Item 1. Business
The Company
Symbol Technologies, Inc. ("Symbol" and, together with its subsidiaries, the "Company"), a Delaware corporation, is the successor by merger in 1987 to Symbol Technologies, Inc., a New York corporation which was organized in 1973 and is the largest manufacturer of bar code-driven data transaction systems. The Company is the only corporation in its industry with in-house technology for the design and manufacture of bar code scanning products, hand-held computers and radio frequency (RF) data communications systems. The Company is engaged in one industry segment - the design, manufacture and marketing of bar code reading equipment, hand-held computers and radio frequency data communications systems which are used as strategic building blocks in data transaction systems in retail, transportation and logistics, parcel delivery and postal service, warehousing and distribution, factory automation, health care and many other applications.
Company Products and Services
General
The Company develops, manufactures, sells and services (i) one-dimensional and two-dimensional bar code scanning products that principally employ laser technology to read data encoded in bar code symbols, (ii) data transaction systems incorporating application specific hand-held computers, and (iii) wireless local area network (WLAN) adapter cards and RF systems to transmit data. The Company distributes the most complete line of bar code reading equipment in the world. The Company's bar code scanning equipment is compatible with a wide variety of data collection systems, including computers, electronic cash registers and portable data collection devices. Bar code scanners are used to enhance accurate data entry and productivity in retail, transportation and logistics, parcel delivery and postal service, warehousing and distribution, factory automation and many other applications.
The Company's data transaction systems consist of hand- held computers, peripheral devices, software and programming tools, and are designed to provide solutions to specific customer needs in data transactions. They are used to collect data at remote locations and to transmit information between these locations and the user's central data processing facility. Data can be entered by a touch screen or a device which reads bar codes or may be keyed into memory on a numeric or alpha-numeric keyboard. Data can be transmitted and received through direct connection, regular telephone lines with acoustic couplers and modems or by radio waves. A majority of the Company's hand-held computers include an integrated bar code reader.
Bar Code Scanning Products
Sales of the Company's bar code scanning products have accounted for approximately 40 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994.
The Company's bar code scanning products consist of devices designed to scan and decode bar code symbols and transmit data. The Company sells various models of its bar code reading systems, each of which consists of a laser scanner and interface controller. In some models, the interface controller is integrated into the handle of the scanner. The laser scanner reads the symbol and transmits a digitized signal to the interface controller. The interface controller contains a microprocessor which decodes the information received and interfaces with the user's computer.
The Company sells several different hand-held laser scanners, the most important of which is the LS 4000 which was introduced in 1996. The LS 4000 is a trigger-operated, visible laser diode-based scanner featuring high-performance scanning and an advanced ergonomic form factor making it ideal for price scanning and inventory management in a wide variety of retail and commercial segments.
The LS 2000 is a prior generation, trigger-operated, visible laser diode-based scanner with the capability to handle contact as well as non-contact scanning applications out to the limit of visibility of the scanning beam. Introduced in 1989, the LS 2000 is primarily sold to point-of-sale customers and for use in conjunction with portable data collection devices. The Company is in the process of replacing the LS 2000 with the LS 4000.
The LS 3000 Series introduced in 1993, consists of trigger-operated, visible laser diode-based scanners used to read all common linear bar code symbologies and densities up to a distance of 20 feet. The LS 3000 is particularly well-suited for industrial and military applications because of its rugged housing. These devices consume less than one watt of power during scanning. Specialty versions of the LS 3000 include long range scanners capable of reading bar codes of virtually all sizes at distances ranging from near contact to more than 35 feet (LS 3000 ER) and low contrast reading capability scanners (LS 3000 HV) both using "spot and scan" two position triggers for ease of aiming and visibility.
Introduced by the Company in 1995, the LS 3600 Series of laser bar code scanners incorporate fuzzy logic technology and beam management optical technology. Fuzzy logic allows these scanners to accurately digitize and decode poor quality or damaged bar codes. Beam management optical technology allows operators to scan bar codes at varying distances.
The LS 1000 Series, introduced in 1996, is the Company's smallest and lightest trigger operated, hand-held laser scanner. The LS 1000 is a limited performance scanner ideal for light use scanning environments where low cost is a critical factor.
In 1995, the Company introduced the LT 1800 LaserTouch visible laser diode-based bar code scanner that combines the performance and accuracy of laser-based bar code technology with scanning for applications where near contact scanning and touch ergonomics are sufficient.
In 1993, the Company introduced the first cableless hand- held scanner, the LS 3070. The LS 3070 transmits data via narrow band RF with a range of up to 50 feet from its base station. The scanner is particularly useful in environments where tethered scanning is inadequate.
In the first quarter of 1997, the Company introduced a less expensive cableless, hand-held scanner, the LS 4071. The LS 4071 is a cordless version of the LS 4000 which utilizes a Company designed RF communication protocol to provide the user with a maximum working range of up to ten feet from its base station. This allows for scanning of heavy or bulky items, which cannot be easily moved for scanning. Designed to provide greater productivity, flexibility and convenience, the LS 4071 is intended for use in retail and light industrial applications.
