Value Microcaps Motherboard

[southacresdave]

Hweb2..SCKT..research list on largest partners

I'm not sure where the industry will go and how far it will take Socket, but it has potential that's for sure. I posted this on another site as part of a long research report I wrote, but I thought I'd share this part here also.

Socket Mobile's Software Application Partners:

At Socket's Shareholder's Meeting, they do a very good presentation to the employees. Here's a link to the one from this year. It's just the slide show, but explains their business better: http://www.mkr-group...g_v9.1.pptx.pdf

I'm going to list a bunch of the major partners that I know. One thing to remember with this list is that all of these companies independently reached out to Socket Mobile to use their scanner products in their software, not Socket selling the idea to them. It's only now with the hiring of James Lopez, Vice-President of Worldwide Marketing, are they going to start to promote their product more. In my research report posted above, I discuss the importance of their Software Development Kit (SDK). This list will start to give you an indication of how it's completely revolutionized the company. From the latest numbers I've heard, they have sold 1000+ SDKs resulting in approx 400 products, approx 125 of which are Point of Sale systems targeted towards small and medium businesses that use the Cloud to store the information. I'm going to focus on biggest names first. Knowing who the partners are and what they are saying and doing to grow is as important to this story as what Socket is doing themselves. Their software capacity is expanding as almost all of them now offer payroll, Quickbooks integration, social networking..... Most of them have only been pushing their systems for 12 months or less and, as they expand in the future, it should flow to Socket Mobile. Come January 2014, they will debut all their updates at the Big Retail show in NY as the 2015 POS "season" starts to ramp up.

NCR:

NCR is a $4.85B company. The product Socket Mobile is used in is NCR Silver. http://www.ncrsilver....com/welcome/ They recently changed their website as they have made a lot of new improvements and it doesn't show a list of hardware anymore (they never listed the Socket Scanner by name, but the pictures showed the unit they offered was definitely a Socket one). About 1/3rd down the new main page you can see a Socket barcode scanner shown in a picture with the tablet stand . On one of their independent resellers http://www.ncrsilver...nt-options.html, the Socket 7ci scanner is shown as the only cordless scanner option. In Sept, 2012, Socket announced this partnership in a press release of their own. This is pretty much the only partnership they have ever announced as they have moved away from that type of publicity. The reasons I've heard for it is that they don't want to promote themselves off the backs of their partners----it doesn't look good, plus, which partners do you announce and which ones don't you?

In May 2012, the CEO of NCR did a major investor relations presentation. It was 4 hours long. The broadcast doesn't exist anymore, but the slide presentation does. http://media.corpora...nalyst_Day.pdf The discussion of NCR Silver begins on Slide 78, which was soon introduced as a product following this presentation in July 2012. Over the next few slides he discusses the target audience of small businesses, of which he states there are 4M in the U.S. and 8M worldwide. It's a shame the audio doesn't exist anymore because he talked about the absolute need for NCR to succeed here as it was important to lock up the small businesses now so NCR will be their choice as the large companies of the future emerge from this crowd. On Slide 94, he talks about expecting 5K customers by the end of 2012 (and the aspiration of having 10K), expect in 2013 = 40K (aspiration of 120K), expect in 2014 = 95K (aspiration of 360K).

In 2013, during a cc call (can't remember which one), the CEO of NCR talked about how they hadn't been as successful with their business approach with NCR Silver as they had hoped. They thought they could use their huge internal sales team to direct sales. The problem is that they have very little experience dealing with small businesses. The CEO commented that they have no intention of failing and were changing their approach completely by using partners instead who already are strongly attached to the small businesses. They started to team up with payment processors Vantiv ($4.4B company in May 2013 http://www.ncr.com/n...vantiv-silver),Elevan (wholly owned subsidiary of US Bank in Jan 2013 http://www.ncr.com/n...ess-customers), Paychex, BNG Holdings, plus more. They have allowed the traditional cash register POS middle men to offer NCR Silver to their customers and receive a monthly residual income from those sales. At the Money 20/20 Las Vegas Conference just last week, they teamed up with Big Commerce (an Australian Company that just raised $75M in funding that provides omni-channel software to small businesses----it's where you link online and brick-n-mortar operations in one. Inventory tracking is essential in this type of system. Big Commerce deals with 55K businesses in 150 countries). This is just part of the news on NCR Silver. It's obvious they are fighting to get their share of the market in the future. The latest numbers I've heard is that 20% of all NCR Silver sales involve a Socket barcode scanner with the system. (A lot of the businesses being targeted by NCR, like cafes, don't need to deal with inventory). Socket is also the cordless option for another one of NCR's POS systems, NCR Counterpoint, but that one is more oriented towards using smartphones as the main device and I've never researched it that much.

VERIFONE

Verifone, $4.8B company, is one of the big boys in the Point of Sale industry. Their tablet based POS system being targeted towards small businesses is currently called Verifone Globalbay Merchant (debuted in Sept 2013). The only barcode scanner that is an option is a Socket Mobile one (again, they don't "name" it, but it is listed on the website: http://www.globalbay...accessories/). Pictures of the scanner are shown in all the literature and slideshows (ex. http://www.slideshar...chant-tablet). If you talk with Socket management, they will verify that it's their scanner that is the option.

What's a little confusing is that Verifone recently sold their Globalbay Merchant "division" to Manhattan Associates in August 2014, but they did NOT sell the tablet POS system for small business as part of it. Verifone has kept that for themselves and will rebrand soon. http://www.pymnts.co...y/#.VGD5_8mj87E

Verifone is selling their system through the Independent Sales Organizations. In April 2014, they had partnered with 100 ISO's, 30 of which were considered part of the largest in the U.S. http://pointofsale.c...Acquirers.html One thing to note is that Verifone is very much a global businesses with over half their sales occurring international.

