2 39309.405 $18.05 $27.99MOT Motorola Inc. 12/31/2008 12/31/2007 2397.4 $11.57 27,737.9 4,323.0 22,146.4 15640.17 $9.43 $19.90CSCO Cisco Systems Inc. 7/31/2008 10/31/2007 6100.0 $23.52 143,472.0 6,851.0 127,287.6 31480.002 $21.77 $34.24NOK Nokia Oyj 12/31/2008 12/31/2007 3965.7 $36.13 143,281.8 1,860.4 123,651.7 20451.059 $20.77 $42.22QCOM Qualcomm Inc. 9/30/2008 12/31/2007 1646.0 $41.86 68,901.6 283.0 61,121.9 15835.001 $35.17 $47.72ERIC LM Ericsson 12/31/2008 12/31/2007 1588.1 $20.45 32,477.2 4,215.1 27,779.5 18490.138 $19.48 $43.41

(1) Information Provided by Capital IQ and Factset.(2) Excludes options(3) Net debt equals total debt (including capital leases) plus preferred stock at book value plus minority interest minus cash and short term investments(4) Book value equals total shareholders' equity less preferred stock at book value

** Incomplete metrics as a result of recent IPO

52 Week Price

COMPARABLE RFID VALUATIONAnalysis of Selected Ratios and Current Market Multiples

(in millions, except per share amounts)



* Cap Cap

Net Gross Net Gross Net EBIT to:Ticker Company (1) Sales Profit (2) EBITDA EBIT Income (3) Profit (2) EBITDA EBIT Income (3) Total Cap. EBITDA Int

Wireless Infrastructure:RIMM Research In Motion Ltd. $5,057.1 $2,510.9 $1,643.9 $1,482.8 $631.6 49.7% 32.5% 29.3% 12.5% 0% 0.5% NAGRMN Garmin $2,574.5 $1,258.7 $880.8 $830.1 $514.1 48.9% 34.2% 32.2% 20.0% 0% 0.1% 2,338.2ELMG EMS Technology (LXE) $284.2 $29.5 $6.4 $6.4 $15.8 10.4% 2.3% 2.3% 5.6% 5% 43.4% 11.5NVTL Novatel Wireless Inc. $388.9 $116.1 $5.9 -$2.1 $0.4 29.8% 1.5% -0.5% 0.1% 0% 0.6% 842.1IDSY ID Systems Inc. $17.3 $7.9 -$6.9 -$7.4 -$1.6 45.8% -40.0% -43.0% -9.4% 0% NA (495.7)

IT Solutions/Software: ACN Accenture Ltd. $22,388.4 $6,314.3 $2,989.1 $2,805.2 $1,243.1 28.2% 13.4% 12.5% 5.6% 0% 0.3% 110.8IBM International Business Machines Corp. $98,786.0 $36,530.0 $18,967.0 $14,964.0 $9,416.0 37.0% 19.2% 15.1% 9.5% 33% 186.0% 15.6MANH Manhattan Associates Inc. $337.4 $176.4 $61.3 $47.7 $19.3 52.3% 18.2% 14.1% 5.7% 0% 0.0% 90.8SAP SAP AG $14,960.8 $10,020.6 $4,554.7 $4,175.0 $2,469.7 67.0% 30.4% 27.9% 16.5% 0% 0.8% NASUNW Sun Microsystems Inc. $13,952.0 $6,587.0 $1,850.0 $1,049.0 $473.0 47.2% 13.3% 7.5% 3.4% 15% 68.9% NAUIS Unisys Corp. $5,652.5 $1,319.3 $512.3 $131.8 -$278.7 23.3% 9.1% 2.3% -4.9% 107% 487.9% 1.7VRSN Verisign $1,496.3 $959.0 $358.0 $120.3 $378.0 64.1% 23.9% 8.0% 25.3% 0% 353.4% NA