In 1995, the Company introduced the LS 4800, a hand-held laser scanner designed to read both PDF 417, a high-density, high-capacity portable data file storing approximately one kilobyte of data in a machine-readable code and all conventional linear bar codes. PDF 417 is a two-dimensional bar code symbology which incorporates error correction capability and has one hundred times the information capacity of a traditional linear bar code. Unlike linear bar codes, PDF 417 can contain an entire data record reducing or eliminating the need for an external system of linked data storage. PDF 417 may be read by either a laser-based bar code reader or a one- or two-dimensional charge coupled device (CCD) bar code reader. Most other two- dimensional bar codes can only be read by a CCD bar code reader. The LS 4800 integrates a miniature resonant 2D scan engine that rasters, reading PDF 417 symbols horizontally and vertically at 560 scans per second. Due to its rapid scan rate and advanced optics, the LS 4800 is adept at reading poor quality symbols. The LS 4900, introduced in 1996 is a battery-powered version of the LS 4800.
Introduced in 1994, the PDF 120 is a one piece touch-only CCD based bar code reader with an integrated decoder. The PDF 120 is capable of reading PDF 417 as well as most one-dimensional bar codes. Suitable for applications that require scanning symbols of up to 1,000 characters, the PDF 120 connects to a range of PCs and terminals via an RS-232 serial interface port.
The PDF 620, introduced in 1995, is a fixed-station card reading device designed for accurate reading of PDF 417 and standard bar codes for a variety of identification card applications. Using CCD technology, the PDF 620 accepts ISO standard sized cards and has a typical first-time read rate of 100%.
In addition to its hand-held scanners, the Company also offers several families of "hands-free" scanners. Unlike the Company's hand-held scanners, these scanners are usually triggered by an object sensor to enable use in situations where use of both hands is required.
The LS 5700 and the LS 5800 miniaturized slot scanners were introduced by the Company in 1996. The LS 5700 was designed to accommodate all vertical or "on counter" applications and incorporates a full sleep mode function which allows the motor and laser to turn off after an extended period of scanner inactivity extending scanner longevity and reducing power consumption. The LS 5800 operates in horizontal or "in counter" applications and features rugged housing and a sealed exit window that resists spills and dirt.
Introduced in 1996 and available in the first quarter of 1997, the MP 8000 is the Company's first multiplane, high- throughput scanner, primarily designed for point-of-sale applications in the food retail market. Versions of the MP 8000 also incorporate a scale for simultaneous weighing and scanning of items. The MP 8000 produces a 56 line scan pattern from two directions creating a 360o read zone that blankets the bar-coded item in scan lines, allowing users to scan items significantly faster with less fatigue.
In 1994, the Company introduced the LS 9100, a laser-diode based projection scanner. The LS 9100 generates a large omni- directional pattern of twenty interlocking laser lines that can read bar codes at various angles for high productivity scanning.
In 1996, the Company introduced the PCK 9100, a compact price checker system that allows shoppers to pass bar-coded items by its scan window and view the latest product information on its high-visibility LCD display. The PCK 9100 incorporates an LS 9100 omni-directional scanner which assures accuracy over a wide range of scanning angles, making it easy for customers to obtain price information.
Since 1988, the Company has been selling a series of scan engines consisting of solid state laser diode-based laser scanners. These compact, non-contact scanners can be integrated internally with the user's own equipment or used independently as fixed-mount scanners on conveyor lines or robotic arms.
The LS 1220, introduced in 1994, incorporates a Mylar scan element for scanning conventional linear bar codes. The latest
version, the LS 6800 Series, was introduced in 1996 and incorporates a high speed raster scan engine that operates at 560 scans per second making it ideal for rapid reading of one- dimensional and two-dimensional symbols.
In 1990, the Company began marketing bar code laser scanner modules or scan engines which are integrated by unaffiliated third parties into their portable computing devices. In 1992, the Company introduced the SE 1000 Series scan engine. The SE 1000 is a small, lightweight, high performing scan engine designed for integration into portable and battery-powered devices. Versions of the SE 1000 are available with an integrated decoder and RS 232 interface.
The SE 1100 Series scan engine, introduced in 1994, offers improved performance over the SE 1000 in a slightly larger size.
In 1996, the Company introduced the low-cost, high- performance SE 1200 Series scan engine. The SE 1200, which measures less than one cubic inch and weighs less than one ounce, enables third-party manufacturers to integrate high-performance laser scanning into a variety of devices including hand-held computers, medical instruments, diagnostic equipment, lottery terminals, vending machines and robotics. The SE 1200 has a working range and ability to read poor quality bar codes equal to that of hand-held scanners. In the first quarter of 1997, the Company introduced a high density version of the SE 1200 capable of reading miniaturized bar codes. The Company anticipates that the SE 1200 will replace the SE 1000 and the SE 1100 in 1997.
The SE 2000 Series scan engine, introduced by the Company in 1995, is a high-performance laser scan engine capable of reading both one-dimensional and two-dimensional bar codes.
The SE 9100 Series scan engine, introduced in 1995, is a high speed, omni-directional scan engine providing dense scan line coverage from the face of the scanner up to a distance of eight inches allowing quick "swipe" scanning as well as standard presentation scanning.
In 1995, the Company introduced the WSS 1000, an innovative hand-mounted bar code-based data transaction system that allows mobile hands-free bar code scanning, data collection and RF data communications. The WSS 1000 is a wearable computer system for users who rely on the efficiency and accuracy of bar code scanning but require the use of both hands to perform job functions. The system, which consists of two components, combines the RS1, a miniature scanner worn as a ring that allows the user to simply touch a thumb and index finger contact switch to scan a bar code and a compact, light weight, wrist mounted 16- bit computer with display which permits wireless communication to the host computer.
The Company also produces a series of low cost, interface controllers. These devices permit the Company's scanner products
to easily interface with a wide range of standardized terminals, personal computers, point-of-sale terminals, portable terminals and dedicated computing hardware.
