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To: sorenk2 who wrote (740)	10/23/2004 9:50:22 AM
From: Glenn Petersen	of 1620

Dexit Inc. (DXT.TO), a pure play Canadian company, went public on June 29, 2004 and raised gross proceeds of $25 million. The stock is currently at $4.05 and there are 10,046,667 shares outstanding. If any of the board participants are from Toronto and have used Dexit's services, I would be interested in some feedback. The following material is from the company's website investors.dexit.com Company Overview Dexit Inc. is in the early stages of operating and marketing a new form of electronic payment facilitation service primarily for small transactions (under $25). The instead of cash™ service allows consumers to pay for a cup of coffee, muffin, newspaper or other items by tapping their Dexit tag on a merchant's Dexit reader. The value of Dexit for consumers and merchants is speed and simplicity at the cash register. No cash changes hands. There is no need to swipe a card and key in a pin number as with a debit card, or sign to authorize a credit card purchase. If you have a Dexit tag, by tapping the tag to the reader, the money is automatically transferred from your account to the merchant's and you're on your way. Dexit offers a great consumer experience and for merchants it means more customers may be processed faster at a lower cost per transaction. Dexit's History Established in October 2001, Dexit's objective was to build and deploy a cash-replacement solution for small transactions that could be used at any type of retailer. Dexit's strategy has been to deploy its service cost-effectively through a network of strategic licencees and partners first in Canada and then internationally. In September 2003, Dexit launched its tag and reader service in downtown Toronto with the promotional support of two major Canadian chartered banks - TD Canada Trust and National Bank of Canada - and TELUS Mobility. The two banks and TELUS are among the more than 100 investors who invested more than $11 million in Dexit when it was a private company. The company has received a strong endorsement from Bell Canada, which entered into two license agreements with Dexit in April 2004, under which Bell will be the exclusive Dexit merchant licensee in Canada and a non-exclusive consumer licensee for an initial term of 5 years. Under these agreements, Bell will be arranging for merchants and consumers to utilize the Dexit Service and paying annual license fees and participating in transactions-based revenue sharing arrangements with Dexit. On June 29, 2004, Dexit completed its initial public offering, issuing 4,166,667 common shares at $6 per share. The total number of shares outstanding as at June 30, 2004 was 10,046,667. Dexit's "Instead of Cash" Service Dexit's electronic payment facilitation service combines proven RFID (radio frequency identification) technology with its own proprietary software which expects to be able to leverage into a worldwide business through licencing agreements. Consumers who have registered for a Dexit customer account are issued RFID payment tags in the form of key fobs or adhesive stickers that can be attached to cell phones or other devices. To use the tag at a participating merchant, the customer pre-pays funds into his or her Dexit account and then periodically replenishes the account for a fee. Customers can replenish their accounts automatically from their bank accounts, or manually via the Internet, telephone banking, or at Dexit kiosk locations. Consumers can also register Dexit as a bill payee with select financial institutions and then, at ATMs and through other means, transfer funds into the account just as they would pay a bill. Consumers can access their Dexit account information, including transaction history and account balances, online or via the telephone. Dexit also offers consumers a proactive messaging facility, whereby they can automatically receive messages (via phone, e-mail or short message service) on their Dexit account status, such as daily account balance, a low-balance warning, and account refill confirmation. Merchants who register for the Dexit Service use a small Dexit point-of-sale terminal with RFID reader connected to the Dexit Host System via an Internet connection. Funds received from consumer purchases are electronically transferred on a regular basis from Dexit to the merchant's bank account, net of fees for the service. In April 2004, Dexit signed agreements with Bell Canada whereby Bell will be the exclusive Dexit merchant licencee in Canada. Under this arrangement, Bell will sign up merchants for the Dexit service and rent, sell, or lease point-of-sale terminals and RFID readers to them. Bell is also a non-exclusive consumer licencee in Canada. These agreements will effectively give Dexit access to Bell's relationships with some 15 million Canadian consumers and more than 500,000 merchants. This agreement and others like it that Dexit intends to sign internationally have the dual benefits of generating revenues and earnings, and rapidly adding at minimal acquisition cost consumers and merchants using the Dexit Service. Dexit's Revenue Model As its service expands, Dexit expects to benefit from a diverse number of revenue sources, including: --Fees from merchants, based on a percentage of the transaction value; --Refill fees from consumers ($1.50 per refill or a $25 annual fee for unlimited refills) --Licencing fees from organizations who sign up and deal directly with merchants and/or consumers in each targeted geographic area; --Income earned on the prepaid funds in the Dexit consumer accounts; --Income from the sale of Dexit point-of-sale terminals and RFID readers for installation at merchant locations. Some of the fees will be shared with licencees. For example, Dexit's agreements with Bell Canada involve the sharing of what Bell charges the merchants it serves within Canada for transaction fees and of the refill fees for consumers signed up by Bell. Growth Strategy Dexit began a controlled launch of its service in September 2003 in downtown Toronto where it received a strong and enthusiastic response from consumers and merchants. In 2004, Dexit expanded the service to campus environments in the Toronto area. As at June 30, 2004, more than 250 merchant locations were accepting the Dexit tag payments, with more than 32,000 consumers registered for the Dexit Service. Average ticket size was less than $5 and average refill amount was approximately $60. Dexit's objective is to expand its service in key strategic areas across the Greater Toronto Area, other Canadian centers and internationally, starting in the fall of 2004. One of the key foundations of the Dexit business model has been to secure trusted third parties such as financial institutions and telecommunications companies as merchant and consumer licencees to drive merchant acceptance and consumer adoption of the Dexit Service within their respective customer bases. By partnering with Bell Canada and other licencees, Dexit is aiming for an accelerated deployment of its service to build scale quickly and cost-effectively to achieve the critical mass necessary to sustain a competitive advantage. Dexit's and its licencees' initial target markets are areas where there is a high consumer-to-merchant ratio, such as office towers, universities, hospitals, and college campuses. Dexit is also targeting the largest national chain merchants, with an emphasis on coffee shops, quick-service restaurants, convenience stores, and other such merchants with average ticket sizes of less than $25. Dexit intends to begin licensing the Dexit service internationally in 2005. Over time, the company intends to create interoperability between Dexit licencees worldwide, giving consumers the ability to use their Dexit tags internationally.

