|
|
SAMSys
Technologies Inc. (SMY) |
|
|
CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" SAMSys Technologies is producing RFID hardware solutions that will read
multiple tag products simultaneously Bio of CEO, Cliff Horwitz is Chairman and Chief
Executive Officer of SAMSys Technologies Inc., and its operating subsidiaries. Family of products include: CEOCFOinterviews:
Mr. Horwitz, please give us a brief history of SAMSys Technologies. Mr.
Horwitz: “I founded the company in 1994 and in the early beginnings we were
really more of a virtual company. I ‘tripped over’ this technology, more by
accident than by intent. I didn’t have a technology background, but became fascinated
with aspects of technology, as I understood it at the time to be. The technology pertained
to practical applications within the manufacturing and distribution environment and the
supply chain in general. I decided it was an area of technology that I would love to get
involved in and still believe today that this is the greatest commercial opportunity that
I have identified. CEOCFOinterviews: Will you explain what the tag and the reader are, how they are used and what you are actually doing? Mr.
Horwitz: “RFID is an automatic data-collection technology. Unfortunately,
there is a tendency on the part of neophytes, and even those who are industry insiders, to
over simplify the technology. In fact, RFID consists of a multiple number of technologies,
in that radio frequency identification is regulated to operate at various frequencies in
the spectrum. There is low frequency, high frequency, ultra-high frequency, and there is
microwave; each of those frequencies gives rise to a technology that is single and
independent from RFID technology which operates at the other frequencies. Whereas one
tends to compare RFID to other one-dimensional technologies such as bar codes, or magnetic
stripe, RFID is very much more complex because of this multi-frequency environment. CEOCFOinterviews: Can you tell us more about the areas that the RFID technology can be applied? Mr. Horwitz: “We constantly try to encourage prospective end-users to use RFID in applications for which only RFID can be used, due to its inherent functional benefits. If the application calls for automation, which removes human intervention, then you need RFID. It is the only technology that will support that level of functionality. It is perfect for implementing a system which requires extremely high speed, such as at a tollbooth. There are currently operating systems in place in California and Toronto, as examples. The transponder will be read at anything upwards of 100 mph. No other technology will support that kind of interrogation. RFID is considered to be a relatively expensive technology, and therefore the value proposition that needs to be established in order to justify the investment in the infrastructure, is a critical one and thus the need to identify precisely what the benefits are that one is looking for. We don’t see it as a displacement technology, particularly as it pertains to something as simple and inexpensive as barcode. I think where barcode works well it should be utilized; where you require functionality that can’t be met by barcode, or one of the other traditional Auto ID technologies, then certainly there is a solid argument for RFID.” CEOCFOinterviews: How did people look at you when you started to make the readers that would read everybody’s tags? Mr.
Horwitz: “Initially, we were regarded by some as heretics. Once one positions
oneself to be able to interrogate another company’s tags, one has to first and
foremost overcome the perception that you are creating direct competition. We needed to
create a level of comfort that we were not looking to cannibalize anybody else’s
business, but that our intentions and motives were absolutely clear and pure, and that the
aim of the exercise was to promote compatibility because of the lack standards. It is the
on-going lack of standards, which is undeniably the single largest hurdle to the
widespread implementation of RFID. I think that we were successful in convincing the vast
majority of tag vendor companies that even though they might continue to design and
develop reader products of their own, (that were capable of reading only their tags
exclusively), that there was an alternative
marketing strategy for them. They could embrace the market potential for a reader that was
capable of reading theirs, and other tag products. CEOCFOinterviews:
Are your products compatibly priced? Mr. Horwitz: “This is a company dedicated to providing reader products and interrogation tools in this area. We are extremely competitive from a pricing point of view. It is clear that any proposition to support the flexibility and modularity would ‘fall-on-deaf-ears’ if there was a huge premium that was attached. Because we have found ways of engineering products that do not carry a premium, we think that our proposition is even more competitive.” CEOCFOinterviews: It seems to me the question is why not get your product if it has the capability? Mr. Horwitz: “Exactly! We are the safest and most cost effective choice, by virtue of the fact that it really is the greatest safeguard against premature obsolescence.” CEOCFOinterviews: How do you sell and to whom are you selling? Mr. Horwitz: “Initially, the industry has been one that, in its evolution, has been addressing high volume large-scale applications, and we are caught up in that business model. We decided about nine months ago that it was time to change and because of that, we have gone out and aggressively started building a network of value added resellers that have entree to very specific geographic markets and specific application markets. We have again changed somewhat the methodology that has historically been embraced. We are finding the approach we have taken over this past six or seven months is starting to pay off. I would say that one of our better-known relationships was with International Paper Company (NYSE: IP), with whom we formed a relationship a few years ago; they selected us as their prime resource RFID reader product, by virtue of our philosophy and positioning. They embraced the compelling nature of the argument for multi-protocol/multi-frequency architecture.” CEOCFOinterviews: Can you tell us a little about you facilities, the development and manufacturing of your products? Mr. Horwitz: “There is an enormous amount of customization involved. In essence we are a company that was founded in Canada, therefore our head office is in Canada and we maintain an administrative office in Toronto. Our principal facility is in Durham, North Carolina, just outside of Research Triangle Park, where we maintain our engineering activities and most of the resources that we require. We produce small quantities internally, but we subcontract bulk manufacture to various companies with whom we have established relationships over time. We initially started off out-sourcing all of our technical development work, but ultimately, by virtue of