Product list prices for the Company's bar code scanning equipment range between $645 to $4,995 depending on product configuration. The Company offers discounts off list price for quantity orders and sales are frequently made at prices below list price.
Portable Data Collection Systems
The Company's portable data collection systems consist of hand-held computers, peripheral devices, software and programming tools. These systems collect data at remote locations and transmit information between these locations and the user's central data processing facility and are designed to provide data collection solutions for a variety of applications. A majority of the Company's hand-held computers also include an integrated bar code reader. These systems accounted for approximately 50 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994.
Portable Data Transaction Devices
The Company's portable data transaction devices are microprocessor-based, lightweight and battery-operated hand-held computers. Data may be captured by a device which reads bar codes or may be keyed into memory via an integrated keyboard or a touch screen. The data collected by the hand-held computer can then be transmitted to a host computer by direct connection through regular telephone lines with acoustic couplers and modems (batch file transfer mode). Data may also be transmitted instantly as it is collected by radio waves (real-time transaction processing). Information from the Company's hand- held computers may be communicated to a stand-alone receiver or computer which formats the data for input into a host computer, directly into a host computer by communications controllers supplied by the Company or directly onto industry-standard Ethernet local area networks (LANs) via Company manufactured access points. Depending on the model, the Company's hand-held computers may have up to 16 megabytes of Random Access Memory (RAM) for data storage and multiple input and output capabilities for the connection of printers, bar code readers and communications devices. In addition, based upon customer specifications, the hand-held computers may also have built-in bar code readers and various built-in communications devices for transmission and receipt of data.
The Company offers two spread spectrum-based, WLAN products. In 1990, the Company introduced its Spectrum One cellular radio frequency network for wireless data transactions. Installation of the network at various customer sites began in 1991 and the network is now installed in over 13,000 sites in 12 countries. Spectrum 24, introduced in 1995, is a high-
performance, spread spectrum, frequency hopping network which operates on a 2.4 Ghz frequency range and is designed for worldwide operation. Based on spread spectrum RF technology, Spectrum One and Spectrum 24 networks provide real-time wireless data communications with a host computer for hundreds of portable and fixed-station computers and radio-integrated scanners. Unlike traditional narrow band RF-based networks, spread spectrum installation requires no individual site license from the FCC. The Spectrum One and Spectrum 24 systems work in tandem with a broad range of the Company's RF capable hand-held computers.
Design engineering and support for both the Company and third-party RF-based data communications systems is conducted in the Company's San Jose, California facility. The focus of the group is the design of wireless bar code data transaction systems based on the Company's Spectrum One and Spectrum 24 WLANs and support for the integration of those high-performance networks into customers' data networks and enterprise-wide information systems.
The LRT 3800, introduced in 1990, incorporates in a single, hand-held unit, high-performance laser bar code scanning, a 16-bit DOS-based computer and a radio modem for communication via the Company's Spectrum WLANs. Based on visible laser diode scanning technology, the battery-operated LRT 3800 is compact and ergonomically designed and provides up to 1.2 megabytes of memory capacity.
The LDT 3805, also introduced in 1990, is identical to the LRT 3800 in physical appearance. Its scanning and computing functions are similar but it has no RF communication capability. It is optimized for collecting and storing data, later to be downloaded to a host computer.
Both the LRT and LDT have the capability for data entry via bar code scanning or by using the full-function keypad. The pair are ideal for scan-intensive applications such as receiving, shipping, inventory control, order and shelf-price verification as well as other applications in both retail and warehousing.
Datawand hand-held computers were first introduced by the Company in 1985. The Company's principal Datawand product, the Datawand IIB, is a self-contained optical wand bar code reader hand-held computer which is only 7-1/4 inches long and one inch in diameter and weighs slightly more than two ounces. In 1989, the Company introduced a new optical wand bar code reader, the Datawand III, which contains 32 kilobytes of memory and a 16 character single line display.
In 1993, the Company announced the co-development with Albert Heijn of The Netherlands, Europe's largest grocery market chain, and TNO Product Centre, a leading Dutch engineering design firm, of a shoppers portable self checkout system. The system, which is integrated with the retailer's point of sale system, utilizes the Company's LST 3803, a hand-held computer with an integrated laser scanner which allows shoppers to scan and tabulate their purchases as they shop. In 1996, the Company introduced an RF capable version of the portable self checkout system.
In 1996, installation of Symbol's portable self checkout systems has expanded both to new customers and more sites. There are currently over 150 systems installed in nine countries on four continents. Although retailers and customers have been very pleased with the portable self checkout system and other food and non-food retailers have expressed an interest in the self checkout concept, due to the innovative nature of the concept, there can be no assurance that self checkout will be implemented on a wide scale either internationally or domestically.
The PDT family of general purpose hand-held computers features advanced technology including Very Large Scale Integrated (VLSI) circuits, which incorporate many standardized integrated circuits into one computer chip allowing for size and cost reductions. Also, the PDT family employs surface mounted component technology for reduced size and increased performance and dependability, as well as industry standard 8-, 16- and 32- bit microprocessors. The PDT family includes a series of hand- held computers which are available with different features and at varying costs depending on customer requirements and preferences. The PDT hand-held computers feature up to sixteen lines of liquid crystal display, slim, lightweight design, multiple input and output ports and up to 7.6 megabytes of internal memory. PDT hand-held computers have various keyboard configurations, including a user configurable keyboard. The PDT family was originally introduced in 1985.