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To: Glenn Petersen who wrote (757)	10/23/2004 10:12:56 AM
From: Glenn Petersen	of 1620

Reuters ran a story on Detix earlier this week: us.rd.yahoo.com The cashless society, one coffee cup at a time Wed Oct 20, 2004 12:56 PM ET By Peter Galloway TORONTO, Oct 20 (Reuters) - The cashless society has become a reality in the warren of underground concourses beneath Toronto's downtown office towers, at least when it comes to paying for a cup of coffee, a parking space or lunch. The basis of this experiment is a matchbox-sized, microchip-embedded plastic tag called Dexit. Most often used to make purchases of less than C$25 ($20), it can be attached to a key chain or a wireless phone. Tap the tag against an Internet-based Dexit terminal in a coffee shop and your large decaf latte is paid for. Tap it at the pay booth in the parking garage instead of fishing for coins. Use it to pay the dry cleaner as you pick up your clothes on the way home. A similar concept, the Mondex smart card, was tested on the Upper West Side of Manhattan in the late 1990s and allowed to fade away, due to a combination of consumer resistance and technical flaws. The same fate befell a Mondex test in Guelph, Ontario. But interest has been revived by the success of single-use cash cards such as Starbucks' coffee card, and Speedpass tags that can be used to buy gas at Exxon stations across the United States and Esso stations in Canada. Most merchants who use Dexit -- there are more than 300 food and service outlets with terminals in Toronto's maze of underground malls -- are places such as Bento Nouveau sushi, Burger King, Krispy Kreme doughnuts and Second Cup coffee. They serve tens of thousands of office workers who want to grab a bite or run a quick errand near their workplaces. The company that issues the tag, a start-up called Dexit Inc., says about 32,000 people are using it, with most transactions under C$25. Dexit is leaving the big-money part of the cashless society to the credit- and debit-card issuers. Company president and chief executive, Renah Persofsky, said she got the idea for Dexit while sitting in a Starbucks watching a woman spend C$100 on a pre-paid coffee card. "I asked the woman why she would give a hundred dollars over to a coffee establishment to get a prepaid card when they accept credit and debit, and she just said 'I don't want to fool around with coins and change to buy a cup of coffee'," Persofsky said. "So I was lying in bed that night and thought, if it's possible to do something like this that consumers can use everywhere, do I have a business here?" Here's how it works: The user gets a free tag and pays Dexit C$1.50 for each refill of C$100 of spending space on it. The first refill is free and there's a C$100 daily limit on spending. To refill, you can have Dexit automatically transfer funds from your bank account or you can use your bank's bill payment service. Dexit's value is its speed at the cash register, the company says. "No cash changes hands," says the blurb. "There is no need to swipe a card and key in a PIN number as with a debit card, or sign or authorize a credit card payment." Reaction has been mixed. "There were lots of people using it when they did a promotion, but now we get three or four a day," said a server at a subterranean coffee shop. "Some people like it, and some say they don't like paying to fill it up. And I guess some people, like me, just like to have money in their pocket." The company raised C$22.7 million in an initial public offering in June and has signed a deal with Canada's biggest phone company, Bell Canada, a unit of BCE Inc. (BCE.TO: Quote, Profile, Research) , that gives Bell exclusive rights to Dexit across the country. Persofsky said Bell is putting its marketing muscle behind the product and takes over full deployment in mid-November. Dexit reported a loss of C$2.9 million on revenue of C$541,000 in the second quarter and Persofsky said she expects it to break even within two years when it has 300,000 to 400,000 clients signed up. The stock has remained around C$3 on the Toronto Stock Exchange recently with 52-week range of C$5.95 to C$2.80. The company envisions turning its small-change operation into a worldwide business with licensing agreements in Britain, Latin America, the United States, India and China. Dave Pupo at Dundee Securities in Toronto, one of two analysts who follow Dexit, says it's possible, though nothing you'd want to bet the store on. "This stock is only for very speculative investors, but if (the company) can maintain capitalization, they can move forward and penetrate the market," he said. "The near cashless society is approaching and the timing is right for the Dexit technology," Pupo said. "But there are impediments restraining immediate mass global acceptance of micro-payments. You know, 80 percent of Americans still use cash for everyday purchases, but I think the time is right to begin saturating the market with this kind of product." ($1=$1.26 Canadian)

