Zebra Technologies Corp. - Enabling Enterprise Asset Intelligence
Ray Rund
Senior Research Analyst
Zebra Technologies Corp. (ZBRA) is the leader in the $10B market for Enterprise Asset Intelligence, which includes mobile computing, RFID readers, data capture scanners, & barcode printing. ZBRA also provides related software and services. The market grows at the rate of GDP +1-2% per year. ZBRA is investing in adjacent markets that are larger and growing more rapidly.
Company Background
ZBRA started in 1969 and was the first to market laser barcode printers and handheld scanners. These products along with RFID printers and readers form the core of ZBRA’s Asset Intelligence and Tracking (AIT) business which has over 40% of the barcode printing market. This business is highly profitable and grows slowly. In 2014 ZBRA made a transformative acquisition of Motorola’s mobile computer business. This became their Enterprise Visibility and Mobility (EVM) business. EVM is the leader in enterprise mobile computing and data capture solutions with 40-45% share of these markets. EVM now accounts for two thirds of ZBRA’s TTM revenue of $4.4B.
The Future is Software and Solutions
Since acquiring the EVM business, Zebra has followed a strategy of internal investment and acquisitions aimed at becoming a full line provider of systems for asset tracking and information access. Recent internal developments and acquisitions have expanded their software offerings to include software which use the data captured by Zebra’s devices for real-time analytics and decision making. With these additions Zebra has begun to address an additional $15B in adjacent market opportunities which are growing faster than the $10B markets which ZBRA already dominates.
ZBRA is benefitting from major trends that are driving growth. These trends include the rapid expansion of e-commerce, cloud computing, mobile workforce computing, intelligent automation, and on-demand fulfillment (e.g. one-day deliveries). All of these trends require real time data collection, analysis and decision making. Enterprises are investing in this area to improve operational efficiency, optimize work flows, control costs, and to meet the increasingly rigorous expectations of their customers.
ZBRA provides customers with a full range of mobile computers, printers, scanners and devices, technical support, maintenance, software and cloud-based subscriptions globally. Services and supplies provide recurring revenue from their very large global installed base.
Strategies for Growth
ZBRA is following a two part growth strategy. The first is to outpace competition in the core AIT and EVM businesses. Using product innovation, their large installed base, and strong distribution networks, ZBRA is capitalizing on technology transitions now occurring in the industry. Two major transitions driving growth are the shift to 2D barcode imaging (from 1D) and the adoption of RFID. A third major transition helping ZBRA increase market share is the shift to Android from legacy mobile computing devices that use obsolete and unsupported versions of Windows operating systems. ZBRA is the undisputed leader in Android based mobile computing, and is winning the majority of business for replacing Windows based devices. The Windows to Android replacement cycle also creates additional cross-selling opportunities for printers, smart sensors and new software. The second leg of ZBRA’s growth strategy is to expand into what they are calling Enterprise Asset Intelligence. EAI combines aspects of cloud computing, automation, connected assets (IoT) and mobility to supply complete systems based on real-time data. ZBRA’s investment in software capabilities positions the company to provide integrated solutions built around their sensors, printers and computers. ZBRA believes the EAI solutions market adds an additional $15B to their addressed markets.
Risks
ZBRA depends on sales through distribution for a the majority of their revenue. Top three distributors account for ~50% of revenue.
ZBRA’s competition in EAI is increasing. To dominate this rapidly growing market, ZBRA must continue to invest in their ability to provide complete and innovative solutions.
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