The PDT 3100 hand-held computer, a 16-bit DOS-compatible computer, was introduced in 1993. Versions of the PDT 3100 also incorporate the Company's SE 1200 scan engine and feature a unique swivel-head scanner design which adjusts instantly for right- or left-hand scanning operation. The PDT 3100 is the Company's largest selling hand-held computer. In 1994, the Company introduced versions of the PDT 3100 incorporating the Company's Spectrum One data communications network and direct or acoustic modems for telephone line communications and in 1996, the Company introduced versions of the PDT 3100 which incorporate the Company's Spectrum 24 WLAN communications capability.
In 1996, the Company introduced two other versions of the 3100, the PDT 3000 and the PDT 3500. The PDT 3000 is a compact, efficient, hand-held computer designed for use in the food and drug retail and convenience store industries. Weighing less than 13 ounces, the PDT 3000 is a limited performance, lower cost version of the PDT 3100. The PDT 3500, features a larger display screen, a choice of Spectrum One or Spectrum 24 networking options and an SE 2000 scan engine providing one- and two- dimensional bar code scanning capability.
Introduced in 1996, the PDT 2100 hand-held integrated computer is the Company's smallest and lightest high-performance
hand-held computer with laser scanning capability. Versions of the PDT 2100 incorporate the Company's Spectrum LAN communication capability. The PDT 2100 design, which resembles a TV remote controller, facilitates easy intuitive use while the PC-standard 16-bit architecture and Microsoft MS-DOS operating system provide superior data management capabilities.
In 1990, the Company introduced the PDT 3300, a 16-bit DOS-compatible batch hand-held computer. The PDT 3300 provides expanded program capacity and keyboard and display flexibility coupled with an environmentally sealed unit for use in harsh environments. The Company also offers versions of the PDT 3300 which operate with the Company's Spectrum One and Spectrum 24 networks.
In 1996, the Company introduced the PDT 1000, a pocket- sized integrated laser scanning computer designed for batch processing. The PDT 1000 is approximately one inch by two inches by 6.5 inches and weighs only seven ounces. The rugged construction, simple three-button keyboard and 96 kilobyte memory make the PDT 1000 suitable for a wide variety of tracking and asset management applications where bar code data capture and storage are required.
The PPT family of portable pen computers integrates several key technologies for improving information management. These PC compatible hand-held computers incorporate pen and touch input on an active matrix screen, a graphical user interface, an SE 1100 or SE 1200 scan engine, and standard PCMCIA slots for memory, modem, wireless or wide area network capability and other peripherals.
The PPT 4100, introduced in 1994, is intended for use in information-intensive applications in retail and other environments where managers will benefit by accessing remote databases to make real-time inventory and purchasing decisions to significantly enhance customer service and improve productivity.
The PPT 4600, introduced in 1995, incorporates a 486 microprocessor which supports both DOS and Windows based applications and an SE 2000 scan engine, making it the first hand-held computer that has the capability to scan and decode PDF 417. Engineered to withstand rugged treatment and endure outdoor conditions such as windblown rain or dust and extreme temperatures, the PPT 4600 is intended for use in industrial and mobile environments.
In 1996, the Company introduced versions of the PPT 4100 and PPT 4600 incorporating Spectrum 24 WLAN communication capability and a fully integrated radio modem optimized for wireless wide area communication.
Introduced in 1996, the PPT 4200 is a high-performance, hand-held touch/pen computer. With options such as a magnetic stripe reader, laser bar code scanner, hard drive, wireless radio
and voice capabilities, the PPT 4200 provides all the functions and power of a standard notebook computer packed into a 5 inch by 9 inch hand-held computer, weighing less than three pounds. The PPT 4200 supports industry-standard PC cards, operating systems and popular pen development tools such as Pen Pal, and Visual Basic providing operating and programming flexibility for retail and industrial management applications.
In 1997, the Company introduced the VRC 4000, a ruggedized vehicle mounted or wall mounted touch screen computer. Designed for rugged, industrial use in warehouse and yard management applications, the VRC 4000 is a PC compatible computer with 16 megabytes of memory and includes a full 10.3 inch VGA display with an infrared touch screen interface. The VRC 4000 is capable of communicating with a host computer or other hand-held devices via the Company's Spectrum 24 wireless network.
Product list prices for the Company's portable data collection equipment range between $395 to $8,250 depending on product configuration. The Company offers discounts off list price for quantity orders and sales are frequently made at prices below list price.
Software and Programming Tools
The Company's portable hand-held computers utilize software which consists of a number of specialized applications and communications software programs, that run under Microsoft MS-DOS and Windows operating systems. A series of application development kits (ADKs) and software development kits (SDKs) are available to allow the Company's programmers, VARs ("Value Added Resellers") and end-user customers to develop applications that fully utilize the integrated features of the Company's family of portable hand-held computers. The ADKs and SDKs provide the software drivers and libraries required to maximize product performance. Used in conjunction with industry standard development tools including Visual Basic and C++, software developers can easily create and support applications to meet specific customer requirements.
The Company has also developed several communication applications designed to facilitate transmission and reception of data between mobile computers and stand-alone receivers or host computers. These applications include a suite of terminal emulation products, host enablers and various protocols. The Company has entered into alliances with independent suppliers of software who assist the Company in development of software.
Customer Support
The Company has a customer support organization which repairs and maintains the Company's products.