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To: Glenn Petersen who wrote (758)	10/23/2004 10:20:33 AM
From: Glenn Petersen	of 1620

Dexit reported $521,400 in revenue for the three months ending June 30, 2004, of which $500,000 was a licensing fee from Bell Canada. Dexit Announces Second-Quarter 2004 Results Tuesday August 10, 7:02 am ET biz.yahoo.com - Granted two significant licences to Bell Canada and completed IPO creating solid foundation for domestic and international growth - Results reflect the significant costs of the initial launch of Dexit(R) service in Toronto, offset by a portion of the licence fees received from Bell Canada - Now expanding in Greater Toronto Area and increasing efforts in select international markets - Conference call/webcast scheduled for 8:30 a.m. (Eastern) today TORONTO, Aug. 10 /CNW/ - Dexit Inc. (TSX: DXT - News), a leading provider of a new "instead of cash"(TM) electronic payment facilitation service for small transactions, today announced its financial results for the three and six months ended June 30, 2004. "The second quarter was another period of accomplishments in Dexit's development," said Renah Persofsky, President and Chief Executive Officer. "Dexit is now ready to expand from our initial focus in downtown Toronto to the Greater Toronto Area and other urban centres in Canada. We are also increasing our efforts in select international markets. "As at June 30, 2004, we had signed up more than 32,000 consumers and deployed to more than 250 merchant locations, including stores represented by major brands such as A&W, Burger King, Mr. Sub, Imperial Parking, Pharma Plus Drugmarts, Petro-Canada, and Mac's Convenience Stores. Our business plan, growth strategies, and proprietary technology also enabled us to attract a very strong partner in Bell Canada. We signed two licence agreements with Bell Canada in April. Under the first agreement, Bell Canada is Dexit's exclusive representative to merchants in Canada. Under the second agreement, Bell Canada will be marketing the Dexit(R) service directly to consumers on a non-exclusive basis. "We believe this relationship with Bell Canada allows the Dexit service to expand across the Greater Toronto Area and other urban centres in Canada in a very cost-effective manner. Bell Canada has business relationships with more than 500,000 merchants across the country. We anticipate an accelerated deployment with our Bell Canada relationship and that Dexit will be able to leverage Bell Canada's large marketing, sales, and service organization," Ms. Persofsky stated. "Dexit's plan is to support Bell Canada's efforts to sign up more merchants and actively seek other organizations to be consumer licensees. We then intend to make a major push with Bell Canada and our other consumer licensees, including TELUS Mobility, TD Canada Trust, and National Bank of Canada, to sign up their consumers. With the addition of Bell Canada as a consumer licensee, we believe we have the right partners to make Dexit a household name within Canada. "We are having discussions with interested international parties which could possibly lead to the introduction of our innovative service in various international markets. We believe the Dexit service offers a compelling alternative to the use of cash for smaller transactions within Canada and internationally. Many consumers seek speed and convenience in their daily lives, and the advantages offered to merchants are numerous," said Ms. Persofsky. Financial Results Since the company is in the initial stages of expanding the Dexit service across Canada, Dexit's revenue remains modest and well below expenses. Revenue was $521,400 in the three-month period ended June 30, 2004 and $524,771 for the six-month period ended June 30, 2004, compared with nil in the same periods in 2003 (all figures expressed in Canadian dollars). In April 2004, the company signed an exclusive merchant licence agreement with Bell Canada and received a payment of $2 million in licence fees, of which $500,000 was recognized as revenue in the second quarter and $1.5 million as deferred revenue. The remainder of the revenue came from merchant transaction fees, consumer refill fees, RFID tag sales, and miscellaneous fees. Sales, marketing, operations, technology, customer support, and administration expenses mainly related to the launch of the Dexit service in downtown Toronto that began in September 2003 resulted in a net loss for the three month period ended June 30, 2004 of $2.91 million or $0.49 per share, compared with a net loss of $0.73 million or $0.31 per share a year earlier. Per-share calculations are based on weighted average shares outstanding of 5,967,000 in the second quarter of 2004 and 2,342,000 a year earlier. Net loss for the six month period rose to $5.81 million or $0.98 per share in 2004 from $1.17 million or $0.57 per share in 2003 (based on 5,921,000 weighted average shares outstanding for the 2004 period and 2,072,000 for the prior-year period). Dexit's initial public offering in June raised $22.69 million, net of financing-related costs. Dexit also received initial licence fees of $2 million paid by Bell Canada. On June 30, 2004, Dexit had cash and cash equivalents of $25.39 million compared with $4.45 million at the end of 2003. Post IPO, the number of shares outstanding as at June 30, 2004 was 10,046,667. Additional information on the interim results is available in the full Second Quarter 2004 Financial Report filed with Sedar and posted in the Investor Relations section of Dexit's website at www.dexit.com. Conference Call Dexit will hold a conference call for analysts and investors to discuss its business and second quarter 2004 financial results at 8:30 a.m. (Eastern) today. To participate in the conference call, please dial 416-640-4127 or 1-800-814-4859. A live audio webcast of the conference call will be available at www.newswire.ca and www.dexit.com. An archived recording of the call will be available at 416-640-1917 or 1-877-289-8525 (Passcode 21081418 followed by the number sign) from 10:30 a.m. on August 10 to midnight August 17. An archived recording of the webcast will also be available at Dexit's website. About Dexit Dexit Inc., based in Toronto, has pioneered a new, "instead of cash"(TM) electronic payment facilitation service for small transactions (generally under $25). The Dexit(R) service enables consumers to pay for coffee, muffins, lunch and other low-cost items quickly and conveniently with the tap of a RFID (radio frequency identification) tag linked to a pre-paid account. Founded in 2001, and funded in part by CANARIE Inc., Dexit launched its service in September 2003, initially in downtown Toronto. More than 32,000 consumers have registered for the Dexit service, which is currently available in more than 250 merchant locations. A comprehensive list of Dexit merchants is available on our web site. Dexit recently completed its initial public offering (IPO) of common shares. To find out more about Dexit Inc. (DXT) visit our website at www.dexit.com. <snip>