Data Capture: ZBRA Zebra Technologies Corp. $844.6 $393.7 $196.0 $172.1 $69.6 46.6% 23.2% 20.4% 8.2% 0% 0.0% 1,593.4IN Intermec, Inc. $849.2 $361.0 $46.1 $34.4 $35.0 42.5% 5.4% 4.1% 4.1% 19% 216.9% 0.0AVY Avery Dennison $6,307.8 $1,863.7 $817.5 $582.9 $352.5 29.5% 13.0% 9.2% 5.6% 23% 310.1% 5.5BRC Brady Corp. $1,410.5 $680.6 $247.2 $192.1 $109.4 48.3% 17.5% 13.6% 7.8% 35% 202.2% 7.7CKP Checkpoint Systems Inc. $787.8 $333.0 $94.0 $75.2 $35.0 42.3% 11.9% 9.5% 4.4% 2% 17.5% 44.1PTNX Printronix Inc. $127.5 $50.1 $8.9 $4.9 $2.9 39.3% 7.0% 3.8% 2.3% 0% 0.0% 8.4

Components/Semi-Conductors: IFX Infineon Technologies AG $10,451.6 $1,370.2 $639.3 -$1,191.2 -$473.5 13.1% 6.1% -11.4% -4.5% 22% 169.1% (28.1)PHG Koninklijke Philips Electronics NV $39,125.8 $13,389.5 $3,047.2 $2,302.9 $1,212.8 34.2% 7.8% 5.9% 3.1% 12% 170.5% 7.7STM STMicroelectronics NV $10,001.0 $3,544.0 $2,214.0 $801.0 $782.0 35.4% 22.1% 8.0% 7.8% 17% 99.8% 18.2WJCI WJ Communications $44.6 $21.7 -$5.5 -$9.5 -$8.4 48.6% -12.2% -21.2% -18.8% 0% NA (121.3)CHIP Verichip $23.7 $15.5 -$6.4 -$8.9 -$6.7 65.4% -27.1% -37.6% -28.4% 38% NA** (5.9)TXN Texas Instruments Inc. $13,835.0 $7,314.0 $4,559.0 $3,489.0 $2,638.0 52.9% 33.0% 25.2% 19.1% 0% 0.0% 1,744.5

Networking/TelecomINTC Intel Corporation $38,334.0 $20,001.0 $13,643.0 $8,845.0 $5,044.0 52.2% 35.6% 23.1% 13.2% 5% 16.0% 324.0MOT Motorola Inc. $36,622.0 $10,179.0 $2,111.0 $1,271.0 $3,261.0 27.8% 5.8% 3.5% 8.9% 14% 204.8% 16.6CSCO Cisco Systems Inc. $37,684.0 $23,789.0 $10,951.0 $9,350.0 $7,333.0 63.1% 29.1% 24.8% 19.5% 17% 57.8% 24.7NOK Nokia Oyj $74,560.0 $26,585.7 $11,681.8 $10,101.7 $5,682.6 35.7% 15.7% 13.5% 7.6% 1% 15.9% 0.1QCOM Qualcomm Inc. $9,292.0 $6,462.0 $4,159.0 $3,759.0 $3,303.0 69.5% 44.8% 40.5% 35.5% 1% 6.8% 234.9ERIC LM Ericsson $29,082.5 $8,730.0 $5,021.7 $5,021.7 $3,841.1 30.0% 17.3% 17.3% 13.2% 10% 63.5% 19.1

Mean 42.8% 13.8% 8.7% 6.5% 12.2%Median 45.6% 13.4% 9.5% 5.7% 3.6%High 69.5% 44.8% 40.5% 35.5% 106.5%Low 10.4% -40.0% -43.0% -28.4% 0.0%

(1) Information Provided by Capital IQ.(2) Before depreciation and amortization.(3) Represents income from continuing operations before extraordinary items.* Numbers not available as systems are still in the process of being updated following earnings reports.** Incomplete metrics as a result of recent IPO

Latest Twelve Month Results Latest Twelve Month MarginsDebt to:





Growth PEG Net Book Dividend Ticker Company (1) EPS P/E EPS (2) P/E EPS (2) P/E Rate (2) Ratio Sales EBITDA EBIT Net Inc Value Yield

Wireless Infrastructure:RIMM Research In Motion Ltd. $1.87 50.6x $0.97 97.2x $2.11 44.7x 34.0% 1.3 21.0 32.0x 35.5x 83.4x 17.2 0.0%GRMN Garmin $3.32 19.9 $2.35 28.1 $3.59 18.4 21.5% 0.9 11.4 16.2 17.2 27.8 7.4 1.3%ELMG EMS Technology (LXE) $1.22 22.1 $0.81 33.2 $1.13 23.9 NA NA 14.0 64.5 64.5 26.1 1.8 0.0%NVTL Novatel Wireless Inc. $0.96 14.8 $0.01 1,421.0 $1.18 12.1 15.0% 0.8 3.6 71.6 (201.3) 954.1 2.5 0.0%IDSY ID Systems Inc. -$0.66 (11.5) $0.11 69.3 -$0.29 (26.0) 17.0% (1.5) 10.9 (12.5) (11.6) -53.3 1.1 0.0%

IT Solutions/Software: ACN Accenture Ltd. $2.11 16.2x $1.73 19.7x $2.11 16.2x 13.9% 1.2 3.2x 6.8x 7.3x 16.4 9.9 0.0%IBM International Business Machines Corp. $7.24 14.5 $6.06 17.3 $7.13 14.7 11.1% 1.3 4.3 8.4 10.6x 16.8 8.5 0.9%MANH Manhattan Associates Inc. $1.13 20.0 $1.08 20.9 $1.30 17.4 15.0% 1.2 3.5 10.2 13.1 32.3 2.8 0.0%SAP SAP AG $2.33 20.6 $2.01 23.9 $2.19 21.9 14.0% 1.6 5.8 12.8 14.0 23.7 7.3 0.7%SUNW Sun Microsystems Inc. $0.87 19.3 -$0.08 (210.1) $0.82 20.4 8.3% 2.5 2.3 8.0 14.2 31.4 2.2 0.0%UIS Unisys Corp. -$0.23 (17.9) -$0.81 (5.1) -$0.23 (17.9) 8.3% (2.1) 1.1 2.8 10.8 -5.1 -653.8 0.0%VRSN Verisign -$0.59 (59.9) $0.96 36.8 $1.02 34.6 18.0% 1.9 9.0 24.1 71.6 22.8 3.4 0.0%

Data Capture: ZBRA Zebra Technologies Corp. $1.45 20.8x $1.56 19.3x $1.64 18.5x 15.7% 1.2 5.3x 10.6x 12.1x 29.8 2.2 0.0%IN Intermec, Inc. $0.40 56.9 $0.38 59.8 $0.40 56.9 19.5% 2.9 3.8 29.8 39.9 39.2 3.2 0.0%AVY Avery Dennison $3.07 16.3 $3.78 13.3 $3.91 12.8 10.5% 1.2 2.6 6.0 8.5 14.0 2.7 2.5%BRC Brady Corp. $2.03 14.4 $2.04 14.4 $2.16 13.6 12.3% 1.1 2.3 6.4 8.3 14.5 1.8 2.0%CKP Checkpoint Systems Inc. $1.29 18.4 $1.00 23.8 $1.37 17.4 17.0% 1.0 2.8 9.9 12.4 26.7 1.8 0.0%PTNX Printronix Inc. $0.66 24.2 -$0.77 (20.7) NA NA NA NA 2.1 NA NA 37.0 1.5 0.0%

