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THE GLOBAL AID/ADCINDUSTRY BUSINESS

PLANNING SERVICE 2000

VOLUME 1AMERICAS

HAND HELD SCANNER SERVICE

SUPPLY ANALYSIS

Study Team:

David KrebsSteve Bernard

Production:

Mary Cobb

May 2000

TABLE OF CONTENTS

Table of Contents iii

VOLUME 1AMERICAS

HAND HELD SCANNER SERVICE-SUPPLY ANALYSIS

IEXECUTIVE SUMMARY....................................................................................INTRODUCTION........................................................................................OVERVIEW................................................................................................VERTICAL MARKETS................................................................................DISTRIBUTION CHANNELS......................................................................REGIONAL MARKET ANALYSIS...............................................................

II MARKET ANALYSIS.............................................................................15INTRODUCTION........................................................................................OVERALL MARKET SEGMENTATION AND TRENDS...............................CORE TECHNOLOGY TRENDS - LASER, CCD, AND 2D.........................LASER BAR CODE SCANNER MARKET ANALYSIS.................................Vertical Market Segmentation.....................................................................Application Segmentation...........................................................................Distribution Segmentation...........................................................................CCD BAR CODE SCANNER MARKET ANALYSIS....................................Vertical Market Segmentation.....................................................................Application Segmentation...........................................................................Distribution Segmentation...........................................................................PEN/WAND BAR CODE SCANNER MARKET ANALYSIS.........................Vertical Market Segmentation.....................................................................Application Segmentation...........................................................................Distribution Segmentation...........................................................................2D BAR CODE SCANNER MARKET ANALYSIS........................................Vertical Market Segmentation.....................................................................Application Segmentation...........................................................................Distribution Segmentation...........................................................................REGIONAL MARKET ANALYSIS...............................................................

III SUPPLIER STRATEGIES......................................................................65INTRODUCTION........................................................................................HAND HELD BAR CODE SCANNER MARKET SHARE.............................Regional Share...........................................................................................Technology Share......................................................................................TECHNOLOGY PRODUCT LINE STRATEGIES AND TRENDS.................MARKET STRATEGIES AND TRENDS.....................................................Regional Markets........................................................................................Vertical Markets..........................................................................................Distribution Markets....................................................................................STRATEGIC RELATIONSHIP DEVELOPMENT AND OBJECTIVES..........

IV SUMMARY OBSERVATIONS AND CONCLUSIONS.................................INTRODUCTION........................................................................................OFFERINGS..............................................................................................MARKETS..................................................................................................SALES AND SUPPORT.............................................................................

LIST OF EXHIBITS

List of Exhibits

VOLUME 1AMERICAS

HAND HELD SCANNER SERVICE-SUPPLY ANALYSIS

EXECUTIVE SUMMARY I-1 North American Shipments of Hand Held Bar Code Scanners (Percent of

Dollars)..................................................................................................... I-2 Latin American Shipments of Hand Held Bar Code Scanners (Percent of

Dollars)..................................................................................................... I-3 North American Shipments of Hand Held Bar Code Scanners (Percent of

Units)........................................................................................................ I-4 Latin American Shipments of Hand Held Bar Code Scanners (Percent of

Units)........................................................................................................ I-5 North American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Technology (Percent of Dollars)............................................................ I-6 Latin American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Technology (Percent of Dollars)............................................................ I-7 North American Shipments of Hand Held Bar Code Scanners Segmented by

Economic Sector (Percent of Dollars)........................................................ I-8 Latin American Shipments of Hand Held Bar Code Scanners Segmented by

Economic Sector (Percent of Dollars)........................................................ I-9 North American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Economic Sector (Percent of Dollars)................................................... I-10 Latin American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Economic Sector (Percent of Dollars)................................................... I-11 North American Shipments of Hand Held Bar Code Scanners Segmented by

Distribution Channel (Percent of Dollars)................................................... I-12 Latin American Shipments of Hand Held Bar Code Scanners Segmented by

Distribution Channel (Percent of Dollars)................................................... I-13 North American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Distribution Channel (Percent of Dollars).............................................. I-14 Latin American Shipments of Hand Held 2D Bar Code Scanners Segmented

by Distribution Channel (Percent of Dollars).............................................. I-15 Americas Shipments of Hand Held Bar Code Scanners Segmented by

Regional Market (Percent of Dollars).........................................................

