Beyond The Supermarket

It all began with a bunch of bored students. As the professor lectured on cavity-resonance theory, he realized he was drawing blank stares. That's when Jerome Swartz knew that pounding physics into the heads of undergraduates at State University of New York, Stony Brook, wasn't the way he wanted to spend his time. He resigned and went to work in the emerging field of bar-code technology--the black-and-white machine-readable labels that are now painted or pasted onto just about every imaginable product. Swartz soon had his own company, Symbol Technologies Inc.

That was in 1973. Now, almost 19 years later, Swartz's company is the leading maker of bar-code scanning equipment in the world. It has 40% of the overall market--and in handheld laser scanners, a technology that Symbol pioneered, an 80%-to-85% share. Those gunlike devices are now used by cash-register clerks at Kmart, Wal-Mart, Target, J.C. Penney, Sears, and dozens of other retailers. Symbol scanners are also used in hundreds of other applications, ranging from handling packages at the U.S. Postal Service and United Parcel Service Inc. to tracking ammunition for the U.S. Army and luggage for Northwest Airlines Inc.

It hasn't always been a smooth ride for Swartz, 51. A PhD. in the physics of laser diodes, Swartz had the technical savvy that eventually helped reduce bar-code scanning equipment from a 30-pound box to a 1-pound wand. But he admits that he lacked the management and marketing skills to make his Bohemia (N.Y.)-based startup the industry leader. In the first decade, growth was slow, since the market for the old, bulky scanners was limited mainly to supermarkets.

`MAN FROM MARS.' In 1983, however, sales began to climb after Symbol used new, inexpensive laser diodes to build the industry's first handheld scanners. Symbol got a basic patent on the technology, one of 60 the company holds. Following a successful patent-infringement suit against Opticon Inc., the subsidiary of Japan's Opto Electronic Co. in 1990, Symbol signed royalty agreements with all major competitors.

As the company grew and its product line multiplied, Swartz looked for a stronger management team. That's when he called in his "man from Mars," Raymond R. Martino. A former marketing executive at the Mars Electronic Div. of M&M/Mars, Martino revamped the marketing department, cut costs, and concentrated on making the company profitable. In 1984, the year after Martino joined, Symbol had its first profitable fiscal year. Since then, Chairman Swartz and President Martino have clearly formed a mutual-admiration society. "The company wouldn't have gone as far as it has without you, Ray," says Swartz. "No," counters Martino. "I wouldn't be here without you, Jerry."

The only glitch in recent years was the way the team handled the acquisition of MSI Data Corp., a maker ef handheld data terminals in Costa Mesa, Calif. "We made every mistake in the book," Swartz recalls. First, acting as a white knight to thwart a bid by Telxon Corp., Symbol paid $150 million for MSI, a price analysts say was far too much. Earnings plunged in 1990, to $7 million from $18 million in 1989, as Symbol struggled to incorporate MSI, manage a business 3,000 miles away, upgrade the subsidiary's weak product line, and merge two sales forces. At the same time, the scanner business was sagging because of consolidation among retailers.

ONE-TWO PUNCH. Recession crimped scanner sales in 1990, too, but the company staged a comeback in 1991 as sales jumped 37%, to an estimated $317 million (chart), thanks largely to a new product line that merges Symbol's bar-code scanning with MSI's portable terminals. The devices, which use wireless communications to relay information to a host computer, are being used by Kmart for such jobs as tracking warehouse inventory, restocking, and price verification.

The new wireless scanners also are helping Symbol defend its market against encroachment from Telxon, the Akron (Ohio)-based leader of the portable data-terminal market. Another threat to Symbol comes from Japan, where Panasonic Industrial Co. and Nippondenso Co. sell low-priced scanners based on Charge Couple Devices (CCD) technology. CCD scanners, which employ technology similar to that used in fax machines, cost about 30% less than the cheapest Symbol model. But Martino points out that they must be placed very close to the bar code, limiting them mainly to point-of-sale applications. Laser scanners, on the other hand, can read labels 15 feet away, he says.

Even if the slump continues, prospects look bright for bar-code gear because of all the new uses that customers keep finding. Hospitals use it to label blood samples. Nursing homes use it on patient ID tags, and United Artists theaters use it to track reels of film. According to Natick (Mass.)-based Venture Development Corp., that should keep the bar-code industry growing by 20% annually, to $4.2 billion by 1995.

If it can keep its lead, Symbol should be the biggest beneficiary. Indeed, investors seem to think it will: Symbol's stock has jumped from about 5 to 24 in the past year. That kind of profit might even wake up Swartz's former students.