Components/Semi-Conductors: IFX Infineon Technologies AG -$1.62 -5.1x -$0.51 -16.4x -$1.02 -8.1x 8.0% (1.0) 4.5x 9.7x -5.2x -13.2 0.9 0.0%PHG Koninklijke Philips Electronics NV $6.15 6.1 $1.09 34.6 $5.21 7.2 24.7% 0.3 3.1 13.7 18.1 34.4 1.4 1.7%STM STMicroelectronics NV -$0.54 (21.4) $0.83 13.9 $0.77 15.0 15.0% 1.0 2.9 4.7 13.0 13.3 1.2 0.7%WJCI WJ Communications -$0.14 (4.6) -$0.13 (4.9) -$0.11 (6.1) NA NA 2.0 (7.9) (4.6) -5.1 1.9 0.0%CHIP Verichip -$1.35 (1.6) -$1.21 (1.7) -$1.30 (1.6) NA NA 0.5 (1.1) (0.8) -1.1 0.7 0.0%TXN Texas Instruments Inc. $1.83 16.5 $1.69 17.8 $1.83 16.5 17.8% 0.9 6.0 9.6 12.5 16.6 3.7 0.4%

Networking/Telecom INTC Intel Corporation $1.18 17.5x $0.86 24.0x $1.18 17.5x 16.3% 1.1 6.0x 8.7x 13.5 23.6 3.0 0.7%MOT Motorola Inc. -$0.04 (289.3) $1.19 9.7 $0.24 48.2 9.6% 5.0 2.7 13.1 21.8 8.5 1.8 1.1%CSCO Cisco Systems Inc. $1.29 18.2 $1.20 19.6 $1.43 16.5 13.4% 1.2 6.0 13.1 15.3 19.6 4.6 0.0%NOK Nokia Oyj $2.67 13.5 $1.27 28.4 $2.01 18.0 12.5% 1.4 5.4 12.3 14.2 25.2 7.0 2.7%QCOM Qualcomm Inc. $2.03 20.6 $1.73 24.2 $2.03 20.6 19.4% 1.1 10.7 16.6 18.3 20.9 4.4 0.6%ERIC LM Ericsson $2.12 9.6 $2.24 9.1 $2.03 10.1 10.0% 1.0 3.7 6.5 6.5 8.5 1.8 0.0%

Mean 0.9x 60.7x 15.6x 15.3% 1.1x 5.4x 14.0x 8.6x 49.6 (18.8) 0.5%Median 16.3 19.7 16.5 15.0% 1.1 3.8 9.9 13.0 21.8 2.4 0.0%High 56.9 1,421.0 56.9 34.0% 5.0 21.0 71.6 71.6 954.1 17.2 2.7%Low (289.3) (210.1) (26.0) 8.0% (2.1) 0.5 (12.5) (201.3) (53.3) (653.8) 0.0%

(1) Information Provided by Capital IQ.(2) Based on mean Multex estimates. EPS estimates are calendarized for comparison purposes.(3) Cal. Year Ended 2004 P/E divided my Multex's estimated mean five year growth rate.* Numbers not available as systems are still in the process of being updated following earnings reports.** Incomplete metrics as a result of recent IPO

LTM Cal. Year Ended 2006 Cal. Year Ended 2007 Price to:




Glossary of RFID Terms Active RFID Tag – The tag has an internal power source (i.e., a battery), which allows for significantly longer read ranges. Primarily used to track large, high-value assets such as intermodal shipping containers. Active tags are significantly larger and more expensive ($25-$250 per unit) than passive tags.

Air Interface – The communication protocol between the tag and reader. Passive tags at UHF are standardized around the Generation 2 protocol; HF is seeking a similar standard. Some active tags are increasingly communicating with standardized Wi-Fi networks (IEEE 802.11x), however, active continues to see several proprietary air interface protocols.

Antenna – Attached to chips on tags and an integral part of a reader; antennas are devices that send and receive radio frequency (electromagnetic) energy.

Anti-Collision – A component of the air-interface protocol that prevents tag data from multiple tags in the read area from interfering (colliding) with each other. Also prevents multiple readers in close proximity from interfering with each other. This is a key component to the Generation 2 standard.

Battery Assisted Passive (also semi-passive) – Passive tags that offer a small battery to boost signal strength, or improve tag sensor capability. The battery generally goes into sleep mode until required. Referred to as Class 3 products; a standard is expected in early 2008.

