Wal-Mart Stores, Inc. (NYSE: WMT) issued a pretty strong set of marching orders five years ago to its top 100 suppliers: adopt RFID in your business practice or suffer the consequences of doing less business with the world's top retailer. RFID was supposed to make logistics easier by allowing automated tracking and shipping of inventory as quick and efficient as possible. Out with the barcode, in with the radio microchip.

It hasn't quite worked out that way. Reportedly, "many" of the retailer's top 600 vendors use RFID "to some degree," but the startup costs can be easily felt by most of Wal-Mart's small suppliers. Outside of the "many" vendors who are using RFID, the rest many not "be using it at all." Apparently, Wal-Mart has backed down from the mandate that all vendors use RFID in their shipments to the retailer.

Wal-Mart is the only customer requiring RFID to be used in shipments. Is it worth the bother just to placate one customer? Well, Wal-Mart's RFID edict was launched at the birth of the technology. Prices and implementation were high, standards weren't in place and the RFID industry seemed completely fragmented. Of course, it's not that way now, but the damage may have already been done. Will Wal-Mart soon drop the requirement that its vendors implement RFID programs into their pallets and shipments? Might as well, since the retailer is really not enforcing its own rules.

Wal-Mart Stores, Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) are in this one together, and we're not talking a battle for retail supremacy here. The two mega discount retailers face an ongoing patent lawsuit over their use of RFID technology to keep track of warehouse and retail inventory levels and automated ordering and processing.

It's hard to imagine a commodity technology being used in so many ways by retailers the world over being patented, but that's just what Houston, Tx. citizen Ronald Bormaster is claiming. Bormaster's RFID patent covers RFID in a way that ensures pallets and units of merchandise don't "collide" when being handled in an automated fashion, and he assigned the patent to a Houston company called "RFID World" -- which is not even using the system on a commercial basis to this day.

Wal-Mart and Target both have asked the patent lawsuit to be thrown out, arguing that it has no merit and that Bormaster's patent isn't a patent in the first place. The retailers say, based on a 2005 University of Arkansas study, that RFID allows in-store merchandise to be replenished three times more quickly when RFID is involved as opposed to manually-scanned bar code systems. Would customers see visible inconveniences in stores if this patent lawsuit was won by Bormaster and RFID was no longer allowed to be used by the two retailers? They say yes. Procter & Gamble Co. (NYSE: PG)'s Gillette brand is also involved with this dispute since it's a large proponent of using RFID in its mass production facilities with its partners. All three companies want the case to be thrown out in its entirety.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. But every once in while an exception is made for a non-conforming but innovative/promising company, and along this line Skyworks looks attractive. (Note: Skyworks is only for investors who can tolerate high-risk.)

Skyworks Solutions, Inc. (Nasdaq: SWKS) is a leading supplier to major mobile phone/PDA manufacturers.

Analysts really like Skyworks' radio frequency and manufacturing expertise, which enables the company to secure design wins with existing and new customers.

Skyworks, which began as a defense contractor, makes its integrated circuits out of gallium arsenide, a material that performs at higher speeds and with less energy consumption than the sector standard, silicon.

Wal-Mart Stores, Inc. (NYSE: WMT) was an early proponent of the tracking technology known as RFID years ago, but seems to have lost patience with vendors that are taking too long to equip their merchandise pallets with the inventory tracking and shrinkage tags. As opposed to bar codes, a reader can track a package or pallet with an RFID chip without scanning anything; a two-way radio chip is used instead.

2008 is now here, and the world's largest retailer has apparently grown quite frustrated with the slowness some vendors have displayed in adopting the new technology. It will, as such, be charging suppliers $2.00 for each pallet that does not contain an RFID tag as of yesterday. This only applies (so far) to its Sam's Warehouse distribution center in Texas.

Wal-Mart is making it clear that the $2.00 surcharge some suppliers will see is quite a bit more than the estimated $0.20 per RFID tag per pallet. With an estimated 15,000 suppliers still not complying with Wal-Mart's three year-old RFID mandate, company will probably be forcing the hand of slow-to-adopt vendors and suppliers this year as it ramps up to have all products tagged with RFID in all 22 nationwide distribution centers in the U.S. by 2010. Until then, it can make a nice side of change with these non-compliance fines. Perhaps an analyst will ask how much the company has made on the next Wal-Mart quarterly results conference call.

Label maker and retail information specialist Avery Dennison Corporation (NYSE: AVY) touted its recent $1.34 billion acquisition of Paxar as an example of competitive synergies and cost-saving efficiencies. Well, that remains to be seen. Avery Dennison used its Paxar acquisition, and related costs of integration, to explain just about everything in its recent 3Q 2007 earnings release.