MARKET ANALYSIS II-1 Americas Shipments of Hand Held Bar Code Scanners (Percent of Dollars)..... II-2 Americas Shipments of Hand Held Bar Code Scanners (Percent of Units)........ II-3 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by

Economic Sector (Percent of Dollars)........................................................ II-4 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by

Primary End-User Application (Percent of Dollars)..................................... II-5 Americas Shipments of Hand Held 2D Bar Code Scanners Segmented by

Distribution Channel (Percent of Dollars)................................................... II-6 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by

Economic Sector (Percent of Dollars)........................................................ II-7 Americas Shipments of Hand Held CCD Bar Code Scanners

Segmented by Primary End-User Application(Percent of Dollars)...................................................................................

II-8 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Distribution Channel (Percent of Dollars)...................................................

II-9 Americas Shipments of Hand Held Pen/Wand 2D Bar Code Scanners Segmented by Economic Sector (Percent of Dollars).................................

II-10 Americas Shipments of Hand Held Pen/Wand Bar Code Scanners

v

List of Exhibits

Segmented by Primary End-User Application(Percent of Dollars)...................................................................................

II-11 Americas Shipments of Hand Held Pen/Wand Bar Code Scanners Segmented by Distribution Channel (Percent of Dollars)..............................................

II-12 Americas Shipments of Hand Held 2D Bar Code Scanners Segmented by Technology (Percent of Dollars)................................................................

II-13 Americas Shipments of Hand Held 2D Laser Bar Code Scanners Segmented by Economic Sector (Percent of Dollars)...................................................

II-14 Americas Shipments of Hand Held 2D CCD Bar Code Scanners Segmented by Economic Sector (Percent of Dollars)...................................................

II-15 Americas Shipments of Hand Held 2D Bar Code Scanners Segmented by Primary End-User Application (Percent of Dollars).....................................

II-16 Americas Shipments of Hand Held 2D Bar Code Scanners Segmented by Distribution Channel (Percent of Dollars)...............................................32

II-17 Americas Shipments of Hand Held Bar Code Scanners Segmented by Regional Market (Percent of Dollars).........................................................

II-18 Americas Shipments of Hand Held Laser Bar Code Scanners to the Manufacturing Sector Segmented by Vertical Market (Percent of Dollars). .

II-19 Americas Shipments of Hand Held Laser Bar Code Scanners to the Dependent Warehousing Sector Segmented by Vertical Market (Percent of Dollars).................................................................................................

II-20 Americas Shipments of Hand Held Laser Bar Code Scanners to the Independent Warehousing Sector Segmented by Vertical Market (Percent of Dollars).................................................................................................

II-21 Americas Shipments of Hand Held Laser Bar Code Scanners to the Transportation Sector Segmented by Vertical Market (Percent of Dollars).

II-22 Americas Shipments of Hand Held Laser Bar Code Scanners to the Retail In Store Sector Segmented by Vertical Market (Percent of Dollars)...............

II-23 Americas Shipments of Hand Held Laser Bar Code Scanners to the Health Care Sector Segmented by Vertical Market (Percent of Dollars)................

II-24 Americas Shipments of Hand Held Laser Bar Code Scanners to the Commercial Services Sector Segmented by Vertical Market (Percent of Dollars).....................................................................................................

II-25 Americas Shipments of Hand Held Laser Bar Code Scanners to the Government Sector Segmented by Vertical Market (Percent of Dollars).....

