PSC and Welch Allyn set to combine forces

By Staff -- Logistics Management, 8/1/2000

The continued commoditization of bar-code terminals and computers has driven two more leading manufacturers of bar-code equipment into joining forces to bolster their chances of survival. Welch Allyn Data Collection announced last month that it would acquire PSC Inc. of Webster, N.Y., for $265.7 million, including the purchase of shares and refinancing of existing debt.

The privately held Welch Allyn plans to combine PSC's operations with those of its handheld-products unit based in Skaneateles Falls, N.Y. The new company will be headquartered at PSC's current location outside Rochester, N.Y. The two companies will have combined revenues of $400 million, according to estimates by the market research firm Venture Development Corp. (VDC), located in Natick, Mass.

The combination is the second merger for both companies within the past year. In October 1999, Welch Allyn bought Hand Held Products Inc., which makes a line of mobile and wireless computers used for bar coding. In January, PSC acquired Percon Inc., a manufacturer of wireless and batch portable-data terminals, decoders, input devices, and data-management application software.

PSC itself makes and sells bar-code scanning and automatic data-collection equipment. Its products include a line of laser- and non-laser-based handheld and fixed-position bar-code scanners, two-dimensional (2D) image readers, and wireless portable-data terminals. Welch Allyn manufactures handheld and fixed bar-code readers as well as portable computers.

VDC analyst David Krebs notes that there's not much overlap between the two companies' business base. PSC primarily sells stationary scanners to retailers, while Welch Allyn has a more diversified customer list.

Welch Allyn and PSC executives said, in announcing the deal, that they believed their combination would allow them to compete more strongly in the marketplace. PSC President Robert C. Strandberg, who will become chief executive officer of the combined companies, says, "We will have the necessary scale for success in the fastest-growing segments of our industry, such as wireless data-collection terminals and two-dimensional scanning solutions."

But analyst Krebs remains skeptical. "Looking at the way hardware-especially handheld scanning equipment-has developed, it's increasingly a commodity business," he observes. "For suppliers to succeed, there is going to be little space for hardware-based strategies. You're not going to get significant income as your margins erode."