Here is the comment I added to it. I think it's worth posting here also. I've followed (and suffered) with this company for quite awhile. I've stuck with it because their business model can produce some great returns. It's finally starting to pay off and should ramp up nicely in 2016 and beyond. I don't know how many barcode scanners they will sell in the future, but those that they do will produce some nice net income with the fixed expenses involved.
"Very good article Nicholas. Thank you for writing it. I look forward to your follow ups. I've followed and owned SCKT for several years now. Socket management has done a good job of position themselves in this emerging market. One thing I'd like to point out about with the competition (and let you think about going forward)......"he who controls the developer, controls the market going forward".
The way the industry traditionally works is the large hardware manufacturers (ex. Motorola) would tell the distributors (ex. Ingram Micro) "push my scanners over the competitions or else we'll do business with one of the other distributors." A little company like Socket had no chance. However, this new cloud based industry is completely different. Socket's SDK (software development kit) is what's made them the leader here. It came out like 3 years ago and they were absolutely giddy about it at the time. They have put a lot of time and effort into making it the best out there. The biggest thing it brings them is that once it's written into the POS and business enterprise software, it's going to be tough to remove them as the preferred scanner of choice.
These software companies aren't in the hardware business-----they just want a solid barcode scanner (with lots of different models to choose from) that their end customers are happy with. The end customer is just going to buy what the developer tells them. The competition (be it Zebra Technology or Honeywell or Opticon or Komatac) is going to have a difficult time getting the main software code changed in the future to support their scanners instead of Socket's. Is Opticon going to pay each developer to re-write that section of code? Why would the developer do it for free? The distributor has no say in it. The customer buys what the developer tells them to. Even in private business enterprises software----the guy writing the software is going to chose the best/easiest SDK system he can work with. He isn't being paid to make his life difficult. Once the code is inserted into the main software, he will tell the company this is the scanner choice, go demo it to make sure, and then plan on buying in big batches.
Socket right now has sold 1500+ SDK's I believe which are now in hundreds and hundreds of finished software apps and growing (you would have to ask the company the actual numbers). This has resulted in them being a very different kind of hardware company. The best SDK on the market captures the developers, the developers then make your scanner the preferred choice, and the hundreds (eventually a thousand) developers are the sales force for the company (which Socket pays nothing for). As the developers grow in size, they sell more Socket scanners (ex. Lightspeed POS just raised $61M this week to expand their tablet pos system worldwide). Socket then just delivers scanners on time and be's the best partner they can to these developers to keep them happy.
I was discussing this 2 years ago with Kevin Mills. He said he didn't think the competition realized this was a different game than before. Whoever controls the developers, controls the market. It's why Socket has put so much effort into their SDK and have created a dozen different models (1D, 2D, diff hardness cases, anti-bacterial cases, diff colors, accessories......). They are bending over backwards to show the developers there is no reason to go elsewhere. It's how a little company can go from nowhere to now starting to emerge as a leader in a new industry. I've always said it that if they succeed it will be tough to take their market share away. It'll be easier to just buy them out in time. "
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