II-26 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Manufacturing End-User Application (Percent of Dollars)..............

II-27 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Warehousing End-User Application (Percent of Dollars)...............

II-28 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Transportation End-User Application (Percent of Dollars).............

II-29 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Retail In Store End-User Application (Percent of Dollars)..............

II-30 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Health Care End-User Application (Percent of Dollars).................

II-31 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Commercial Services End-User Application (Percent of Dollars). . .

II-32 Americas Shipments of Hand Held Laser Bar Code Scanners Segmented by Primary Government End-User Application (Percent of Dollars).................

II-33 Americas Shipments of Hand Held Laser Bar Code Scanners to the Manufacturing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-34 Americas Shipments of Hand Held Laser Bar Code Scanners to the Warehousing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

vi

List of Exhibits

II-35 Americas Shipments of Hand Held Laser Bar Code Scanners to the Transportation Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-36 Americas Shipments of Hand Held Laser Bar Code Scanners to the Retail In Store Sector Segmented by Distribution Channel (Percent of Dollars)........

II-37 Americas Shipments of Hand Held Laser Bar Code Scanners to the Health Care Sector Segmented by Distribution Channel (Percent of Dollars)........

II-38 Americas Shipments of Hand Held Laser Bar Code Scanners to the Commercial Services Sector Segmented by Distribution Channel (Percent of Dollars).................................................................................................

II-39 Americas Shipments of Hand Held Laser Bar Code Scanners to the Government Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-40 Americas Shipments of Hand Held CCD Bar Code Scanners to the Manufacturing Sector Segmented by Vertical Market (Percent of Dollars). .

II-41 Americas Shipments of Hand Held CCD Bar Code Scanners to the Dependent Warehousing Sector Segmented by Vertical Market (Percent of Dollars). . .

II-42 Americas Shipments of Hand Held CCD Bar Code Scanners to the Independent Warehousing Sector Segmented by Vertical Market (Percent of Dollars).................................................................................................

II-43 Americas Shipments of Hand Held CCD Bar Code Scanners to the Transportation Sector Segmented by Vertical Market (Percent of Dollars).

II-44 Americas Shipments of Hand Held CCD Bar Code Scanners to the Retail In Store Sector Segmented by Vertical Market (Percent of Dollars)...............

II-45 Americas Shipments of Hand Held CCD Bar Code Scanners to the Health Care Sector Segmented by Vertical Market (Percent of Dollars)................

II-46 Americas Shipments of Hand Held CCD Bar Code Scanners to the Commercial Services Sector Segmented by Vertical Market (Percent of Dollars).....................................................................................................

II-47 Americas Shipments of Hand Held CCD Bar Code Scanners to the Government Sector Segmented by Vertical Market (Percent of Dollars).....

II-48 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Manufacturing End-User Application (Percent of Dollars)..............

II-49 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Warehousing End-User Application (Percent of Dollars)...............

II-50 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Transportation End-User Application (Percent of Dollars).............

II-51 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Retail In Store End-User Application (Percent of Dollars)..............

II-52 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Health Care End-User Application (Percent of Dollars)................

II-53 Americas Shipments of Hand Held CCD Bar Code Scanners Segmented by Primary Commercial Services End-User Application (Percent of Dollars). . .

II-54 Americas Shipments of Hand Held Bar CCD Code Scanners Segmented by Primary Government End-User Application (Percent of Dollars).................

II-55 Americas Shipments of Hand Held CCD Bar Code Scanners to the Manufacturing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-56 Americas Shipments of Hand Held CCD Bar Code Scanners to the Warehousing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-57 Americas Shipments of Hand Held CCD Bar Code Scanners to the Transportation Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-58 Americas Shipments of Hand Held CCD Bar Code Scanners to the Retail In Store Sector Segmented by Distribution Channel (Percent of Dollars)........

vii

List of Exhibits

II-59 Americas Shipments of Hand Held CCD Bar Code Scanners to the Health Care Sector Segmented by Distribution Channel (Percent of Dollars)........

