Roberto Tunioli: This story goes back a long time ago, back to when I first came in contact with the world of Auto ID. I was Romano Volta’s right hand man and was conducting research to better understand Datalogic’s market and its competitors. I came to the conclusion that the bar code market was more interesting than the industrial automation market in which Datalogic had been born in. I soon realized that there were huge opportunities in the IT market where bar code could be re-directed and above all I recognized the magnitude of the American market both in terms of technology and customers. Therefore in 1993, when I joined the group, I already had a plan to have a direct presence in the countries where key accounts were headquartered and to gain market share in the US. The first task was to re-acquire our subsidiaries, converting them from “franchises” to fully owned entities. We sent some of our key managers to these subsidiaries, people like Guglielmo Piazzi, Pietro Todescato, Gian Paolo Fedrigo, and Francesco Montanari. They were sent to these markets to establish a direct link between the local market and Datalogic headquarters. I was guided by my belief that to be stronger, the company had to expand outside of Europe, with the greatest presence in Asia and U.S. So what we see today has roots that go back a long way. Back then I had started to consider these possibilities with investment banks. Discarding the option to build a company from the ground up, it seemed more opportune to acquire a local company, well-established in its home territory and to enhance those resources. How could we expand our market share from Italy, which only accounts for 3% of the world GDP? Our products couldn’t re-define any new standards because those standards are established elsewhere. We could have started from our own products, improving them or lowering the price. But this was another scenario that didn’t convince me. I preferred to have the products that others wanted to imitate. I wanted the company to surpass its own limits by reaching large strategic multinational customers, those who really count in the market. But overall, I was convinced all the more that our automation experience only enabled us to participate in 10% of the total barcode and automatic identification market and it was my intent to widen our activity into the other 90% of the market. All this line of reasoning then came to fruition in 1996 with our first move towards PSC, when we bought 12% of the company. This was a step that was not well understood and was limiting and from which we were unable to realize the expected synergies. Distanced from PSC and without a similar possibility in the Asian market, we looked back to our home market to grow the local barcode business, and quickly arrived at a satisfying balance between industrial and retail sectors. We were still a European business, with 15 to 16% of sales outside of Europe. But it didn’t end here. We were still convinced about the importance of an acquisition in America, but jaded by the negative outcome of our first attempt. We decided to go public to have enough capital to utilize if we were presented with the right occasion to acquired a company. And that opportunity finally arrived. After a few minor moves, we finally concluded with the total acquisition of PSC. This was a step that allowed us to be really present in the American market and the retail sector which, though growth has slowed, is still the primary market for bar code and RFID because the technology can be maximised here. It is the merchandise, which moves along the entire supply chain, from the warehouses out to the store shelves - this is what really makes up the market. You can’t be in the bar code business if you are not a player in retail. So finally, with the acquisition of PSC, we had a worldwide presence, and not just in terms of sales but also in technology firsts and patents, which by the way are about 700.

RT: This change will substantially enhance all of our resources. We have now put together, through acquisition and internal growth, a set of jewels and we don’t want to de-value them by putting them in an unattractive setting or wearing them with the wrong clothes. There are many examples of acquisitions that are like military occupations. You change direction, management, information systems, and with these moves, you generate hostility by forming two fronts – those who are collaborators and considered traitors, and the resistance movement that refuses to adapt. In the end, you cannot govern. It’s only a question of time and you end up destroying everything. Datalogic does not reason like this. Once again we have looked around at what’s happening in the world and in Italy, and found the Unicredit case very interesting. Unicredit, working with McKinsey, put into action an impressive project. They had acquired several banks and maintained the original structure for a long period of time, even years. In the meantime, they estimated how to take advantage of the available resources, coming to the conclusion that each branch supported three distinct activities (commercial, corporate and private). As a consequence, three different banks were created, each focussed on its specific activity and each represented separately in every branch. It was a challenging move for sure, but capitalized on all the resources, in particular on the work force, that can support the customer with the highest level of competence and the greatest focus. Returning to Datalogic, I found that here there was also a natural division between product lines, maybe not a complete separation but enough to give the resources more focus (see at the end of the interview details regarding the three companies). I applied the 80-20 rule. For example fixed bar code scanners are used almost 80% in the retail sector. So we will put them in a single division. And hand held scanners are also 80% retail and 20% industrial. They will be integrated into the same division, since their use in the industrial market is too limited to justify creating a separate division. That would be too horizontal an approach. We have decided to create a structure where at least 80% of the activity, products or customers are well-focussed and this is the basis of our transformation. Another important issue to face was where to place the headquarters of these three companies. To put them all in Bologna would have been impressive but not very useful. The headquarters need to be established where there are the best conditions for developing the market or where the most capable people reside. And if both aims can’t be met, then we have asked the people to move closer to the area where the conditions for success are ideal. Given that the home of the retail market is in America, where the infrastructure, patents, large customers and leaders like Wal-Mart, in short the market, exists, then the headquarters of Datalogic Scanning will be in Eugene, Oregon. And Bill Parnell, who has been asked to head up this division, will manage the fixed and hand-held retail scanner business on a world-wide basis. Regarding the industrial automation market, this is different from the IT market, less tied to America and more distributed throughout the world. You could say that industrial automation was born in Europe and for this reason we have considered the Bologna area to be significant on an international level, to have the competence and the DNA to best develop this business. In Datalogic Automation, we are bringing together all the products that are typical for industrial automation, like RFID, industrial scanners, and the Laservall products. Furthermore we want to take advantage of the close proximity to Datasensor, a photocell manufacturer which is Datalogic’s sister company and is owned by the Volta family. The headquarters of Datalogic Mobile, given these assumptions, should have been in America or Asia, but instead will be in Bologna. This is because it is at a different competitive level than the other two divisions that are leaders in the world-wide market. In retail we are number one. We are second in the hand-held market, and in industrial automation we are among the top three. But in the mobile market we are only fifth or sixth. Being near to the world headquarters will allow us to put into place the best mechanisms for aggressively dealing with this situation, with the objective of accelerated growth.