The Company's domestic customer support operations include locations in Arkansas, California, Georgia, Illinois, Kentucky,
Michigan, Minnesota, New Jersey, New York, North Carolina, Texas and Virginia. The Company also has foreign customer support offices in Australia, Austria, Belgium, Canada, China, Denmark, France, Germany, Italy, Norway, Singapore, South Africa, Spain and the United Kingdom. In Japan, customer support is provided by Olympus Optical Co., Ltd. These centers enhance the Company's ability to respond to its customers' requirements for fast, efficient service.
The Company currently offers a variety of service arrangements to meet customer needs. The Company's On-Site service provides for maintenance and repairs at any customer location. Depot Service includes maintenance and repairs at the Company's field service offices. The Self-Service contracts generally have a term of from one to five years. In addition, the Company offers Time-And-Materials service on a non-contract, as-needed basis.
The Company undertakes to correct defects in materials and workmanship for a period of time after delivery of its products. The period of time covered by these warranties varies depending on the product involved as well as contractual arrangements but is generally twelve months.
Maintenance and support revenues contributed less than 10 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994.
Sales and Marketing
The Company presently markets its products domestically and internationally through a variety of distribution channels, including a direct sales force, original equipment manufacturers, VARs and sales representatives and distributors. VARs distribute the Company's products to customers while also selling to those customers other products or services not provided by the Company. The Company's sales organization includes domestic sales offices located throughout the United States and foreign sales offices in Australia, Austria, Belgium, Canada, China, Denmark, France, Germany, Italy, Mexico, Norway, Singapore, South Africa, Spain and the United Kingdom.
The Company currently has contractual relationships and strategic alliances with unaffiliated partners. Through these relationships, the Company is able to broaden its distribution network and participate in industries other than those serviced by the Company's direct sales force and distributors.
Customers generally order products for delivery within 45 days. Accordingly, shipments made during any particular quarter generally represent orders received either during that quarter or shortly before the beginning of that quarter and generally consist of products manufactured in the quarter. The Company maintains significant levels of inventory to facilitate meeting delivery requirements of its customers. The Company, pursuant to
contract or invoice, normally extends 30 day payment terms to its customers. Actual payment terms vary from time to time but generally do not exceed 90 days.
Since a substantial portion of the Company's sales of scanner products are to retail organizations which tend not to purchase equipment such as the Company's scanner products during the Christmas selling season, the Company's business has, from time to time, been seasonal in the fourth quarter. The Company believes there may again be reduced demand for its scanner products in the fourth quarter of the current fiscal year. The Company attempts to offset the reduced demand of the retail industry by selling its products to other market segments. While this effort was successful in 1996, there can be no assurance that the effort will succeed in 1997 and subsequent years.
The following table sets forth certain information as to international sales of the Company: Year Ended December 31, (in thousands)
1996 1995 1994 Area
Western Europe $222,611 $178,027 $141,090 Other $ 44,545 $ 40,402 $ 25,999
The Company undertakes hedging activities to the extent of known cash flow in an attempt to minimize the impact of foreign currency fluctuations.
Manufacturing
The products which are manufactured by the Company are manufactured at its Bohemia, New York facilities.
While components and supplies are generally available from a variety of sources, the Company presently depends on a single source or a limited number of suppliers for several components of its equipment, certain subassemblies and certain of its products. Certain of the Company's products are manufactured in Japan and Taiwan. Due to the general availability of components and supplies, the Company does not believe that the loss of any supplier or subassembly manufacturer would have a long-term material adverse effect on its business although set-up costs and delays could occur if the Company changes any single source supplier. In the past, delays in delivery of components have not had a material adverse effect on shipments of the Company's products. Certain of the Company's products are manufactured by third parties. Failure of such third parties to supply products to the Company could have an adverse affect on the Company's ability to deliver such products to its customers. However, the Company has no reason to believe that these suppliers will be unable to meet their supply or delivery obligations to the Company over any extended period.
The Company employs certain advanced manufacturing processes that require highly sophisticated and costly equipment and are continuously being modified in an effort to improve efficiency, reduce manufacturing costs and incorporate product improvements.
Research and Product Development
The Company believes that its future growth depends, in large part, upon its ability to continue to apply its technology to develop new products, improve existing products and expand market applications for its products. The Company's research and development projects include, among others: improvements to the reliability, quality and readability of its laser scanners at increased working distances and higher density codes (including, but not limited to, two-dimensional codes); improvements in and expansion of its series of interface controllers; continued development of its solid state laser diode scanners; improvements to packaging and miniaturization technology for bar code data capture products, portable data collection devices and integrated bar coded data capture products; development of high-performance digital data radios, high-speed radio frequency data communications networks and telecommunications protocols and products; and the addition of application software to provide a complete line of high-performance interface hardware.
The Company uses both its own associates and from time to time unaffiliated consultants in its product engineering and research and development programs. Dr. Jerome Swartz, Chairman of the Board of Directors and Chief Executive Officer of the Company, leads the Company's research, patent and new product development programs. From time-to-time the Company has participated with and/or partially funded research projects in conjunction with a number of universities including the State University of New York at Stony Brook, Polytechnic University of New York and Tel Aviv University in Israel.
The Company expended (including overhead charges) approximately $ 20,164,000, $19,879,000 and $16,678,000 for research and development during the years ended December 31, 1996, 1995 and 1994, respectively.