II-60 Americas Shipments of Hand Held CCD Bar Code Scanners to the Commercial Services Sector Segmented by Distribution Channel (Percent of Dollars).................................................................................................

II-61 Americas Shipments of Hand Held CCD Bar Code Scanners to the Government Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-62 Americas Shipments of Hand Held 2D Bar Code Scanners to the Manufacturing Sector Segmented by Vertical Market (Percent of Dollars). .

II-63 Americas Shipments of Hand Held 2D Bar Code Scanners to the Dependent Warehousing Sector Segmented by Vertical Market (Percent of Dollars). . .

II-64 Americas Shipments of Hand Held 2D Bar Code Scanners to the Independent Warehousing Sector Segmented by Vertical Market (Percent of Dollars). . .

II-65 Americas Shipments of Hand Held 2D Bar Code Scanners to the Transportation Sector Segmented by Vertical Market (Percent of Dollars).

II-66 Americas Shipments of Hand Held 2D Bar Code Scanners to the Retail In Store Sector Segmented by Vertical Market (Percent of Dollars)...............

II-67 Americas Shipments of Hand Held 2D Bar Code Scanners to the Health Care Sector Segmented by Vertical Market (Percent of Dollars).........................

II-68 Americas Shipments of Hand Held 2D Bar Code Scanners to the Commercial Services Sector Segmented by Vertical Market (Percent of Dollars)..........

II-69 Americas Shipments of Hand Held 2D Bar Code Scanners to the Government Sector Segmented by Vertical Market (Percent of Dollars).........................

II-70 Americas Shipments of Hand Held 2D Bar Code Scanners to the Manufacturing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-71 Americas Shipments of Hand Held 2D Bar Code Scanners to the Warehousing Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-72 Americas Shipments of Hand Held 2D Bar Code Scanners to the Transportation Sector Segmented by Distribution Channel (Percent of Dollars).....................................................................................................

II-73 Americas Shipments of Hand Held 2D Bar Code Scanners to the Retail In Store Sector Segmented by Distribution Channel (Percent of Dollars)........

II-74 Americas Shipments of Hand Held 2D Bar Code Scanners to the Health Care Sector Segmented by Distribution Channel (Percent of Dollars).................

II-75 Americas Shipments of Hand Held 2D Bar Code Scanners to the Commercial Services Sector Segmented by Distribution Channel (Percent of Dollars)...

II-76 Americas Shipments of Hand Held 2D Bar Code Scanners to the Government Sector Segmented by Distribution Channel (Percent of Dollars).................

SUPPLIER STRATEGIES III-1 Americas Shipments of Hand Held Bar Code Scanners Segmented by Vendor

Share (Percent of Dollars)......................................................................... III-2 North American Shipments of Hand Held Bar Code Scanners Segmented by

Vendor Share (Percent of Dollars)............................................................. III-3 Latin American Shipments of Hand Held Bar Code Scanners Segmented by

Vendor Share (Percent of Dollars)............................................................. III-4 Americas Shipments of Laser Hand Held Bar Code Scanners Segmented by

Leading Vendor Share (Percent of Dollars)................................................ III-5 Americas Shipments of CCD Hand Held Bar Code Scanners Segmented by

Leading Vendor Share (Percent of Dollars)................................................ III-6 Americas Shipments of Hand Held 2D Bar Code Scanners Segmented by

Vendor Share (Percent of Dollars)............................................................. III-7 Future Hand Held Scanner Development Strategies (Percent of Respondents)

viii

List of Exhibits

III-8 Future Hand Held 2D Scanner Development Strategies (Percent of Respondents)...........................................................................................