RT: On the contrary, Datalogic Mobile will also have a market focus, by instead of addressing an industry, it will be focused on applications. More precisely, this focus will be on warehouse management systems. We will address logistics as a vertical market, applying again the 80/20 rule. All offerings that don’t fit into this direction will be evaluated individually, above all if they cannot be met with standard product. The company will strive to optimize products solely for the logistics market. And because of this, the three companies, Datalogic Scanning, Datalogic Mobile and Datalogic Automation, as well as their managers, sales offices, products, budgets and clients, will be autonomous but not independent. In other words, they will be free to conduct their business within the established guidelines.

RT: First of all, I can say that there is no problem here locally, given that Italy is a small percentage of our overall business. We have twenty clients in Italy and the most strategic are located close to us. And if there’s a problem, I’ll pick up the telephone and solve it. But even in general, I don’t consider this a problem. I can only say that we will have to have a “helicopter view” and concentrate on the fundamental dynamics, following the 80/20 rule. We have defined three categories of products as 80% of our focus and the remaining 20% are details that won’t be addressed with general resources. Obviously, with all the possibilities at our disposal, we can find a solution that is of mutual interest. Let me explain this: if we have an important client who prefers a single interface, then we will strive to create that with a group taskforce approach that, in every country, will involve the local salesperson. We won’t allow local deals that are purely speculative or bad salesmanship. In these cases, Corporate will take action. In other words, the customer is important and will be treated so. But always with the objective of selling our products in the best way possible.

RT: It is only has advantages for Datalogic partners. First, the Datalogic partner will have three separate contracts, one for each pre-transformation Datalogic division (HHR, Mobile, USS) and contracts with PSC. Second, the contracts cannot be more than three. This is an improvement. And furthermore, nothing has changed from the past because even the old Datalogic had a single coordination and coherent conditions for large customer contracts. In the U.S., this problem doesn’t exist because Scansource handles all the distribution and they will pass from two contracts (one with Datalogic and one with PSC) to . . . two contracts - one with Datalogic Scanning and one with Datalogic Mobile. So really there are no major changes. Therefore, this “problem” in reality is non-existent and remains limited to specific, less important cases that should not block the overall process. In most situations, common sense prevails. But if our customer doesn’t look for that advantage and wants to speculate, then the problem arises but we won’t hesitate to resolve those cases. What must be emphasized is that we offer our partners something more significant than just a re-organization. We will offer them the maximum focus, the maximum competence, and the best that there is in the company. Our partners can market this to their own clients. We give them the best support for their projects. We put the partners in the condition to operate the most efficient way possible, and by so doing, they can earn more. In short, this structure puts them in the position to have the greatest advantages and the maximum value. Let’s not forget that Datalogic, is one of the few companies that has had a viable channel strategy for over fifteen years, with 95% of our sales through indirect channels.

RT: I can only say that some of our customers have called this change “timely” or “undertaken professionally”. The operation has been conducted with the utmost clarity, without hiding anything, and not giving answers unless they were sure ones. To best face this change, we involved a noted Harvard professor and internationally renowned author, John P. Kotter, who is an expert in this dynamic. The 80/20 rule is valid in many situations because it simply means that perfection does not exist, even in solutions. You need to not hang on to your experience like it’s the only thing that you have, but you need to question, study, and create a new path, always seeking to improve. This is the true solution.

Datalogic Group has undertaken and important transformation towards a new organization, after the acquisitions that they have made, in particular the PSC acquisition. This change will take place on April 2, 2007 and the company will be divided into four separate companies. Datalogic S.p.A., led by Roberto Tunioli, will be responsible for defining the vision, values and strategies and will provide coordination and control for the Group and its companies. The top management of the Group and corporate functions will report to this company. There will be a Business Development Division, which will report directly to Roberto Tunioli, with the responsibility to develop new business internally within the Group (product line Shopevolution, Informatics) and the evaluation of mergers and acquisitions. Datalogic Scanning, which incorporates all the PSC activite in terms of fixed scanners for point of sale and both PSC and Datalogic handheld scanner business. The headquarters will be Eugene, Oregon, which is the former headquarters of PSC. There are two production plants, one in Eugene and one in Trnava Slovakia. Manager: Bill Parnell Datalogic Mobile, which puts together the two current PSC and Datalogic mobile computing businesses. The headquarters will be in Bologna with production sites in Quinto near Treviso and Eugene. Manager: Francesco Montanari who will report to Gian Paolo Fedrigo. Datalogic Automation, which units three businesses: Unattended Scanning Systems, (Datalogic fixed scanners), EMS (RFID) and Laservall. In other words, the industrial automation businesses. The headquarters will be in Bologna with production sites in Italy and the United States. Manager: Guglielmo Piazzi, who reports to Gian Paolo Fedrigo. As far as the brands, the PSC brand will be retired while Datalogic will be the global brand of the whole Group. The PSC heritage anyway will be preserved and enhanced: both in the new star-shaped symbol which will accompany the Datalogic logo and is an evolution of the PSC star, and in the former PSC product brands, like Magellan, Falcon, PowerScan etc., that will become Datalogic Magellan, Datalogic Falcon and so on.