Competition
The business in which the Company is engaged is highly competitive and acutely influenced by advances in technology, product improvements and new product introduction, and price competition. To the Company's knowledge, many firms are engaged in the manufacture and marketing of portable data collection systems and bar code reading equipment utilizing laser technology. In addition, the Company's bar code reading equipment also competes with devices which utilize technologies other than laser scanners such as CCDs and optical wands. Furthermore, numerous companies, including present manufacturers of scanners, lasers, optical instruments, microprocessors, notebook computers, PDAs and data radios have the technical
potential to compete with the Company. Many of these firms have far greater financial, marketing and technical resources than the Company. The Company competes principally on the basis of performance and the quality of its products and services.
The Company believes that its principal competitors in the bar code scanning equipment industry are INTERMEC Corporation, Matsushita Electric Corporation, Metrologic Instruments, Inc., NipponDenso Co., Ltd., Opticon, Inc., PSC Inc. and Welch Allyn, Inc. and that its principal competitors in the portable data transaction systems industry are Fujitsu, Ltd., Hand Held Products, Inc., INTERMEC Corporation, LXE Inc., NipponDenso Co., Norand Corporation, Mars Electronics and Telxon Corporation. Some of the Company's competitors in the portable data transaction systems industry also participate in the field service market.
Patent and Trademark Matters
The Company files domestic and foreign patent applications to support its technology position and new product development. The Company owns over 250 U.S. Letters Patents covering various aspects of the technology used in the Company's principal products and has entered into cross-license agreements with other companies. In addition, the Company owns numerous foreign companion patents. The Company has also filed additional patent applications in the U.S. Patent and Trademark Office as well as in foreign patent offices. The Company will continue to file patents, both U.S. and foreign, to cover its most recent research developments in the scanning, data collection and RF data communications fields. Key patents covering basic hand-held laser scanning technology begin to expire in 2000 and key patents covering scanner integrated hand-held computers begin to expire in 2005.
The Company believes that its patent portfolio does provide some competitive advantage in that such patents tend to limit the number of unlicensed competitors and permit the Company to manufacture products which may have features which provide better performance and/or lower cost. Although management believes that its patents provide some competitive advantage, the Company depends more for its success upon its proprietary know-how, innovative skills, technical competence and marketing abilities. In addition, because of rapidly changing technology, the Company's present intention is not to rely primarily on patents or other intellectual property rights to protect or establish its market position. Instead, the Company has established an active program to protect its investment in technology by enforcing and licensing certain of its intellectual property rights. The Company has entered into royalty-bearing license agreements with, among others, Hand Held Products, Inc., INTERMEC Corporation, LXE Inc., Metrologic Instruments, Inc., Norand Corporation, Olympus Optical Co., Ltd, Opticon Sensors Europe, B.V., PSC Inc., Spectra Physics, Inc. and Telxon Corporation.
On April 1, 1996, PSC Inc. ("PSC") commenced suit against the Company purporting to assert claims against the Company for alleged violations of the federal antitrust laws, unfair competition and also seeking a declaratory judgment of non- infringement and invalidity as to certain of the Company's patents. The Company has consented to PSC's serving a Third Amended Complaint, which purports to assert essentially the same antitrust and unfair competition claims against the Company, and also seeks a declaratory judgment of alleged non-infringement and validity of nine of the Company's patents, and a declaratory judgment that PSC has not breached its two license agreements with the Company and that those agreements have been terminated. The Company intends to amend its suit against PSC to assert infringement of four Symbol patents, breach of contract, and fraud. The Company is also seeking damages of over $1 million plus interest in unpaid royalties for each quarter since the second quarter of 1996. The Company had also sued Data General Corporation ("Data General"), a manufacturer of portable integrated scanning terminals incorporating a component manufactured by PSC, for infringement of the same four patents and five additional patents. The nine patents asserted against Data General are the same nine Symbol patents as to which PSC is seeking declaratory relief.
On October 9, 1996, the Court granted the Company's motion to sever and stay PSC's antitrust, unfair competition and related claims. On the same day, the Court denied Data General's motion to stay the Company's claims against it.
The Company moved that an expedited hearing to be held at the end of March, 1997 on three of the patents asserted against PSC, and to stay all non-patent discovery. PSC opposed the Company's motion and made a cross-motion that no hearing be held until October, 1997 at the earliest and that all issues be tried in the Spring of 1998 or thereafter. On October 9, 1996, the Court set a one week trial for July 14, 1997 to construe the claims in all nine patents asserted by Symbol against Data General and PSC, and stayed discovery on all non-patent claims.
The Company believes that all claims purportedly asserted against it by PSC are factually and legally baseless, and wholly without merit. The Company intends to vigorously defend the litigation.
Although the Company believes that its products and technology do not infringe the proprietary rights of others, there can be no assurance that third parties will not assert infringement and other claims against the Company or that such claims will not be successful. From time to time, the Company has received and may receive in the future notices of claims of infringement of other parties' rights. In such event, the Company has and will continue to take reasonable steps to evaluate the merits of such claims, take such action as it may deem appropriate, which action may require that the Company enter into licensing discussions, if available, and/or modify the
affected products and technology, or result in litigation against parties seeking to enforce a claim which the Company reasonably believes is without merit. In the event litigation is commenced, such parties are likely to claim damages and/or seek to enjoin commercial activities relating to the Company's products or technology affected by such party's rights. In addition to subjecting the Company to potential liability for damages, such litigation may require the Company to obtain a license in order to manufacture or market the affected products and technology. To date, such activities have not had a material adverse affect on the Company's business and the Company has either prevailed in all litigation, obtained a license on commercially acceptable terms or otherwise been able to modify any affected products or technology. However, there can be no assurance that the Company will continue to prevail in any such actions or that any license required under any such patent would be made available on commercially acceptable terms, if at all. There are a significant number of U.S. and foreign patents and patent applications in the Company's areas of interest, and the Company believes that there has been and is likely to continue to be significant litigation in the industry regarding patent and other intellectual property rights.