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To: Skywatcher who wrote (756)	10/24/2004 4:11:53 PM
From: Glenn Petersen	of 1620

Spotlight on Security, Privacy Issues At the Smart Card Alliance conference, Richard Clarke and others emphasize the role RFID can play to improve security and the need to address public concerns about the technology. rfidjournal.com By Mary Catherine O’Connor Oct. 22, 2004—Richard Clarke, former presidential advisor on terrorism to Reagan, Clinton and both Bushes, opened the Smart Card Alliance annual fall conference on Monday and gave three directives to the crowd of mostly smart card technology vendors and integrators: “unite, lobby and educate.” Discussing topics ranging from homeland security to identity theft to the role of biometrics in identity security, Clarke’s overriding message to the smart card industry was that it has a very important role to play in helping to make the U.S. more secure, while also being mindful of the public’s concerns over privacy. “Security and privacy are two sides of the same coin,” he told the members of the Smart Card Alliance, a nonprofit organization working to accelerate the acceptance of smart card technology. He also said that despite the absence of attacks on U.S. soil since Sept. 11, 2001, the threat to our national security is “at least as large as it was three years ago,” and that at the same time, the American public is voicing growing concerns over the loss of privacy through heightened security efforts. Secure identity cards have embedded microchips that often include an antenna, allowing dual capacity for use with contact or contactless (RFID) readers. Where enabled for contactless uses, most smart cards are compliant with the ISO 14443 standard and operate at 13.56 MHz. Clarke said that an opt-in system that depends on voluntary participation, like those used for electronic tollway payments, could aid in the wider adoption of smart cards. He also suggested that the smart card industry look at ways to federate and strengthen private and public partnerships. By bringing together organizations that issue or might someday issue smart cards for things like identification or payments, some operational resources could be shared and the number of individual cards to be issued could be kept to a minimum, he said. He said that we can get to a point where smart cards are used widely for identify security and that this can happen while “preserving the great American values of privacy and civil liberties.” One way to achieve this, he suggested, is for the security industry to work with the American Civil Liberties Union. While not suggesting measures as extensive as Clarke’s, other speakers throughout the conference echoed the importance of promulgating information on smart cards. This can be done by encouraging integrators of smart card technology implementations to share case studies with other potential implementers and by encouraging coverage of the technology in the national media toward a greater understanding of smart card technology among end users of the cards. Clarke’s book Against All Enemies, published in March, was critical of the current Bush administration’s response to terrorism after Sept. 11. During his address on Monday he faulted the Bush administration for failing to adequately implement its national strategy to secure cyberspace. But Clarke did suggest that the Homeland Security Presidential Directive 12 (HSPD-12), signed in August, is a move in the right direction. The directive mandates that all federal employees be issued an identification credential that is fraud-resistant and can be electronically authenticated. Though the directive does not specify the use of smart cards, the technology is clearly appropriate for use in meeting the mandate. Clarke said HSPD-12 could spread the use and acceptance of smart cards for secure identification. “If it works for the federal government,” he said, “it might work elsewhere.” Regarding the privacy concerns that surround the use of RFID technology in the retail environment, Clarke said that now is the time for retailers to work together to adopt a uniform data privacy policy. Otherwise, he said, there will be legislation regulating them to do so. During a “state of the industry” executive’s panel, Bill Gravell, director of identity management for Northrop Grumman Information Technology, said that at Northrop Grumman and other large corporations where smart smart cards are issued for secure identity and access to facilities, it was important to educate personnel on how the technology works and what types of data it tracks. He noted that the use of secure ID cards in the corporate environment is a social change as much as a business initiative and technological issue, and suggested working through human resources to facilitate this education.