Shopify

Shopify is a private company that started out by setting up websites for small businesses. They deal with 120K small businesses in 100+ countries (October press release. That's up from them saying 80K at the end of 2013), and raised $20M in 2011/2012 and another $100M in late 2013 (valuing the company at over $1B). The latest venture funding was to tie their strength in e-commerce to the brick-n-mortar part of their small business clients. Again, this is the "omni-central" approach that is becoming more and more prevalent. One of those products that is pushing this for them is Shopify POS, a tablet based cash register. http://www.shopify.com/pos Yet, again, the Socket Mobile barcode scanner is the only choice. Under their "hardware" page, they actually list the 7ci as the option to buy this time.

Shopify just opened a 102,000 square ft headquarters for their 500 employees.

LIGHTSPEED

Lightspeed is another fast growing company out of Canada. They raised $30M in 2012 from Accel Partners (same one that backed Facebook) and another $35M in September 2014 for rapid expansion. http://www.lightspee...ion-in-funding/Their products are all Apple based. They started off with a desktop computer based POS system, but have aggressively switched the focus to a tablet/Cloud system for retail and restaurants. For the retail tablet system, the Socket 7ci scanner is the only choice and is automatically sold with each system. http://www.lightspee...m/pos-hardware/Lightspeed's software is very much inventory oriented and so a barcode is essential. This is the partner that Socket lost (as I mentioned in my research report), but who came back just a few months later.

They too are connected with Big Commerce (as I listed above in the NCR section) plus a bunch of other partners, growing around 100%+ a year, in 20K+ stores in 30+ countries. Their CEO is pretty driven.

SHOPKEEP

http://www.shopkeep.com/ They too only use the Socket Scanner barcodes (though they don't use the cheaper 7ci, but the 7mi's, the 7pi's and the 7xi's http://shop.shopkeep...rcode-scanners They raised $10M in 2013 and another $25M in April 2014 for rapid expansion. They started in NY, but just opened an office in San Francisco and one in Dublin, Ireland. They are in over 10K small businesses. They too have partnered with payment processors, ISOs, and others. The product has won several big awards and is discussed more and more in news about the industry. I may not be posting as much info here as the others (as I'm running out of time to build this list), but don't make that seem like they aren't important. I believe they are. They have a great product and are an example of how this tablet/cloud POS industry is wide open and you don't know who is going to be the ultimate winner in the end (well, other than Socket since they are tied to a lot of products).

VEND

This is a New Zealand company that is starting to expand around the world. http://www.vendhq.com/ Like everyone else, they too are raising money like mad. $8M in 2013, and another $25M in March 2014. http://blog.vendhq.c...re-peg-capital 10K stores, 100 countries and just expanded with their first office into the U.S. this year and Canada.

****Side Note: It's crazy that all these companies are raising millions and Socket Mobile has a market cap of $11M!

For hardware, this is the first example of a company that also allows a USB (plug in) barcode scanner to be used as a choice. However, the Socket Scanners are the only cordless option offered. The nice thing about a Bluetooth barcode scanner is that you can use it more than 40" away (whatever the cord length is) from the register! http://www.vendhq.com/pos-hardware

I don't research this one as much as others because I always forget about it.

SQUARE

Obviously, everyone knows about Square (with Jack Dorsey). I think the latest valuation is $6B. They use the "toggle" for smartphones and such. However, that business model isn't highly profitable. There is a LOT more money in providing software through the Cloud for small businesses that then pays a company a monthly fee + allows you to process payments also if they desire. It's why Square came out the the Square Stand. The barcode that the primarily feature with it is another USB plug-in one. What's crazy is that the stand swivels (so the customer can sign their name with their finger). How does a plug-in scanner deal with that?!? However, if you talk to the company or go into their hardware choices, you will find that the Socket Scanner is, yet again, the only cordless option available for recommendation https://squareup.com...orted-hardware

I won't go into Square more because everyone is familiar with them.

OTHER PARTNERS

I'm starting to run out of time here. I can come back later if people are interested. There is Micros, Epicor, Fujitsu, as some of the bigger names (though the info on those is harder to find and I'm not sure how important those are to Socket in the future). There are a ton of smaller names. This is just the tablet POS players. It doesn't count the other barcode scanner users for field operations, warehouses, sales people..... What everyone needs to remember is what the CEO keeps saying, "sales now are a result of what happened 12 to 24 months ago", namely, that what is happening now is just the start as it takes time for these applications to be written and pushed in to the market place. As more and more of the software partners expand their efforts, Socket is rewarded.

COMPETITORS

I want to highlight the negatives as well as the positives. The biggest product Socket is NOT in Revel Systems (I put them about the size of Lightspeed). http://revelup.com/ They use the Motorola CS3000 scanner or a Honeywell one http://revelup.com/h...arcode-scanners. There are other smaller POS systems that also don't use the Socket scanner.

There are other players, like Groupon's Breadcrumb, that don't use any barcode scanner as inventory tracking is not really a part of their software.

Socket's CEO said in the last cc call that he doesn't think there will be many more "new" players. Most likely the existing ones will battle it out for market share, merge, or go out of business. The only two players I see left of any significance would be if Amazon got involved (as they have hinted at. I'm not sure small business wants their greatest competitor involved in their brick-n-mortar sales though) and Apple. Apple does have a partnership with Verifone already http://www.mobilepay...ne-partnership/

BUSINESS ENTERPRISE

Keep an eye on this. Also, if you talk to Socket yourself, ask them more about the future they see with business enterprise. The partnership of IBM with Apple could open up this whole industry.

http://www.apple.com...e-Mobility.html

https://gigaom.com/2...for-enterprise/