III-9 Regional Market Strategies (Percent of Respondents)...................................... III-10 Vertical Market Strategies (Percent of Respondents)........................................ III-11 Channel Strategies (Percent of Respondents).................................................. III-12 Channel Requirements (Percent of Respondents)............................................ III-13 Supplier Assessment of Regional Indirect Channel Product/Industry

Knowledge (1 = poor; 7 = excellent)......................................................... III-14 Indirect Channel Support Offerings (Percent of Respondents).......................... III-15 Strategic Relationship Objectives (Percent of Respondents).............................

ix

I EXECUTIVE SUMMARY

I. Executive Summary 2

INTRODUCTION

The 2000 Americas Hand Held Bar Code Scanner Service presents an overview of the strategies and perspectives of hand held suppliers serving the North and Latin American markets. Venture Development interviewed more than 100 AIDC suppliers, industry consultants, equity analysts, and trade association representatives to obtain quantitative and qualitative market data. The interviews provided valuable insight into unit shipment data, distribution strategies, and product development trends.

OVERVIEW

In 1999, the Americas market for hand held bar code scanners reached $522.0 million, representing an increase of almost 10% over 1998. North American shipments accounted for 89% of revenues, while Latin American represented just under 11% of revenue shipments (see Exhibits I-1 and I-2). Unit shipments were slightly less unbalanced as Latin America accounted for more than 15% of total shipments, primarily due to the consumption of lower-end offerings (see Exhibits I-3 and I-4).

Exhibit I-1North American Shipments of Hand Held Bar Code Scanners

(Percent of Dollars)

1999 Total: $423.0 Million

Pen/Wand6.2%

CCD29.1%

Laser56.0%

2D8.4%

2D scanner markets enjoyed healthy growth in both regional markets, reaching unprecedented revenue and shipment levels. North America totaled $39.2 million in revenues, compared to Latin America’s more modest $2.3 million figure (see Exhibits I-5 and I-6). CCD imagers enjoyed prolific growth in manufacturing, warehousing, and transportation sectors, a direct result of increasing application demand (materials management, core process) and moderating average selling prices.

The more prevalent trends and issues shaping the 1999 market include:

· convergence of regional markets - despite some core differences for price points and vertical market segments, abundant similarities in product form factors, application environments, and distribution channel composition are emerging for North American and Latin American markets;

·


· sweeping core technology changes - while laser bar code scanners will remain a mainstay of the AIDC markets, the emergence of CCD scanners and CCD imagers offering comparable performance and better durability at lower average selling prices is provoking widespread strategy revisions throughout the industry;

·· vertical market specialization - due to the gradual commoditization of hand held

scanners, suppliers are becoming wary of competing primarily on price across all vertical markets, and are moving towards a focused solutions service (hardware, software, integration, support capabilities) in their strongest vertical market segments;

·· expanding application environments - performance enhancements (long range laser

and CCD readers, multi-dimensional symbology decoding, wireless functionality, and enhanced low-contrast reading) is enabling an invigorating growth of hand held scanners outside of standard POS and materials management application segments;

·· distribution channel refinement - in addition to continued aggressive channel

development efforts throughout Latin American markets, suppliers are addressing some of the channel issues which initially plagued multi-tiered distribution schemes (widespread price erosion, post-installation support disconnects, tier 2 and tier 3 customer neglect) to provide for future growth and expansion of the hand held market; and

·· evolving competitive environments - progressive supplier consolidation (the Welch

Allyn and Hand Held Products union and the PSC acquisition of Percon), decreasing market participation (Hewlett Packard and Caere and have discontinued hardware offerings), and expanding AIDC partnerships (Datalogic and PSC, Symbol and Zebra) represent defining characteristics of a maturing market.