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From: Cooters	10/28/2004 4:59:59 PM
	of 1620

VF Contracts for Millions of Tags The clothing company that produces Lee, Wrangler, The North Face and other well-known brands signed a three-year deal to buy RFID tags and readers from Alien Technology. By Jonathan Collins Oct. 28, 2004—Major consumer apparel manufacturer VF Corp. has signed a three-agreement to purchase RFID tags and readers from Alien Technology. VF will deploy the equipment to help it meet RFID shipping mandates from customers including Wal-Mart and Target. Initially, VF will RFID equip seven of its more than 50 U.S. distribution centers to enable it to add RFID tags to cases of its garments, in order to meet Wal-Mart’s January 2005 deadline requiring suppliers to tag cases and pallets of goods shipped to the retailer’s three north Texas distribution centers. The company, which produces many well-known brands, including Lee, Wrangler, Nautica, Eastpak and The North Face, expects to deploy two to four Alien RFID readers at each of its distribution centers during the next few years. The deal represents a significant win for Alien. The clothing manufacturer has already begun shipping tagged cases of its products to Wal-Mart’s three distribution centers and says it expects to use around 600,000 RFID tags a year at first. Toward the end of the contract period, however, VF expects usage will grow to more than 5 million tags annually as more of its customers’ DCs become equipped to receive tagged shipments. The company will initially use Alien’s 64-bit EPC Class 1 tags but will switch to a 96-bit version later next year. VF says it tested tags and readers from three or four vendors but opted for Alien tags and readers for a number of reasons. “What made Alien stand out was the maturity of the product, the documentation and that the configuration was easily connected to our existing WMS systems without additional middleware,” says Jim Jackson, director of communications infrastructure at VF. Alien also managed to undercut its competitors on tag prices as well, which was also a factor in VF’s decision to go with Alien, says Jackson. “From the hardware point of view, there was not a significant price difference between competing vendors, but from a tag-pricing standpoint, there was an advantage with Alien. Hardware costs can be almost trivial compared with tag costs, and we feel we got a good price for tags from Alien,” says Jackson, adding that the tags’ performance has been impressive “We have had no problem getting multiple reads per carton on conveyors moving up to 300 feet per minute.” Unlike some Wal-Mart suppliers that are limiting the number of product SKUs that they will tag and ship to Wal-Mart by January, VF says it will be tagging all its shipments of jeans, intimate apparel and sportswear to Wal-Mart’s three RFID-enabled distribution centers in north Texas. Because of the configuration of its packing and shipping operations, the company decided it made more sense to tag every case being shipped to the three Wal-Mart DCs covered by the mandate. “It’s binary. We either we tag everything going to those centers, or we tag none at all,” says Jackson. The company will encode and manually apply tags to cases as part of its existing pick-and-pack process of assembling orders for specific customers. If the items were tagged earlier in the supply chain, VF says, it might be able to use those tags for its own operations. However, the tagging will take place alongside well-established bar code systems that already have the ability to track packed cartons on existing conveyor systems. “Our tagged cases don’t exist until two hours before they go out the door, and our distribution centers have been set up for line-of-sight bar code automation, so there is not a lot of additional value that we can get from tagging our cases,” says Jackson. Nevertheless, VF says it is hopeful that its initial RFID deployment and the growth of RFID use in retailer supply chains might help to bring the price of tags down enough to let VF move to item-level tagging. “By using the technology, we are helping to drive the technology to the next level, which could help get us to item-level tagging probably in the next three to five years,” says Jackson. VF believes that RFID’s ability to read tags without the need for a clear line of sight can drive cost savings in its operations at the item level. “If we could use item-level RFID tagging to ensure that each case has the correct contents without having to open the case and check each item individually, then we can use that to drive savings,” Jackson says. He maintains that the company first began looking at the potential for item-level tagging garments in its supply chain tagging 11 years ago, but tag cost has been a limiting factor in deploying such a system.