The Company has also obtained certain domestic and international trademark registrations for its products and maintains certain details about its processes, products and strategies as trade secrets.
The Company regards its software as proprietary and attempts to protect it with copyrights, trade secret law and international nondisclosure safeguards, as well as restrictions on disclosure and transferability that are incorporated into its software license agreements. The Company licenses its software products to customers rather than transferring title. Despite these restrictions, it may be possible for competitors or users to copy aspects of the Company's products or to obtain information which the Company regards as trade secrets. Computer software generally has not been patented and existing copyright laws afford only limited practical protection. In addition, the laws of foreign countries generally do not protect the Company's proprietary rights in its products to the same extent as do the laws of the United States.
Government Regulations
The use of lasers and radio emissions are subject to regulation in the United States and in other countries in which the Company does business. In the United States, various Federal agencies, including the Center for Devices and Radiological Health of the Food and Drug Administration, the Federal Communications Commission, the Occupational Safety and Health Administration and various State agencies, have promulgated regulations which concern the use of lasers and/or radio/electromagnetic emissions standards. Member countries of the European community have enacted or are in the process of
adopting standards concerning electrical and laser safety and electromagnetic compatibility and emissions standards.
The Company believes that all of its products are in material compliance with current standards and regulations; however, regulatory changes in the United States and other countries may require modifications to certain of the Company's products in order for the Company to continue to be able to manufacture and market these products.
The Company's RF hand-held computers include various models all of which intentionally transmit radio signals as part of their normal operation. The Company's LRT 3800 laser radio hand- held computer and certain versions of its hand-held computers and its Spectrum One and Spectrum 24 cellular frequency networks utilize spread spectrum radio technology. The Company has obtained certification from the FCC for its products which utilize this radio technology. Such certification is valid for the life of the product unless and until the circuitry of the product is altered in material respects, in which case a new certification may be required. Users of these products in the United States do not require any license from the FCC to use or operate the product. Certain of the Company's products transmit narrow band radio signals as part of their normal operation. The Company has obtained certification from the FCC for its narrow band radio products. However, these models must not only be accepted by the FCC prior to marketing but users of these devices must themselves also obtain a site license from the FCC to operate them.
Associates
At December 31, 1996, the Company had approximately 2,900 full-time associates. Of these, approximately 2,300 were employed domestically. The Company also employs temporary production personnel. None of the Company's associates are represented by a labor union. The Company considers its relationship with its associates to be good.
Item 2.
Item 2. Properties
The following table states the location, primary use and approximate size of all principal plants and facilities of the Company and its subsidiaries and the duration of the Company's tenancy with respect to each facility.
Location Principal Use Size Tenancy/Ownership
One Symbol Plaza World headquarters 174,000 square Owned (subject to Holtsville, NY feet mortgage)
116 Wilbur Place Customer support 92,000 square Owned (subject to Bohemia, NY and warehousing feet mortgage)
110 Wilbur Place Manufacturing 30,000 square Owned (subject to Bohemia, NY feet mortgage)
12 & 13 Oaklands Pk. International head- 21,700 square Owned Fishponds Road quarters, marketing feet Wokingham, Berkshire and administration England and U.K. headquarters
110 Orville Drive Manufacturing 110,000 square Leased: expires Bohemia, NY feet Aug. 31, 2001
1101 Lakeland Ave. Manufacturing 90,400 square Leased: expires Bohemia, NY and distribution feet Aug. 31, 2001
2145 Hamilton Ave. Network systems, 51,500 square Leased: expires San Jose, CA engineering, feet March 3, 1999 marketing
340 Fischer Ave. Service and sales 31,200 square Leased: expires Costa Mesa, CA feet May 31, 2001
180 Orville Drive Warehousing and 22,612 square Leased: expires Bohemia, NY facilities feet Aug. 31, 2001 management
Knaves House Administration 10,900 square Leased: expires High Wycombe, feet June 24, 2003 Buckinghamshire England
Knaves Beech Customer Service 6,185 square Leased: expires Business Center feet Sept. 28, 2003 High Wycombe, Buckinghamshire England
Ilex House Customer service 5,400 square Leased: expires Mulberry Business Pk. feet April 5, 2002 Fishponds Road Wokingham, Berkshire England
In addition to these principal locations, the Company and its subsidiaries also lease other offices throughout the world, ranging in size from approximately 150 to 24,000 square feet.
Item 3.
Item 3. Legal Proceedings
On January 13, 1997, the Court, in the action entitled In re. Symbol Technologies, Inc. Class Action Litigation issued an order granting the Company's motion for summary judgment and dismissing all claims against the Company. Final Judgment of dismissal was entered on January 24, 1997.