Net sales increased 19% to $1.68 billion, the entire increase due to Paxar acquisition. EPS would have been $0.99 except for costs related to Paxar acquisition. So EPS was actually $0.58. Avery will eventually realize $115-$125 million in cost savings from Paxar acquisition but hasn't realized anything yet. CEO Dean Scarborough stated Avery Dennison is trying to "find operational efficiencies" and is "on track to achieve targeted cost synergies," but can't find the efficiencies just yet and apparently missed the synergistic target due to the fact that the company is "experiencing some current headwinds." Wonder if his speech writer gets paid by the cliche?

Avery Dennison used some creative financing to acquire Paxar and needs to show some bang for its billion bucks, soon. In the pressure-sensitive label segment, sales were up 5%, but organic growth accounted for just 1%. In the retail information services segment, Avery posted 136% sales increase, 135% of which was due to Paxar acquisition and 1% due to organic growth. The office and consumer products segment reported a 5% decline in sales. CEO Scarborough blamed the decline on a slow back-to-school season, whatever that might mean.

Investors should not look for clarity in next quarter's earnings reports either. The company is already hedging its FY 2007 to exclude Paxar integration costs. The stock closed on Oct. 24 at $57.95, down $1.35.

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It seems that Verichip Corp (NASDAQ: CHIP) will have some fancy footwork to do in light of a recent study, which allegedly links subcutaneous data chip implants with aggressive malignant tumor growth as reported by Engadget. Have no fear though, I'm sure that Verichip will quickly release its own scientific report to fully discredit any assertion that chip implants aren't good for you. Currently, there are approximately 2,000 implant recipients in the United States. Never mind that the Japanese have yet to make the technology secure enough to protect a personal bus pass.

That's your future folks, the corporate world with the assistance of "well meaning" social engineers in government and your tax dollars, want to know where your pet is, where your car is, where you are and where every farm animal on the planet is at any given moment. Will it ever happen? Just you try to fight it.

With the alignment of Taser International Inc. (NASDAQ: TASR) and iRobot Corp. (NASDAQ: IRBT) to design and manufacture robotic mobile zapping devices for government agencies the world over, if you get too aggressive in your protests they'll just send a flying Roomba clone draped in a copy of the Patriot Act. Where's Issac Asimov when you need him?

I have been writing about the investment merits of VeriSign Inc. (NASDAQ: VRSN) for over one year. The major premise of recommending VeriSign is its pricing ability and power. Well, that power is materializing as VRSN has announced a 7% price increase for all .com domain addresses and a 10% price increase for all .net domain addresses.

VRSN is the keeper of all .com and .net addresses. All traffic ending in .com or .net must go through the VeriSign data center. They are, in essence, the toll booth of the internet. VRSN will see potential viruses before any other company and they can also detect any terrorist plots to hack the internet. It is literally one American company with a special 'red phone" directly to the White House. I once asked CEO Stratton Sclavos if he's ever had to pick up the phone, and he refused to answer that question. He said if he told me, he'd have to kill me... I think he was kidding.

VeriSign was granted the status of keeper of the internet by the US Department of Commerce and by not for profit Internet Corporation for Assigned Names and Numbers, otherwise known as ICANN. ICANN has granted Verisign the exclusivity to .com and .com through 2012 with the presumptive right of renewal. VeriSign was awarded the lengthy agreement back in the 1990's and it was renewed this past year by ICANN trough 2012. With the approval came the little detail that VRSN wanted: being able to raise the annual price.

Cardinal Health Inc. (NYSE: CAH) is the nation's number one supplier of support products and services for the health care industry. After a lengthy investigation by the New York Attorney General's office regarding the purchase of pharmaceutical products on the secondary pharmaceutical market, Cardinal Health announced December 26, 2006, that a settlement had been reached and that the situation is, for Cardinal, no longer an issue, except as pertains to their ongoing efforts to improve the security of the pharmaceutical products supply chain.

It should be noted that the $81 billion health provider Cardinal was only one participant in an investigation that involves health care players nation wide. Cardinal's stock value has deflated some over the past nine months, and may constitute a nice buy right about now.

The good news is that Cardinal has completed a comprehensive test of RFID technology, one of my pet projects. Cardinal has proven that RFID (radio frequency identification) tags can be applied to product, encoded en route, and then accurately read at normal production speeds during packaging and distribution of pharmaceuticals. The test has shown that RFID can be exploited within existing product flow models utilizing current equipment and materials. Cardinal reports encoding yields of 95% to 97%, and they expect they can fine tune for even higher yields. Yield simply means complete and accurate encoding in one production pass through.