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From: Montana Wildhack	10/28/2004 5:35:49 PM
	of 1620

WalMart transitions to implementation biz.yahoo.com Wal-Mart EPC Pilot Begins Transition to Implementation; First SAM'S CLUB Location and Distribution Center to Come Online This Fall Thursday October 28, 3:03 pm ET BENTONVILLE, Ark., Oct. 28 /PRNewswire-FirstCall/ -- Just five months into its electronic product code (EPC) pilot program, Wal-Mart (NYSE: WMT - News) is giving the "go ahead" to suppliers wishing to get a jumpstart on the January 2005 milestones. "They're ready; we're ready; there is no need to wait," Carolyn Walton, Wal-Mart's Information Systems Division vice president responsible for EPC implementation, said. "I sometimes get the feeling that people think we are going to flip some gigantic switch on January 1st and tagged cases and pallets will appear from more than 100 suppliers. "Instead, as we anticipated, suppliers are coming to us and asking to get into the game before the milestone happens," she continued. "We welcome their enthusiasm and participation." One of those companies is Beaver Street Fisheries, a seafood distributor and one of more than 30 suppliers that have stepped forward to voluntarily meet the January 2005 milestone. "We're on a quest to grow our business and we believe success lies in efficiency," said Howard Stockdale, chief information officer for the Jacksonville, Fla.-based company. "We believe RFID offers an opportunity to fine tune our processes and we've made a decision to aggressively pursue this technology. Participating in Wal-Mart's initiative is part of this strategy." Approximately a year ago, Beaver Street Fisheries started asking what potential radio frequency identification, or RFID, held for helping the company achieve its business goals. After doing its homework, Stockdale put together an RFID team and built a small lab. The team then created a three- step plan to incorporate the technology into the company's processes. "Beaver Street provides a textbook example of how to approach this technology," Walton said. "They got into the game early. They put together a team to see how RFID could benefit their own business. And, they developed an implementation plan that was aggressive but achievable. By doing all of this, participating in Wal-Mart's January 2005 initiative actually became an efficient way to test their own program." Stockdale says the company's RFID program hasn't been without challenges, especially since it imports products from more than 50 countries around the world. Still, he said embracing the technology has led to a re-engineering process that will make the company more competitive. "We're looking at the future and making the appropriate investments," he said. "We're going to become an even bigger player in the market and RFID is going to help us achieve that. That's part of the ROI that we know is coming." Beaver Street Fisheries will begin shipping tagged cases and pallets to Wal-Mart the week of Nov. 1. Labels will be applied on an in-line conveyor system, which represents the successful achievement of phase two of the company's three-phase RFID program. Suppliers already shipping tagged cases and pallets to Wal-Mart are expected to start within the next two weeks include apparel, toy, bicycle and dairy product manufacturers. Original Goals Wal-Mart initially announced its EPC initiative in June 2003. At the time, the company stated that the first phase of implementation would involve its top 100 suppliers tagging cases and pallets of products headed to three Dallas/Fort Worth area distribution centers starting in January 2005. Since then, more than 30 suppliers have voluntarily asked to meet that same milestone. The primary consumer benefit expected during initial EPC adoption is better merchandise availability. Wal-Mart expects to do a better job of having the right product in the right place at the right time, improving the customer shopping experience. Wal-Mart launched an EPC pilot April 30 in the North Texas area. Cases and pallets of 21 products from eight suppliers are being shipped to Wal- Mart's Sanger, Texas, distribution center and then onward to seven local Supercenters with RFID tags attached. This technology allows retailers greater inventory visibility from supplier to distribution center to a store's backroom. Moving Forward As part of the initial implementation, by January, Wal-Mart will expand to three the number of EPC-equipped distribution centers in North Texas. At the same time, it will also increase the number of participating stores from seven to more than 130. Most of these will be located in North Texas. Others will be located in the south central Oklahoma region. This fall, the first SAM'S CLUB location will feature EPC capabilities. The club, located at the southwest corner of Highway 121 and Ohio Drive in Plano, will be the company's first retail facility outside its Wal-Mart Supercenters to use this revolutionary technology. SAM'S CLUB will abide by the same EPCglobal consumer guidelines of consumer notification and choice. Price signs will include EPCglobal symbols when a tagged case or pallet is available. In the SAM'S CLUB merchandising model, it is more likely that an individual could select to purchase an entire case or pallet of product. Members who choose to purchase these products can keep the tag or remove it post-purchase. Rewarding Progress "We've seen tremendous progress in the EPC initiative around the globe," Walton said. "Tag prices have fallen dramatically since June of last year. They certainly need to fall further to allow RFID to achieve its maximum potential and we believe this will happen as more and more technology vendors enter the marketplace. "We also see more retail pilots -- and pilots in other industries -- ready for launch," she continued. "Consumers, too, continue to demonstrate a common sense approach to the technology's roll-out, something we believe comes from concerted efforts to educate customers on how EPCs will ultimately improve their shopping experience." Still, Wal-Mart knows there are still non-believers who question the timing of its initiative and some organizations that claim that there is no long-term return-on-investment even if RFID tags were given away for free. "We believe in this technology and we are extremely proud to be helping end the 'chicken or egg' cycle that it has been stuck in," Walton said. "We sincerely believe there is ROI for any company willing to approach this technology as a way to improve their own business and not just a way to meet our milestone. Beaver Street Fisheries is an excellent example of that. We remain committed to helping other suppliers wanting to find that same success." "As time passes, we firmly believe that everyone will ultimately look back at January 2005 and agree that it was the right thing to do and the right time to do it," she said. Walton said the company's plans for calendar years 2005 and 2006 remain as previously announced. Wal-Mart continues to work with suppliers to determine how best to grow the initiative beyond that.

