Radio-frequency identification technology isn't going away anytime soon. But some of the companies that sell the stuff might be. Even as uses for...

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Radio-frequency identification technology isn’t going away anytime soon.

But some of the companies that sell the stuff might be.

Even as uses for the digital barcodes and tracking chips proliferate, the radio-frequency identification industry may be on the verge of a shake-up that could hit the Dallas area harder than others.

Experts say that while consolidations, bankruptcies and mergers may sound traumatic, they would actually indicate the industry is maturing.

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And opportunities will continue to blossom for startups focused on new uses for the technology.

John Koenigs, president and chief executive of Richardson, Texas-based RFID software firm GlobeRanger, said the industry is just starting to move out of the startup stage.

“The logical next step in that is, yes, some consolidation,” he said. “I don’t necessarily think consolidation is a bad thing.”

By all appearances, the industry seems to be growing faster.

For example, 135 companies had exhibits at the RFID World conference in Grapevine, Texas, earlier this year compared with 80 last year in Denver, and the show floor was crammed with more than 3,000 attendees.

At the inaugural conference in Fort Lauderdale, Fla., in 2003, there were about 400 attendees.

But Dean Frew, president and chief executive officer at Dallas-based RFID implementation firm Xterprise Solutions, said some of those companies might not be back next year.

He pointed to a handful of major recent acquisitions.

In September, Symbol Technologies bought Matrics for $230 million in cash.

Last month, VeriSign bought radio-frequency consulting firm R4 Global Solutions for $15 million in cash.

Neither of those deals involved Texas companies, but given the concentration of radio-frequency identification companies in the Dallas area, industry experts say it’s only a matter of time before deals start closing closer to home.

Tony Sabetti, director of retail-supply-chain products for the RFID division at Dallas-based Texas Instruments, said there are about 40 to 50 companies in the Dallas area focused solely on radio-frequency technology.

“History says that most technologies when they first emerge have dozens and dozens of companies and, over time, those that evolve succeed and stay, and those that don’t become niche players or go on to something else,” he said.

Impact of Wal-Mart

Many of the new firms sprang up to cater to companies trying to meet Wal-Mart’s RFID mandate.

Wal-Mart has already required its largest suppliers to start using radio-frequency technology, and is now pushing its smaller suppliers to adopt it as well.

While many suppliers simply did the bare minimum to comply initially, they now hope to use radio-frequency tags and readers to help their own supply chains operate as efficiently as Wal-Mart’s, Frew said.

As a result, the less sophisticated startup radio-frequency firms that just stick tags on boxes without helping a company overhaul its supply chain are going to see demand decline.

Xterprise, which was founded in 2002, is on pace for revenue 10 times higher than a year ago and is about to move to a larger facility in Carrollton, Texas, Frew said.

“Some firms are going to do IPOs,” Frew said. “Some firms are going to get bought out. Some firms are just going to decay and go. It really is this food chain.”

Siemens is one of the companies that might do some of the buying out.

“We’re looking at about a dozen” radio-frequency companies, said Bob Turk, director of RFID for Siemens. “I can’t tell you how many we’re going to buy. We may buy none. But we’re always looking at new businesses.”

Turk said compliance mandates from companies like Wal-Mart and agencies like the Department of Defense are still driving most of the demand for radio-frequency products and services.

But over the next two years, most of the affected companies will be in compliance and will start using RFID technologies internally, he said.

The potential return on investment will be too big for them to ignore, he said.

“I think once some of those case studies and once some of those facts start to get known and publicized, we’ll see much more of a groundswell,” Turk said.

New uses

But even as the industry matures, Koenigs at GlobeRanger said, new uses will pop up, creating opportunities for startups.

“This stuff is going to be pervasive,” he said. “It’s molecular level sensor technology in your clothes and under your skin. We call it pervasive automation.”

“The good news is that the market maturity curve is probably a 10- to 15-year curve,” Koenigs said.

Turk said he also expects to see new companies perfecting battery technology for some of the more powerful RFID tags, as well as more software firms creating programs to help companies integrate their radio-frequency data with the rest of their infrastructure.

“There are some significant product and service voids that need to be filled,” said Sabetti at Texas Instruments. “And I think there’s a wonderful opportunity for some of these small companies to fill those voids.”