the fact that we monopolized the resources of the company that we were using, acquired that company a few years ago and essentially that entity has become the core of our now internal technology development group.” CEOCFOinterviews: Can you tell us about the implementation process and if the architecture is set up for any add-ons or upgrades? Mr. Horwitz: “The key to our architecture is that it is modular in nature. The manner in which that is accomplished is the architecture supports the addition of modules if and when they become necessary. Because of the complexity of the technology, whereby it may well be that certain products are better suited to one frequency vs. another, perhaps at the stage of initial implementation there is simply a single frequency reading, or interrogation, environment created. The architecture will support the addition of other modules as and when or if, they become needed. As frequencies are added, as protocols are added, and as other changes take place to the interrogation environment, there certainly is the potential for additional and on-going supply. It’s typically not going to be a one shot deal. Unfortunately, the industry and technology itself, is at such an early stage that we don’t yet have the track-record by which to determine what will and won’t be happening on a go-forward basis. We have a good idea of what we think will happen, but as the industry matures, I think a lot of this will shake out in the reality of day-to-day applications.” CEOCFOinterviews: Are there government regulations regarding the radio frequency usage? Mr. Horwitz: “Very much so! The worst part about it is that it changes on a jurisdiction-by-jurisdiction basis, so each country has its own sovereign right to establish, regulate and determine, not only which frequencies can be used but the power levels at which they can be used. The power level has a direct impact on the functionality because the higher the power the longer the range. Each application and installation has to be evaluated within the context of what is permitted in that jurisdiction.” CEOCFOinterviews: At this point do you go out and look for new places that your products will be valuable? Mr. Horwitz: “That is what the resellers do. They invariably operate within a geographic area and within certain vertical markets. Clearly, they know the needs of their customers far better than we do. In order to be successful, one has to understand the dynamics for any specific market for which one is providing solutions. We continue to work very closely with these companies in order to address the specific needs of their constituency. Because of the fact that the technology is so multi-faceted, it’s a regular occurrence that one sees the ability to fine-tune a certain device to do one thing in one environment and something entirely different in another environment.” CEOCFOinterviews: What role do patents play for SAMSys? Mr. Horwitz: “There is an element of intellectual property protection that is defensive in nature; in other words, protective of what it is that you have created. I think it is equally defensive to use that intellectual property in order to establish competitive differentiation. By protecting one’s unique intellectual property, you clearly establish what it is that you and you alone are capable of doing. There is a completely different side to the issue and that is that in the final analysis, whatever intellectual property one has protected, it really only has value if one can take it out into the market place and leverage what you have through deployment. I think that for us it is a motivator to recognize that we have created something that is novel and unique, but that we now need to get out there and ensure that there is a commercial value to that intellectual property. That is clearly distinct from just sitting back on it and using it as a threat against others such that it is never deployed.” CEOCFOinterviews: Do you need to reach the public and the business community, and if so, how do you get the story out about RFID and SAMSys? Mr.
Horwitz: “Yes, both! There is a business community, that is the end-user
community of this particular technology and clearly there is a need to educate. While it
is not something that we can do single-handedly, we certainly participate in a number of
initiatives in order to get the comfort level with RFID to as high a level as possible.
Publicity, coverage and telling the
story is a terribly important part of that process. There are trade shows and we are
active participants in those shows. CEOCFOinterviews: What is your current cash and/or credit position? Mr. Horwitz: “We are a company that has always been funded through equity financing. Last year, we completed a significant private placement with a company in the U.K. called BTG which is the world’s largest intellectual property management company. They have been involved in the RFID field for a number of years and believe that our strategy, approach and philosophy surrounding RFID, was the most practical, the most appropriate and certainly the most attractive for them to participate in. They took up a very significant equity position within the company. Right now, we are in the fortunate position of being comfortably liquid although we continue to consume our equity and liquidity base on an on-going basis until such time, as we reach cash-flow neutrality. This is a position that we believe we will reach by the end of the current year. We hope and believe that we will see a transition to a more consistent and reliable revenue stream by the end of this year, to the extent that we don’t continue to have to issue additional equity in order to fund our operation.” CEOCFOinterviews: Do you see acquisitions in the future? Mr. Horwitz: “Very much so! We see this as being an industry that is ‘ripe’ for and desperately in need of rationalization and consolidation, and we are currently evaluating a number of opportunities. We see ourselves as being extremely well positioned to be the consolidator because of our, what we term as, “technology agnostic positioning.” Because we have no ‘axe to grind’ in so many key areas pertaining to the technology, both at the protocol and frequency level, we could easily integrate into our operation a number of entities that own intellectual property specific to one or the other area.” CEOCFOinterviews: What are your final thoughts for shareholders and potential investors? Mr. Horwitz: “This is an industry that by all accounts we are beginning to see more coverage of and therefore greater reinforcement of this fact: We are at the inflection point in the growth curve of RFID. The efforts that have been made by the MIT Group have reinforced the demand and the desirability of RFID as a technology. I think we will see the kind of implementation and the scale of implementation, that we who have been involved in the industry for eight or nine years, have believed was going to materialize. I don’t believe it is a question of if, but only a question of when.” disclaimers |