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To: Montana Wildhack who wrote (764)	10/30/2004 11:33:11 AM
From: Glenn Petersen	of 1620

RFID's Payback Stretches Beyond 2 Years, Analyst Says informationweek.com Oct. 29, 2004 Early adopters may find it hard to speed up the ROI on RFID deployments. By Elena Malykhina It's inevitable that people deploying radio-frequency identification systems will see cost increases before savings roll in. Companies have to pay for the new infrastructure, after all. But some companies may not see RFID efficiencies for at least two years, says one analyst firm. In fact, ARC Advisory Group suggests that delayed returns on investments could end up actually raising costs for retailers that are uninvolved with RFID. ARC has issued a report that says early adopters of electronic-product-code RFID systems will wait for a return on investment longer than perhaps they'd anticipated. Some companies have deployed RFID because of Wal-Mart Stores Inc.'s tagging mandate. Steve Banker, service director for supply-chain management at ARC, says those companies may be reluctant to recoup their investments by charging Wal-Mart higher prices. So they might charge more of other retail customers instead, Banker says. ARC says it polled 24 companies that are investing in EPC RFID and only one company said it anticipates getting an ROI in less than two years. Virtually all of the rest predicted that payback would begin after two years. "This is still an immature technology, and until the [tag] readability and the reliability improve, which may be over two years away, suppliers are not going to be able to reduce their inventory," he says. Banker says a company that spends $10 million on infrastructure and tags cannot earn back more than $1 million to $1.5 million a year and, therefore, will have a payback period of more than two years, he says. RFID has a lower ROI for manufacturers and distributors selling to large retailers than for their retail customers, Banker says. Retailers run a highly automated distribution chain and they expect the manufacturers to pay for RFID tags without being reimbursed. Passing on tag costs, in fact, is the main reason retailers have a higher chance of achieving ROI in less than two years, he says. "One of the benefits retailers talk about is better in-stock position in the store, which they say will benefit them and their suppliers, but the savings are greater for retailers than for manufacturers," he says. Although companies participating in the ARC study say RFID has a poor ROI, those facing mandates are searching for other benefits to mitigate the costs. In order to get benefits from RFID in their warehouses, for example, suppliers will have to move tagging out to factories, and they have to automate receiving and follow-through processes, Banker says. "That does not make much economic sense until there's a much higher volume of goods being tagged heading out to retailers," he says. "Until you have almost perfect [tag] readability throughout the extended supply chain, you won't get those benefits." Since Wal-Mart suppliers believe that they will not reap savings from RFID for several years, some said they might have to raise prices for Wal-Mart, Banker says. Others don't want to take a profit hit and said they will increase prices to other retailers instead.

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From: Glenn Petersen	11/1/2004 8:03:55 AM
	of 1620

