What Now for Symbol?
Symbol today reported a loss of $30.5 million for its second quarter, and the firm said its CEO, Bill Nuti, will resign in order to head up NCR Corp. (see Symbol Reports $30.5M Loss and Symbol CEO Hops to NCR).
The Holtsville, N.Y.-based vendor -- which manufactures a range of wireless products, including barcode scanners, mobile computers, payment systems, printers, RFID kit, and wireless LAN equipment -- warned of the second-quarter shortfall late in June, when it said that it would cut some 12 percent of its workforce (see Symbol Cuts 700 Heads). The firm blames the shortfall on a downturn in the retail market.
Now some in the industry are wondering if the company needs to more drastically reinvent itself. One way to do this may be by selling off its wireless LAN business.
Symbol is number two in the enterprise wireless LAN business after Cisco Systems Inc. (Nasdaq: CSCO), but selling 802.11 access points and switches is not the firm's biggest concern. The firm's main business has always been selling barcode scanners and other point-of-sale kit into the retail market.
"The wireless LAN business at Symbol has always been a poor stepchild to their legacy, cashcow business," says one source who did not wish to be named. "Symbol staffed up bigtime over the past two years under Nuti, and while they've garnered some reasonable revenue in the WLAN space, it hasn't met expectations to justify the headcount ramp. Their latest results show that more expense cuts are needed, and this is after some substantial cuts."
It's doubtful that the firm would back out of the WLAN business entirely. But should Symbol build this largely commoditized technology itself or buy it in?
"I think WLANs are irretrievably tied to their future success across the board, so the question is whether they need to develop new technology in this area or could instead partner with another supplier," says Craig Mathias, principal analyst at Farpoint Group.
"I personally think they could drive their WLAN products into both the enterprise and small-business spaces much more effectively than they've been able to so far, so one could make the argument that remaining in the WLAN business makes sense," Mathias says. "If, on the other hand, they are looking to cut costs, they could go to another WLAN supplier and OEM all they need, allowing competition to dive prices lower without having to do a lot of work themselves."
Its not clear what Symbol itself plans at the moment. The firm didn't return calls for comment.
Nuti said back in June that the enterprise WLAN business would be unaffected by planned cuts. "We do not believe we are losing market share. We have evidence from industry analyst companies that we have in fact gained market share across our core businesses," he said at the time.
But the firm's new interim CEO, Sal Iannuzzi, says in a statement that the firm is "focused on balancing our spending on activities needed to drive profitable growth," although it is not yet clear how that will be achieved.
Symbol would not be the first company to get burnt in the Cisco-dominated enterprise wireless LAN business. One-time contender Proxim Corp. (Nasdaq: PROX) finally managed to sell off its assets in July after filing for Chapter 11 bankruptcy protection.
— Dan Jones, Site Editor, Unstrung