Enterprise Mobility & Connected Devices Blog

Honeywell's Intermec Acquisition Reshaping the Competitive Landscape of the Rugged Mobile Market

After monitoring the rugged mobile market and witnessing the consolidation trend that has been taking the market by storm for the past few years (e.g. Honeywell's acquisition of EMS Technologies, Inc and Motorola Solutions' acquisition of PSION), here at VDC Research, we were expecting 2012 to bring us more in terms of acquisitions - and the month of December did not disappoint us. On Monday, Honeywell International Inc. (NYSE: HON) announced that it would acquire Intermec Inc. (NYSE: IN) for about $600 million in cash ($10 per share).

Despite maintaining its competitive position, Intermec, the workflow performance company that develops, manufactures and integrates technologies that identify, track and manage supply chain assets has been going through restructuring and was in search of a new CEO in addition to evaluating its alternatives. In addition to being a key manufacturer of rugged mobile computers, RFID, barcode scanners and barcode printers, the company is a turnkey solution provider with offerings in hardware, software, services and integrated solutions.

In this blog post, we are going to be looking at Honeywell's acquisition of Intermec and its impact on the enterprise mobility market.

Sign of the Times*:The rugged mobile market - and more specifically the rugged handheld market - is at crossroads. In fact we appear to be entering a phase of lower growth. Some of this can be attributed to consumerization and increased market erosion by smartphones. In addition, macro factors such as the weak economic climate in Europe and the soft recovery in North America do not bode well for higher growth dynamics. What is increasingly clear for participants in this already wildly fragmented market is that without scale - or an extremely focused niche position - one's ability to compete is compromised. Although Motorola - fresh off its recent acquisition of PSION - remains the clear leader in the rugged handheld market with over 40% share, combining Honeywell (LXE) and Intermec creates a more viable "number two" with a market share reaching 20%. This substantially broadens the gap with the rest of the market as the next closest competitor's share hovers around 5%.

Portfolio Fit and Mix:Honeywell's enterprise mobility and AIDC products are part of its Scanning Mobility unit within its ACS division. From a hardware perspective, Intermec expands Honeywell's rugged handheld and forklift mounted portfolio, especially around devices for field mobile and logistics solutions. In addition, through Intermec's printer and media division Honeywell has effectively expanded its TAM by several billion. Moreover, with Intermec's Vocollect division (Vocollect is the leader in voice solutions for mobile workers) Honeywell is further enhancing its warehouse capabilities, a critical market for rugged mobile and data collection technologies. What is likely especially appealing to Honeywell, is access to Intermec's installed base - particularly in markets like DSD, industrial warehousing, logistics and field service. Beyond core hardware, Intermec also has some interesting capabilities around professional services - through its Enterprise Mobile business unit - and software. These could be critical as Honeywell explores possibilities to enhance its service footprint and scale its service offerings.

Consolidation Trend and Honeywell as a Serial Acquirer:Consolidation trend has been a common theme in theme in the enterprise mobility market over the past couple of years and VDC expects this trend to continue in areas where the market has reached a certain level of maturity. Honeywell has excelled as an acquirer of companies as the company acquired Hand Held Products, Metrologic, EMS Technologies and Intermec since 2007. PSION's acquisition by Motorola Solutions earlier in the year shook up the competitive landscape as the consolidated company is better positioned in the market with its expanded product portfolio and market share gains. While the overall tendency in the market might suggest being more cautious giving the economic uncertainties and volatility, Honeywell once again focused on the potential opportunities associated with it and decided to move forward with the acquisition. The company continues to focus on mid-market deals (under $1 billion) and use consolidation as a way to support its organic growth. Honeywell's expertise in consolidation perhaps gives the company a significant leverage over its peers as the company perceives these acquisitions as a safer way to grow its business.

Despite its large installed base of customers and devices and its strong position with its partner ecosystem, Intermec has been having some challenges over the past couple of quarters. It would be interesting to see how Honeywell successfully integrates the company and turns its business around. The impact of this acquisition on Intermec's employees and product lines is also yet to be seen.

*The figures reported in this section are from VDC Research's Strategic Insights 2012 Enterprise & Government Mobility Hardware Mobile Devices Report and references to consolidated companies when mentioning Motorola Solutions (includes PSION) and Honeywell (includes Intermec).

P.S. Since the announcement of the acquisition, multiple law firms announced that they will be investigating the acquisition as a result of the potential claims against the Board of Directors of Intermec, Inc. We will update this blog post as more information becomes available.

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