Exhibit I-2Latin American Shipments of Hand Held Bar Code Scanners

(Percent of Dollars)



Pen/Wand17.1%

CCD38.8%

Laser39.7%

2D4.0%


(Percent of Units)

1999 Total: 2,488,000 Units

Pen/Wand27.5%

CCD35.1%

Laser35.5%

2D1.8%


(Percent of Units)1999 Total: 404,700 Units


Pen/Wand48.9%

CCD33.4%

Laser17.0%

2D1.1%

Exhibit I-5North American Shipments of Hand Held 2D Bar Code Scanners

Segmented by Technology(Percent of Dollars)


Linear CCD4.3%

Arrayed CCD

39.8%

Laser55.9%

Exhibit I-6Latin American Shipments of Hand Held 2D Bar Code Scanners

Segmented by Technology(Percent of Dollars)



LinearCCD

13.0%

Arrayed CCD

21.8%Laser65.2%

VERTICAL MARKETS

In 1999, shipments of hand held laser bar code scanners were predominantly concentrated among manufacturing, transporting and warehousing sectors (see Exhibits I-7 and I-8). Relative to historical trends and findings, the following significant points are illustrated in the 1999 laser bar code scanner vertical market spaces:

· alternative market growth - despite a continued massing of revenues in manufacturing and warehousing markets, laser scanners are experiencing more growth outside of these traditional verticals, most notably in health care and commercial service sectors; and

·· retail in store stagnation - typically coming in second place to CCD scanners, hand

held laser offerings are further marginalized by stationary POS scanners which are reaching new levels of affordability and hybrid presentation scanners such as the Metrologic Orbit.


Segmented by Economic Sector(Percent of Dollars)



Commercial Services

6.8%

Government5.5%

Health Care8.5%

Transporation22.9%

Warehousing20.7%

Manufacturing23.4%

Retail inStore12.2%

Hand held CCD scanner implementation continues to grow across many economic sectors. Enhanced performance capabilities, lower price points, and elevated end user awareness have enabled the adoption of hand held CCD scanners in a number of vertical markets outside of the traditional retail in store sectors. CCD scanner suppliers have cited the following market trends pointing towards continued growth across vertical markets:

· balanced market presence - hand held CCD scanners are experiencing healthy growth outside of their standard markets (retail in store and commercial services), flourishing in former laser segments such as warehousing and transportation; and

·· emerging market preferences - CCD scanners have a strong installed base in

developing AIDC markets such as healthcare and commercial services as they have been able to better meet end user requirements ranging from price points to clean room specifications.

··





Commercial Services

3.8%Health Care

4.2%

Transportation

14.5%

Warehousing22.1%

Manufacturing26.3%

Retail InStore25.5%

Government3.6%

·2D laser bar code scanner revenues totaled $23.4 million in 1999, while 2D CCD bar code scanners reached $18.1 million in 1999. Despite some similarities, a closer look at the economic sector and vertical market segmentation of 2D bar code scanners indicates continued dichotomy between the two technologies (see Exhibits I-9 and I-10). The noteworthy trends include:

· balanced laser shipments - 2D laser bar code scanners are evenly distributed across economic sectors and vertical markets - despite concentrations of 27.8% and 22.5% in manufacturing and transportation segments, respectively, government, warehousing, and health care markets are seeing significant growth and are poised to alleviate the dependency on manufacturing and transportation market spaces; and

·· CCD specialization - although demand speculation and potential application

development for multi-dimensional symbology systems (and corresponding CCD 2D systems) is at unprecedented levels, 2D CCD markets remain largely dependent on manufacturing segments, with nearly 50% of revenues derived from those sectors.





