STRATEGIES FOR SUCCESS

Logistics Asia, 1/3/2008

Since taking over last year, Patrick Byrne, President & CEO, Intermec, has been working hard to reinvigorate the 40-year-old asset tracking technology company. He talks to Bob Gill about the major changes he is putting in place.

Patrick Byrne joined Intermec as President and Chief Executive Officer in July 2007. During a 24-year career at HP and Agilent Technologies, he held positions in R&D, engineering, marketing, and general management, including President of Agilent’s Electronic Measurement Group and Vice President of Agilent’s WirelessBusiness Unit.

As a developer and manufacturer of products that identify, track and manage supply chain assets, Intermec’s core technologies include mobile computers, bar code scanners, RFID systems, printers and label media. With headquarters in Washington State, USA, the company employs close to 2,500 people worldwide Reported fiscal year 2007 revenues of US$849 million included a record Q4 contribution of $253 million.

Q: WHAT ATTRACTED YOU TO TAKE THE HOT SEAT AT INTERMEC?

A: First, that this is a growth sector – there are not many 13 billion dollar technology markets that are growing 10 to 15 percent a year. As the competitive edge moves out to the mobility area, enabling the productivity of the mobile worker and improving supply chain asset performance are very strong underlying growth drivers. Another factor: coming into a technology company with a 40-year history of innovation and an expertise recognized and valued by global customers.

So essentially, it was this very powerful combination of technology expertise and growth market that attracted me to join Intermec and work towards expanding the company and accelerating the performance forour shareholders.

Q: AND WHAT WERE YOUR INITIAL IMPRESSIONS?

A: What I perceived from the outside, in terms of the opportunities and the deep expertise, I certainly found to be the case when I came in. But I also realized that the financial performance of the company – five percent operating profit – was not where it should be, especially for me coming from an industry where 10 to 15 percent was the norm. So there was evidently an opportunity to improve discipline and rigor in operational execution, and this is one of the things we are doing right now.

Q: THE KEY CHANGES YOU HAVE MADE SINCE TAKING OVER?

A: The changes are all driven by our new strategic focus, which encompasses five areas: markets, products, channels, growth, and supply chain.

For markets, this is now a very focused company. There are so many sectors that we could potentially be in, but instead, we now have a laser-like focus on four sectors: Industrial Goods; Consumer Packaged Goods; Transportation & Logistics; Retail.

And we will also concentrate on four applications for those industries: Enterprise Asset Management; Warehouse Operations; In-Transit Visibility; Direct Store Delivery.

For products, our strategy involves bringing out differentiated, innovative offerings on time, in high volume, and at high quality. To this end, we recently appointed Phil Danner, ex-GE, as Vice President, Global Product Development, and we’re looking to speed up the new product development engine and get new products out 30 percent faster.

For channels, previously, there was a degree of ambiguity over direct and indirect sales channels. But we’ve now made it crystal clear to our partners that we will grow our business with them, which means we’re not going to compete with them, we’re going to enable them. For growth, global expansion is a key part of the strategy. I spent a lot of time internationalizing businesses at HP and Agilent, and I see real opportunities to scale this business, particularly in Asia.

In supply chain, the aim is to improve cycle time, remove complexity and cost, so as to free up cash for the business. With our product line rationalization program, standard configurations will drive 80 to 90 percent of business flow.

Q: SO HOW IMPORTANT IS ASIA FOR INTERMEC?

A: Relatively speaking, the Asia market has historically not been a focus point for the company.

However, given its current contribution of five percent of revenue, the large addressable market, and the outstanding team and partners we have in the region, there is now a tremendous opportunity to accelerate from that base – and so we are very bullish about our prospects in Asia.

Q: ANY WORRIES ABOUT THE IMPACT OF A US RECESSION ON INTERMEC’S BUSINESS?

A: Great companies always focus; even when the news is bad they focus. Because there is always an opportunity embedded somewhere in the threat. For example, in a high fuel price environment, transport logistics companies are going to care a lot if they are wasting fuel. And high input prices are making life tough for bakeries, which are big customers of ours. So getting more productivity out of the mobile worker, which our solutions enable, translates to taking cost out of the business.

Q: WHERE DO YOU BELIEVE WE ARE ON THE RFID ROAD?

A: RFID is now the phase where category leadership will be established, and the market will then consolidate over whoever the category leader is. Intermec has very aggressive goals: we just hired a new VP, Ray Cronin, to run the RFID unit, and aided by our global sales channels, the business will really start to scale over the next few years.

Q: THE CN3 MOBILE COMPUTER IS THE FASTEST GROWING PRODUCT IN INTERMEC HISTORY. WHY HAS IT BEEN SO SUCCESSFUL?

A: The CN3 has a very compelling combination of capabilities – powerful computer platform, embedded GPS, broadband wireless, imager, durable package – which makes it an ideal fit for the transport logistics industry. It’s growth is still accelerating, and we are continuing to invest in the product with a number of new variants.

A lot of new product success is about hitting market windows. The CN3 is out at a time when customers are spending money to move intelligence out to the field, to invest in the mobile worker, and where there is extensive GPS and wireless infrastructure for them to tap on to get very high utility from the product.

Q: HOW WOULD YOU DEFINE YOUR LEADERSHIP APPROACH?

A: I try to be very clear and focused; for example, I have only made six PowerPoint slides since I arrived and I use them everywhere – for shareholders, the management team, customers. I also seek clear accountability of the executive team. That means identifying who is responsible for markets, for channels, for global expansion, etc, and delegating to let them make decisions and to deliver.

Q: WHAT ARE YOUR AMBITIONS FOR THE COMPANY?

A: In the mid-term, double-digit growth rates and at least 10 percent operating profit. And to expand our portfolio to provide more complete solutions and bring in significantly more revenue.

On a broader level, to add value to all our stakeholders. For employees, that means making Intermec a great place to work, where innovation is rewarded and where there are exciting career opportunities for the long term. For customers, to be the trusted advisor, such that they value our expertise and will select us because our technology is better and because we execute better than anyone else. For shareholders, to deliver superior, long term returns.

Having spent almost 25 years at HP and Agilent, I am here for the long term, and I look forward to seeing Intermec shape the future of the industry as the market leader.

Patrick Byrne

The CN3 mobile computer.