See, also, Patent and Trademark Matters for a discussion of certain other litigation involving the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 4A. Executive Officers of the Registrant
The following table sets forth the names, ages and all positions and offices held by the Company's executive officers:
Jerome Swartz.......... 56 Chairman of the Board of Directors Chief Executive Officer and Director
Tomo Razmilovic........ 54 President, Chief Operating Officer and Director
Fred Heiman............ 57 Executive Vice President and Director
Thomas G. Amato........ 51 Senior Vice President-Finance and Chief Financial Officer
Richard Bravman........ 42 Senior Vice President, Sales/Marketing-Wireless Systems Division
Brian T. Burke......... 50 Vice President, Controller and Chief Accounting Officer
Allen C. Creveling..... 55 Senior Vice President-Human Resources
Richard M. Feldt....... 45 Senior Vice President, General Manager-Worldwide Operations
Leonard H. Goldner..... 49 Senior Vice President, General Counsel and Secretary
Joseph Katz............ 44 Senior Vice President, Research and Development
Boris Metlitsky........ 49 Senior Vice President, General Manager-Scanner Products Division
Satya Sharma........... 56 Senior Vice President-Quality
Dr. Swartz co-founded and has been employed by the Company from its inception in 1973. He has been the Chairman of the Board of Directors and Chief Executive Officer of the Company for more than the past ten years. Dr. Swartz was an industry consultant for 12 years in the areas of optical and electronic systems and instrumentation and has a total of some 140 technical papers and issued and pending U.S. patents to his credit, including the Company's basic patents in hand-held laser scanning. He is also a trustee of the Polytechnic University of New York and an adjunct full professor of Electrical Engineering at the State University of New York at Stony Brook. He is also a fellow of the Institute of Electrical and Electronic Engineering.
Mr. Razmilovic has been the President and Chief Operating Officer of the Company since October 1995. He was previously Senior Vice President-Worldwide Sales and Services. He first joined the Company in September 1989. From January 1989 to August 1989, he was President and Chief Executive Officer of Cominvest Group, a Swedish multinational high technology company. From August 1985 to December 1988, he was President of ICL International, a major European computer manufacturer and he also led its industry marketing and software development divisions.
Dr. Heiman joined the Company in July 1986. He had previously been employed by Intel Corporation, a manufacturer of semiconductor components, from May 1983 until July 1986, in a number of positions, the most recent of which was as its Director of Corporate Planning. Dr. Heiman is the inventor or co-inventor of 20 issued U.S. patents, including the first MOS integrated circuit chip, which became the basis of much of the modern revolution in computer and electronics communications and the first silicon storage tube used in display and scanning applications.
Mr. Amato joined the Company in October 1990. Prior to joining the Company he was Senior Vice President of Finance and Administration and Chief Financial Officer for Amcast Industrial Corp., a manufacturer of metal components, from 1985 to 1990.
Mr. Bravman has been employed by the Company for more than the past fifteen years in various management positions.
Mr. Burke joined the Company in November 1987. From October 1984 to October 1987, he was President, Chief Executive Officer and Director of Super Web Press Service Corporation, a manufacturer of printing presses.
Mr. Creveling joined the Company in February 1989. From January 1988 to January 1989, he was Chief Financial Officer at Keystone Camera Corp. From 1971 to 1987, he was employed by Mars Electronics, a division of M&M/Mars, where he held the position of Vice President Finance.
Mr. Feldt joined the Company in September 1995. From 1991 to August 1995, he was Vice President of Manufacturing at A.T.
Cross, a leading manufacturer of writing instruments. From July, 1988 to December, 1990, Mr. Feldt served as a Director of the Imaging and Publishing Systems Division of Eastman Kodak.
Mr. Goldner joined the Company in September 1990. From September 1979 until August 1990, he was a partner of the New York law firm of Shereff, Friedman, Hoffman & Goodman, which firm was securities counsel to the Company.
Dr. Metlitsky joined the Company in March 1983 and has served in various technical and managerial positions.
Dr. Katz joined the Company in January 1989 and has held several positions in Research and Development. From May 1981 until January 1989, Dr. Katz held a number of positions at the Jet Propulsion Laboratory of the California Institute of Technology, the most recent of which was as Technical Group Supervisor.
Dr. Sharma joined the Company in March 1995. Prior to joining the Company, Dr. Sharma held various management positions at AT&T. From April 1990 to March 1995 Dr. Sharma served as Director of Quality of AT&T's Power Systems Division and from January 1986 to April 1990 he was a Department Head at AT&T Bell Labs.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters
The Company's Common Stock is listed on the New York Stock Exchange. The following table sets forth, for each quarter period of the last two years, the high and low sales prices as reported by the New York Stock Exchange.
Year Ending: High Low
December 31, 1995 First Quarter 31 1/4 24 3/8 Second Quarter 40 1/2 28 5/8 Third Quarter 40 5/8 32 7/8 Fourth Quarter 40 29 3/8
December 31, 1996 First Quarter 40 1/4 31 7/8 Second Quarter 48 35 1/8 Third Quarter 46 7/8 38 Fourth Quarter 49 1/2 41 1/2
As of February 1, 1997 there were 1,153 holders of record of the Company's Common Stock.
Historically, changes in the Company's results of operations or projected results of operations have resulted in significant changes in the market price of the Company's Common Stock. As a result, the market price of the Company's Common Stock has been highly volatile.
To date, the Company has not paid any cash dividends to its shareholders. The Company's ability to pay cash dividends is limited by certain of the Company's loan agreements, the most restrictive of which would generally limit dividends payable in any year to an amount not greater than 50 percent of the Company's net income. On February 10, 1997, the Board of Directors declared a semi-annual dividend of $.03 per share, payable on April 1, 1997 to all shareholders of record on March 10, 1997. On the same date, the Board declared a 3 for 2 stock split, to be effected as a 50% stock dividend payable on April 1, 1997 to all shareholders of record on March 10, 1997. References to shares of the Company's Common Stock have not been adjusted to reflect this stock split.
Item 6.
Item 6. Selected Financial Data (in thousands, except per share data)