Wal-Mart strapped in, buckled up and rode with roller coaster down the hill with the rest of the market today, closing down to $44.16, a drop of $0.99 or 2.19%. Seems like most of the big movers did the 2% dance today. With the DJIA down over 160 points and the NASDAQ sinking over 36, it was a sell-sell-sell day all over the trading floor. Wal-Mart shares trading hands topped over 25 million today alone.

With Wal-Mart seeking ever-so-clever ways to reduce costs, it's now only going to prosecute shoplifters who steal over $25 worth of merchandise from its stores. Ahh, how quaint. Seriously though, this is probably a good move for the Wal-Mart of 2003 -- in other words, this is a late date to the party. Although I don't have statistics to back me up, something in me says that it costs way more to prosecute shoplifters than the actual cost of the items (not retail prices, but costs) that end up being stolen, and, er, recovered. That is, unless your local court fees and police manpower are free to the public. Oh wait, don't we pay taxes for that?

With Wal-Mart being at the forefront of the worldwide trend of introducing RFID tracking into its back-end logistics and even into point-of-sale systems, apparently Wal-Mart Canada is also making a headstrong effort to embrace RFID. So much, in fact, that they are recruiting and wooing different retailers to take part in Wal-Mart Canada's RFID program, which by all counts, is way out of the *trial* stage by now.

Well, not really in Wal-Mart Canada, but here in the U.S., where Wal-Mart has had voluntary RFID compliance from a large set of major vendors for quite some time. Wal-Mart, most likely, is probably responsible for pushing RFID into the mainstream merchandising business more than any RFID manufacturer or marketer -- just due to its sheer size.

With Wal-Mart Canada coming on board with a voluntary compliance (not forced, yet), most likely larger vendor partners to Wal-Mart Canada will also choose to participate in the RFID program to ensure they are 1) fully compliant by the time mandatory participation happens and 2) so that these large vendors can remain on good terms with a major buy -- the Wal-Mart Canada folks.

With Wal-Mart considered to be the company that brought inventory and logistical visibility to RFID technology, Wal-Mart Canada is bringing this technology into that part of the Wal-Mart Kingdom, according to the RFID Journal. Wal-Mart Canada wants to make this RFID pilot program small so it can monitor progress and leverage information it has learned from the underway RFID usage in the U.S. stores of Wal-Mart to ensure the technology's introduction into Canadian Wal-Mart stores is uneventful and extra-smooth.

RFID, by many estimates, is already making an impact in retail due to more tightly-controlled inventory measurement and better warehouse and logistical tracking of pallets and mass merchandise -- without the need for proximity bar coding and other types of older tracking technology.

This is a rather amusing tale -- Wal-Mart's agreement to pay a $1.5 million fine for not placing price tags on certain items in accordance with Michigan state law. That's a mere pittance from the Wal-Mart coffers, but still it points to a few issues. First, Michigan is pretty strict when it comes to ensuring every single item in every single store has a price tag -- or the customer can get quite a hefty discount (well, not really).

The second is this: Why does the world's largest retailer still use paper, bar-coded price tags on anything? Surely there is a more innovative way to indicate price on almost all items. On the shelf, a real-time LCD display (which could change pricing as it receives a radio-frequency update from the store) could replace paper tags. On the items themselves, well, this is a much thornier issue. But, for a company with a focus on RFID and other cutting-edge technology, perhaps the price tag is too hard to overcome.

With Wal-Mart (WMT) leading the way regarding deployment of RFID technology (Radio Frequency Identification), it's now time for the initial RFID supplier group to stand aside and let another 200 suppliers start integrating this merchandise and logistical fodder into its supply chain to our friendly Bentonville folks.

By the end of 2006, 200 more suppliers will need to comply with Wal-Mart's RFID program, and then by the end of 2007, another 300 suppliers will face this challenge. Perhaps some equity ownership in RFID firms is a hot ticket these days, in my opinion.

As we posted about earlier, several big-time execs at Wal-Mart are shuffling their chairs. Linda Dillman - the high-visibility head of Wal-Mart's internal information systems team - is leaving for a benefits and risk management executuve position. This leaves a hole in the RFID team at Wal-Mart, since one of Dillman's mandates was to install and use RFID in all Wal-Mart systems from warehouses to store shelves in particular Wal-Mart high-tech fashion to gain competitive advantage on the other big-box megastores.

Now that Wal-Mart has implemented RFID - but it is not a one-time battle - another Wal-Mart veteran, Rollin Ford, has stepped in to replace Dillman's RFID cheerleading efforts. A logisitics executive, Ford will most likely know how to keep Wal-Mart at the foot of the RFID movement. Click here to read more about RFID.