SYMBOL SEEN AS WEATHERING LEGAL STORM

MICHAEL GARRY

HOLTSVILLE, N.Y. -- Symbol Technologies here, a major supplier of handheld and wireless in-store systems to the food retailers, said it has resolved the vast majority of its recent legal issues and is committed to moving forward. Retail analysts contacted by SN agreed that Symbol is weathering the storm.

Symbol earlier this month struck agreements with the U.S. Attorney's Office and the Security and Exchange Commission that will prevent any criminal complaints from being filed against it in connection with three-year-old allegations of accounting fraud.

The agreements came as seven former senior executives of Symbol were indicted on accounting fraud charges. One of those executives, Tomo Razmilovic, former chief executive officer for Symbol, reportedly fled the United States to avoid facing charges.

"We believe the issue is behind us," Verlin Youd, vice president, retail systems, told SN last week. "We're using it as a springboard and an energizing point to drive forward with strong initiatives for our partners and customers in retail and other industries."

Retail analysts said Symbol would not suffer in the retail market as a result of its legal problems. "For the most part, I think the market for Symbol products has weathered the management crisis pretty well," said Greg Buzek, president, IHL Consulting Group, Franklin, Tenn. "I don't think anyone believes that Symbol is going the way of Enron or even Worldcom."

Symbol holds a major share of the market in food retailing for handheld scanner terminals, having acquired its primary competitor, Telxon. It currently competes with Intermec, among others.

Scott Langdoc, vice president of research, retail, AMR Research, Boston, also dismissed that the accounting issue would have any effect on Symbol's execution in the retail market. "They have some very important products now coming out that support better wireless security, as well as kiosk technologies and a new breed of handheld terminals," he said. "Overall, they'll be fine."

Buzek noted he is seeing "a lot of new Symbol scanners out in the industry as we do our store audits." In April, Symbol was the focus of an announcement by Albertsons that the chain is rolling out Symbol's portable handheld self-checkout system to its 103 stores in the Dallas marketplace. Food Lion has also unveiled the handhelds for self-checkout at its new Bloom format store in Charlotte, N.C.

Youd said Symbol's "product development pipeline is full," adding that at FMI's Marketechnics show in March, Symbol unveiled a new wireless switch.

Buzek, however, noted he had "heard rumblings of complaints" that customer responsiveness, particularly in the dealer channel that markets Symbol products to retailers, "has not been as high as in previous years."

Youd responded by saying he was not aware that dealers had been less responsive, saying Symbol increased its support of third-party channels last year in a program called PartnerSelect. In March, the program received a "five-star rating" from VARBusiness magazine.

In a conference call earlier this month, Symbol executives, including William Nuti, current president and CEO, acknowledged that the accounting issue had caused the company to divert resources from its finance and IT departments, along with "20% to 30%" of the senior management team's time over the past year. Youd, however, said the company "worked hard not to divert resources focused on our customers and partners, and we were largely successful."

In its agreements earlier this month with the U.S. Attorney's Office and SEC, Symbol said it would pay $37 million in cash to a fund earmarked for purchasers of Symbol stock from February 2000 to October 2002. Symbol also agreed to pay an additional $98 million, mostly in stock, in a settlement of private shareholder litigation.

Symbol also announced it would retain an independent, government-approved examiner to review its internal controls, financial reporting practices, and compliance with the settlement agreement, and to maintain an annual training and education program. The company reported revenues of $1.53 billion in 2003, compared with $1.4 billion the previous year.