Class 0 – Class 0 refers to a proprietary air interface protocol for passive UHF tags. Class 0 is read only, while a subsequent protocol, Class 0 Plus, offers read/write capability. This protocol is largely obsolete with Gen 2.

Class 1 – Class 1 refers to a proprietary air interface protocol for passive UHF tags. Class 1 offers read/write capability. Class This protocol is largely obsolete with Gen 2.

Closed Loop Solution – Set of readers and tags intended for a particular application having specific, well defined start and end point. Generally seen in tracking work in process or reverse logistics operations.

DoD Mandate – A mandate to all 43,000+ DoD suppliers, announced in June of 2003, to employ RFID. The DoD issued a timetable specifying when RFID will be required (by products into specified DoD depots). The timetable has been somewhat fluid given DoD budget dollars are focused on existing operations in Iraq and Afghanistan.

Dual Di-Pole – A tag that essentially has two antennas, reducing the sensitivity to orientation and increasing read capability.

Electronic Product Codes (EPC) – The code that resides on an RFID tag that is unique to each product. The code contains manufacturer and product

information as well as an individualized serial number. EPCs are maintained by EPCglobal.

Encode and Apply – A step up from “Slap and Ship,” where labels are encoded and applied on a more automated basis. Slightly more capital intensive, but more operationally efficient than slap and ship.

Encoder – Device that transmits and writes data on to an RFID tag. Used extensively in printers and label applicators for product shipments. Encoders are generally RFID reader modules developed for a printing or other encoding application.

Environmental Factors – Typically discussed with respect to UHF products, which can be affected by many factors including the presence of metal, liquids, significant reader activity, other RF “noise,” etc. These factors require process controls in terms of tag and reader placement. Readers also need proper adjustment for a given environment.

EPC Global – The body responsible for RFID standards creation; formed originally as a joint venture between the Uniform Code Council (UCC) and the Electronic Article Numbering Association (EAN). EPC Global is responsible for RFID standards development and for promoting vertical RFID solution development.

EPC Network – Developed by the Auto-ID center, this Internet-based system allows supply chain participants to retrieve data associated with an EPC through the Internet. The network remains in an emerging phase, and is administered by EPC Global.

Fluidic Self Assembly (FSA) – A proprietary process developed to rapidly attach chips to straps. The process uses a fluid bath to place small chips on a substrate for strap attachment. This process continues to be developed.

Generation 2 – The RFID air interface standard for supply chain shipments using UHF. The Gen 2 standard was approved in December 2004 by EPC Global, and has since received international approval by ISO as 18000-6C. EPCglobal is working to create a similar standard for HF.

High Frequency (HF) RFID – RFID products that use the 13.56MHz band, which is not regulated by any government. This frequency generally allows read ranges of 4-8 feet, and is not affected by environmental factors such as liquid due to magnetic coupling. The existing ISO 15963 standard is different from the Gen 2 protocol. We expect a new EPC-based standard by the end of 2007. HF has historically be used in contactless payment and item level tracking applications.


Glossary of RFID Terms Hybrid (semi-active) RFID Tag – Tag that incorporates a smaller internal power supply, which is triggered by reader action. After interrogation, the tag resumes a passive stance.

ISO – International Organization for Standardization is a network of the national standards institutes of 148 countries, on the basis of one member per country, with a Central Secretariat in Geneva, Switzerland, that coordinates the system. ISO is not government affiliated. EPC Global is an ISO member and has received ISO approval for the Generation 2 standard.

Kill Command – A code within the RFID tag that once activated will permanently disable the tag. Intended to limit consumer tracking after purchase for privacy protection.

Low Frequency (LF) RFID – RFID products that use the 125Kz band. Products that use this frequency are generally smaller and cheaper as read ranges are short, typically less than 12 inches. Security access and control and contactless payment are typical applications.

