Zebra Technologies Corporation CEO Interview: Anders Gustafsson

• On 4:55 pm EDT, Tuesday August 25, 2009

67 WALL STREET, New York - August 25, 2009 - The Wall Street Transcript has just published its Application Software Report offering a timely review of the sector to serious investors and industry executives. This 111 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Upgrade Cycle for Application Software -- Software as a Service -- Cloud Computing -- Virtualization Software -- Government Software Sales Cycle -- Demise of Unix -- Installed Base of Microsoft Software -- Installed Base of Oracle Software

Companies include: Microsoft (MSFT); VMware (VMW); Oracle (ORCL); RedHat (RHAT); Sybase (SY); Google (GOOG); Symantec (SYMC); Avocent (AVCT); Novell (NOVL); SolarWinds (SWI);CommVault (CVLT); Data Domain (DDUP); IBM (IBM); SPSS Inc. (SPSS); Steel Vault (SVUL); StrikeForce Technologies (SFOR); Jagged Peak (JGPK); Lyris, Inc. (LYRI); Saba Software, Inc. (SABA); TTI Team Telecom International (TTIL); AMICAS, Inc. (AMCS); Sonic Solutions (SNIC); BluePhoenix Solutions Ltd (BPHX); ArcSight, Inc. (ARST); Etelo, Inc. (ETLO); Pansoft Company Limited (PSOF); Exobox Technologies Corp. (EXBX); PROS Holdings, Inc. (PRO); Proginet Corporation (PFGF); Versant (VSNT); Wyndstorm Corp. (WYND); China Digital TV Holding Co. (STV); QAD Inc. (QADI); Magic Software Enterprises, Inc. (MGIC); Wizzard Software Corp. (WZE); SXC Health Solutions Corp. (SXCI); Telvent (TLVT).

In the following brief excerpt from the 111 page report, Anders Gustafsson, CEO of Zebra Technologies Corporation, discusses the outlook for the sector and for investors.

TWST: Let's start with a short introduction to Zebra, and please include a simple explanation of "asset tracking," since that seems to be a key component of the company.

Mr. Gustafsson: We celebrated our 40th anniversary at the beginning of this year, and we went public in 1991. Initially, we had two different products and have been in the bar code space for the majority of our life, including acting as a pioneer in commercializing bar code technology. The bar code celebrates its 35th anniversary this year since the first grocery store, a supermarket in Ohio, started using bar codes on produce and goods for checkout services. We were a pioneer and leader in the bar code market then, and we are still the leader in the bar code printing area today. In 2008, we had $976 million of revenue, making us an almost $1 billion company. Our market capitalization is approximately $1.5 billion.Over the years, we have added different businesses to our traditional bar code printing operations. We now have the broadest range of bar code and label printing technologies of anybody in the industry. We have high-end tabletop and high-performance printers that sit at the end of many manufacturing lines, where every product that comes off the manufacturing line gets a label put on it. These are our highest-performance printers, since if the printer is down, the whole line goes down. We also have desktop-type printers, which are used in express mail courier offices for shipping labels. Then we have mobile printers, so if you rent a car from Hertz, for example, when you return it your receipt will be printed. We also have kiosk-type printers that can go into anything from parking meters to airports, where they can print boarding passes. We offer the broadest range of printing solutions of any company in our space. We also have various types of ID badge or card printers, ranging from drivers licenses in a number of states in the US to ID badges for employees.

TWST: Zebra also provides software and management services, correct?

Mr. Gustafsson: Yes, in the specialty printing division we are expanding to new areas. Software is one part where we have tools that help interconnect printers to networks and to applications so they are easy to use and get up to speed. We also help our customers with label design. For instance, we have software for specialized new printers in healthcare that print patient wristbands. This technology can also be used in hospitality environments. For example, when children go to an amusement park, a bar code prints a wristband label so you can keep track of them and use the codes to pay for rides.Then we have a second division, Zebra Enterprise Solutions, which focuses on real-time locations of assets and different types of fleet management solutions. This also includes more software and services, where we provide solutions that can range from tracking cars that come off the assembly line at a car maker like Ford or GM to putting devices on goods on an assembly line to know exactly what work needs to be done at every station. We can also drive that with a software-based Kanban system, so we can drive inventory management on both the line side and also back with the suppliers.We have a really broad set of solutions. Our mission is to help customers improve their business processes around how they identify, track and manage any kind of asset, transaction or people. We can track employees, so if something happens the employer will know exactly where everybody is. For example, we have applications with Vail Ski Resort where we have provided them with RFID-enabled printers to print ski passes. In hazardous work environments, we can track employees so if anybody is missing, the employer can figure out exactly who and where that person is.

TWST: In your May 5 earnings release, Zebra announced net sales for the first quarter were down to $193 million versus $246 million in the corresponding period a year ago. At the time, you said that you moved aggressively to align costs with the lower demand level, and that you have continued to make investments that maximize risk-adjusted return. What are those aggressive moves and investments?

Mr. Gustafsson: We started early to look at what we expected the economic fallout to be. In Q3 of last year, we thought about revenue projections going forward and then started to take some actions to address our cost structure. We had actually started even before then some large structural programs to outsource all our manufacturing facilities and to implement a new ERP system. An outsourcing project was announced in the beginning of 2008, and we expect it to be complete by the end of this year, and that should improve our gross margins by 3%.

TWST: Looking at the broader picture, in 2007 and 2008, Zebra acquired WhereNet Corp., proveo AG, Navis Holdings LLC and Multispectral Solutions, Inc. Those are a lot of acquisitions. How do they position you for the future?

Mr. Gustafsson: These acquisitions fill out a continuum of solutions to track different types of assets. So at the low end, where you might now have just manual paper and pen, we would replace that with bar code tracking labels that can go on small, inexpensive assets that can be tracked, located and managed. It can be a pillbox of pharmaceuticals in the pharmacy or a pallet of groceries being delivered to a supermarket, something that Wal-Mart has had a big initiative around. For this we use an asset-tracking technology called "passive radio frequency identification" (RFID), which can track products from further away so you don't have to have a direct line of sight through to each individual good that sits on pallets and on crates of goods, something that Wal-Mart has had a big initiative around. We also have active RFID, which can track assets and goods in real time in a more of a campus environment, so we can track within a couple of feet of accuracy over a thousand yards of distance. Those are bigger assets, which can sit on cars, on heavy equipment, on containers, in marine terminals.

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