Commercial Services

4.8%Government

14.0%

Health Care7.4%

Transporation20.9% Warehousing

9.9%

Manufacturing36.5%

Retail in

Store6.5%




Commercial Services

4.3%

Government8.7%

Health Care4.3%

Transportation26.1%

Warehousing8.7%

Manufacturing43.5%

Retail in

Store4.4%

DISTRIBUTION CHANNELS

The familiar AIDC distribution channel segmentation of direct and OEM sales offset by a balance of sales through non value-adding (distributor) channels, moderate value-adding (VAR), and high value-adding channels (systems integrators) is disappearing. The AIDC distribution channel is rapidly achieving a state of development which is common throughout a number of IT markets. Indirect sales comprise a greater percentage of sales and even within indirect channels, there is a greater concentration of sales through distributor and system integrator channels (end users


will continue to exhibit limited desire for a partial value-add solution from VAR partners). Additionally, the noteworthy findings include (see Exhibits I-11 and I-12):

· the search for margins - slight increase in direct to end user sales as more suppliers strive to move towards a higher margin solutions model, bundling linear hand held scanners with supplemental software, integration services, and post-installation support;

·· disinterest in laser OEM agreements - a decrease in OEM shipments, due in large

part to the indisputable shift in demand for and actual installations of CCD based scanning systems; and

·· alternative indirect channel development - suppliers are exploring numerous ‘other’

indirect distribution channel possibilities, including supply chain software partners, Big 5 consulting firms, and a plethora of retail (office superstore) outlets.


Segmented by Distribution Channel(Percent of Dollars)


Other3.9%

System Integrator

15.4%

Distributor26.2%

Direct to OEM17.0%

Direct to End User

24.2%

VAR13.3%





Other3.1%

System Integrator

12.8%

Distributor32.9%

Direct to OEM16.5%

Direct to End User

17.5%

VAR17.2%

Although the distribution channel composition and segmentation for hand held 2D bar code scanners are beginning to resemble traditional linear bar code scanner distribution channels, a few basic differences prevail. Direct to end user and direct to OEM shipments combine to account for approximately 50% of the total revenue shipments. Additionally, the predominance of the system integrator channel underlies the added technical and support requirements of 2D systems. However, a number of trends are very familiar (see Exhibits I-13 and I-14):

· dealer/distributor shortcomings - D/D channels principally interested in moving boxes and little else have proven to be poor distribution channel partners, with no interest and desire in investing in the required service and support needs;

·· the VAR dilemma - VARs which take the time to learn the technological intricacies

and can complement that knowledge with reasonable integration and service skill sets have enjoyed success in 2D markets - unfortunately most VARs don’t fit the above description; and

·· education failures - suppliers have yet to invest significantly (with either money or

time) in the education required to bring channel and end user communities up to speed in understanding and harnessing the true capabilities of 2D symbology systems.

·





Other1.8%

System Integrator

21.7%

Distributor10.2%

Direct to OEM25.5%

Direct to End User

23.7%

VAR17.1%




Other4.3%

System Integrator

21.7%

Distributor13.1%

Direct to OEM13.0%

Direct to End User

30.5%

VAR17.4%

REGIONAL MARKET ANALYSIS

VDC defines the Americas market as the aggregate North American and Latin American markets. North America includes the United States and Canada, while Latin America is comprised of Mexico, Brazil, Argentina, Venezuela, Chile, and other Latin American nations. In 1999, shipments to North American end users accounted for more than 89% total Americas shipments, while Latin American shipments represented approximately 11% of the total market space (see Exhibit I-15). The predominant trends witnessed in each region include the following observations.

Exhibit I-15 Americas Shipments of Hand Held Bar Code Scanners

Segmented by Regional Market(Percent of Dollars)



2.7%

77.8%

11.6%

3.0%

1.0%

1.2%

1.3%

1.4%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

Chile

Venezuela

Argentina

Brazil

Mexico

Canada

United States

.

North America:

· an emerging technology paradigm - hand held bar code scanner shipments to North American regions are shifting from predominantly laser to a balance of laser and CCD units, as CCD performance specifications improve and end user accounts increasingly require the multi-dimensional capabilities of the CCD technology.

Latin America:

· vertical market opportunities - there is an abundance of AIDC needs across all vertical market and economic sectors within Latin American markets - growth prospects for economical solutions such as hand held scanners are practically limitless at the present time.

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