ID Chip May Not Be a Money Maker nytimes.com November 1, 2004 NEW ECONOMY By BARNABY J. FEDER THE recent news that the Food and Drug Administration had approved an implantable microchip for humans has garnered a lot of attention. But that does not mean that the idea of chips as personal identity tags will ever generate profits. The device, called the VeriChip and marketed by Applied Digital Solutions, horrified privacy advocates, who were concerned less with its F.D.A.-approved use than with where the technology might lead, declaring that people could become walking bar codes. Investors, however, piled into Applied Digital's stock, sending it up 68 percent, to $3.57, on Oct. 13, the day of the announcement. The shares, which are listed on the Nasdaq, later climbed as high as $4.62. On Friday, the shares closed at $4, up 19 cents, or 5 percent. Moving quickly to exploit the optimism, Applied Digital announced on Oct. 22 that it had raised $11.9 million in a private sale of 2.5 million shares at $3.61 a share, and warrants to buy nearly 2.2 million shares. The purchaser was Satellite Strategic Finance Associates, an investment company that bought $2 million of shares of Applied Digital in April. It is far from clear, however, whether the F.D.A. approval actually moved Applied Digital far enough toward its long-term vision to make it a less risky stock. Scott R. Silverman, Applied Digital's chairman and chief executive, said that investors in the company, which is based in Delray Beach, Fla., see VeriChip as "the proverbial home run" and said that he was not about to discourage that view. While he insisted that a revamping that the company had undergone has created a business that can survive without VeriChip, he said that "Veri- Chip's what's going to deliver value to shareholders in the long run." The F.D.A.'s approval is for Veri- Chip's use in a system that would give health care workers quick access to the medical records of anyone who had been implanted with the device. But the average ballplayer has a far better chance of hitting a home run than the average investor has of picking big winners among the thousands of new technologies that small companies like Applied Digital are trying to take to the market. In this case, investors also face the challenge of understanding Applied Digital's intricate finances and relationships with its publicly traded subsidiaries, Digital Angel and Infotech USA. Digital Angel also cashed in on the jump in Applied Digital stock after the F.D.A.'s announcement, selling close to 1.07 million shares of Applied Digital for $4 million. That stock was obtained in March in a stock swap with Applied Digital. The complicated financial structure is tied to Applied Digital's past. Applied Digital grew out of a wireless communications venture called Applied Cellular Technology. Richard J. Sullivan, a veteran entrepreneur, became chief executive in 1993, took the company public in 1994 and engineered more than 50 acquisitions by 2002. Applied's stock soared to more than $151 a share early in 2000, then collapsed with the bursting telecommunications and Internet bubbles. Mr. Silverman, a lawyer and consultant, was named president in 2002 to help streamline Mr. Sullivan's money-losing hodgepodge. He succeeded Mr. Sullivan as chief executive last year. In addition to its stake in Digital Angel, which is based in South St. Paul, Minn., Applied Digital controls 52 percent of InfoTech USA, a computer services and networking firm based in Fairfield, N.J., that was formerly known as SysComm International. All three have been losing money, according to filings with the Securities and Exchange Commission. Mr. Silverman recently summed up Applied Digital's status as "much closer than ever before to net income." There is nothing modest about Applied Digital's vision for VeriChip. The company's executives have told investors that VeriChip is addressing markets worth hundreds of billions of dollars. VeriChip, they have said, could become the theft- and loss-proof successor to the credit card, a device to monitor the whereabouts of children and mentally impaired adults and a tool to prevent anyone other than a police officer from using a gun issued to the officer. But Applied has not demonstrated that it is technically feasible for Veri- Chip-driven data systems to operate at the reliability levels needed in most of the financial, security and medical uses bandied about by the company's enthusiasts. To be sure, Digital Angel and competitors like AllFlex USA and Avid Identification Systems have been using similar implanted radio tags to permit pet shelters, laboratories and veterinarians to identify millions of animals. But the infrastructure investment that would be needed to have a major impact on VeriChip's intended human markets is far larger and more complex. It is also difficult to see how Veri- Chip would compete economically with other available technologies. None of the alternatives do everything VeriChip can, but biometrics, like face and iris scans or fingerprints, and radio tags embedded in smart cards or wristbands have a head start toward commercialization. Generally, they are also less expensive to deploy than VeriChip. So far, VeriChip's biggest success has been in Mexico, where several hundred Mexicans have enrolled in a version of the medical application that was approved by the F.D.A. in the United States. A smaller group, which includes Rafael Macedo de la Concha, Mexico's attorney general, were implanted with chips to control access to documents vital to the battle with drug traffickers. Mr. Silverman said the F.D.A. clearance would unlock the domestic medical business, which he said was VeriChip's best application. But the F.D.A. approval limits the chip to encoding a 16-digit identification. The chip cannot carry such basic data as blood type or organ donor instructions, and it is useless if the health care worker does not have the scanner and a computer or other means of accessing electronic records. The approval letter from the F.D.A. also contains ominous warnings about potential risks, like migration of the implanted chip and interference with magnetic resonance imaging device, which are widely used in hospitals. There is no evidence that such possibilities are problems with VeriChip, but critics hope such warnings will help scare off the big medical products companies that Applied Digital desperately needs to sign on as distributors. Given Applied Digital's complexity, some investors said that Digital Angel was a less risky way to invest in VeriChip's potential. Digital Angel owns the underlying technology, which it licenses to Applied Digital, and manufactures VeriChip along with its animal tracking devices. Applied Digital's license runs out in 2013, so even if VeriChip grows into a major product, Applied's grasp over its long-range returns may be shaky. Digital Angel's shares, which closed at $2.71 the day before the F.D.A. approval of VeriChip, ended trading Friday at $3.53. David Talbot, a portfolio manager for Healthvest Advisors, which first invested in Digital Angel three years ago, said new management installed at Digital Angel has steered the company toward profitability. Mr. Talbot said that he believed the animal tagging business alone was worth more than Digital Angel's current stock price. But when asked about relations between the Applied Digital companies, he added, "I wish it wasn't so convoluted."

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