Mandate Requirements – Primarily refers to an edict put in place by retailers, most notably Metro, Wal-Mart and the DoD, requiring that certain types of shipments (mostly deliveries at the case and pallet level) use RFID for tracking purposes. The Metro mandate is the only one that imposes a charge for non-compliance.

Metro Mandate – German based retailer that is piloting Gen 2 based RFID at 229 German based stores. Suppliers are required to tag all pallets by October 1, 2007 or face a charge of approximately 2 euros per pallet. Case level tagging is expected in 2008. Metro, the worlds 5th largest retailer, operates roughly 2,400 stores in Europe and Asia. Middleware – A specific class of software that offers several levels of functionality. Middleware acts as a data filter, eliminating duplicate reads so that the host system maintains accurate records and is not inundated with excessive data. Middleware also ensures that the RFID data formatting “maps up” with the host system data structure.

Optional User Memory – Additional bits memory available on a tag that can be used by any member of the supply chain as they see fit (i.e., routing information). Intended to allow for increased tracking efficiency.

Parallel Integrated Chip Assembly (PICA) – A proprietary process developed by Symbol (Motorola) to rapidly assemble chips to tags. The process uses small punches to extract a chip from the wafer and attach the chip to the tag antenna using a single motion. The process remains in test stages, and

Motorola no longer produces tags.

Passive RFID Tag – A tag that receives its power supply from the reader upon interrogation. Used primarily in supply chain applications, these tags tend to be small in size and relatively inexpensive compared to active tags.

Pilots – Testing done by companies seeking RFID solutions, primarily for supply chain applications. Consumer product companies under mandate requirements are seeking ways to increase the value add to themselves in addition to meeting mandate compliance, which requires evaluation of equipment and internal business processes. Portal – A door or other point in a facility surrounded by fixed RFID readers to identify and track the flow of product. Dock doors are a typical example.

Reader – Also known as an interrogator. Typically a network-based device and antenna configuration, which reads the information contained on an RFID tag. In passive operations, the reader supplies the tag with power. Readers can be fixed position for dock door or other portal applications, or embedded into mobile computing devices for in store or exception reporting requirements. Rollout – When pilots provide sufficient evidence of a strong return on investment, companies are expected to deploy (rollout) the technology into greater parts of their internal operations or external supply chain partners. This process is expected to result in significant growth for the RFID industry. Slap and Ship – Refers to placing an RFID tagged bar code label on products immediately before shipment. The process is typically done on an exception basis for products requiring compliance labeling. Slap and Ship is not labor efficient and allows virtually no incremental value add to the supplier; however, the up-front capital investment is small. Strap – Component of a tag or inlay that connects the microchip to the antenna. The purpose of the strap is largely to make the manufacturing process of antenna attachment easier and faster.

Tag – Also referred to as transponder or transponder tag, which is typically affixed to an item for tracking purposes. Composed of a semi-conductor chip and antenna held together in a substrate. Each tag has a manufacturer installed unique identification number as well as additional few bits to many kilobits of incremental memory. Passive tags receive energy from the reader, while active tags have an internal power supply.


Glossary of RFID Terms UID – Unique Identification is a DoD based numbering scheme to identify a broad range of high-value assets. RFID is not necessarily required, but is preferred in many UID applications. UID applications typically require more than 256 bits of memory. Ultra High Frequency (UHF) RFID – RFID products that use the 868MHz to 950MHz frequency band, which is regulated by governments. This frequency allows read ranges of 8-30 feet (2x-4x of HF), but can be heavily affected by environmental factors, including liquids and metals. Wal-Mart Mandate – Wal-Mart mandated that its top 600 suppliers ship products with Gen 2 RFID tags identifying each pallet and case to up to 1,400 stores by the end of 2007. As part of this program, Wal-Mart continues to conduct pilots to determine ROI.

Write Once Read Many (WORM) – Used to describe an RFID tag that allows only one set of data to be written on to it. Typically used in applications where security is a concern.


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Documents

RFID - Griva Case study