FOR SALE E-toll industry shakedown

A major shakeup is underway in the US electronic toll business. At least two major manufacturers of electronic toll equipment are for formally "For Sale" — Hughes Transportation Management Systems and AT/Comm. Other major units of the e-toll business Mark IV, MFS Network Technologies and the TIRIS division of Texas Instruments could find themselves with new parents. People at Raytheon, we heard, thought they had gotten hold of both Hughes TMS and Texas Instruments TIRIS as part of their acquisition of the large defense components of these companies, and there were some amusing conversations among people who didn't know quite where they stood.

Raytheon's official spokesman Blanche Necessary says that she cannot comment on whether these units are being acquired: "We are reviewing the situation. All details of the purchases have yet to be worked out." At Hughes and TI they say much the same thing, though it seems more likely Hughes will be absorbed into Raytheon than TI.

Hughes TMS has been for sale for the best part of a year with Advent Inc, a broker in Boston searching for a buyer. There have been disucssions with Hitachi and Fujitsu about a purchase but they appear to have fizzled out. Hughes TMS has only one major e-toll installation — on Highway 407 in Canada that is about to open, and whether that system is a very great asset or a very great liability is the subject of many strongly expressed opinions. Hughes also has major associated electronic clearance systems for trucks on HELP Inc's I-5/I-10 corridor in the west and on I-75 and H-401 in Canada and has hopes of selling large numbers of its systems to truck owners for fleet management purposes as well. Its slotted Aloha TDMA technology was placed in the public domain and exhaustive tests of different e-toll systems by Japanese authorities led to a version of the Hughes system (albeit somewhat beefed up by Hitachi) being chosen as the best available. There are independent consultants who have been involved in the different vehicle-to-roadside communications technologies who swear "Hughes is the best." Hughes also has a pattern matching technology for automatic license plate recognition at speed that has enabled it to advertise "Hughes Cashless Toll Roads." A chip designed for the nose of a missile for target recognition was adapted to match vehicles entering and leaving a toll road and to read license plate numbers. The success or failure of this system on H-407 which should be known by mid-year could have a major bearing on the value (+ or -ve) of Hughes TMS. The talk is that as of now you can buy it for $60m.

AT/Comm has just been put up for sale. Its prospects for major new sales were heavily hurt when Syntonic with Mark IV and Denso were selected to complete the e-toll installation on the large Illinois tollway system. It's one Big League system is to be scrapped. AT/Comm's litigation has delayed signature of a contract for the Mark IV equipment but it seems unlikely it can turn that around. AT/Comm's only remaining installations are on the Maine Turnpike and two small systems in Australia — the M2 Hills Motorway in Sydney and the Gateway bridge in Brisbane. The operators are apparently quite happy with the equipment. The Illinois tollway's head of toll operations told us they had no problem with AT/Comm equipment and that the only reason for abandoning it was the lower price of its competitor, and the attraction of interoperability with other Hughes/Mark IV systems nearby.

There has been talk too of a spinoff of MFS Network Technologies the system integrator that grew out of Keewit and is now part of Worldcom the telephone company. And it was said Mark IV was thinking of selling its very successful IVHS division.

Raytheon the new player: Raytheon is already a world giant in air traffic control systems and both airborne and ground radars and other electronics. It has invested some $25m in a neat Personal Rapid Transit system of car-sized automated vehicles on an elevated fixed guideway in collaboration with the Chicago area transit agency which wants to build systems to feed its metro rail stations. Moreover there has been talk that Raytheon has been developing a "super-reader" for electronic tolling that would be capable of sorting out the jumble of signals from otherwise incompatible in-vehicle toll tags, but we can't get any confirmation of that. It seems most likely that Raytheon will absorb Hughes TMS and Savi Technologies, presently another electronics subsidiary of Texas Instruments that manufactures fleet management and other vehicle electronics.

It is difficult to know how to properly report such 'For Sale' matters. Nothing may come of the efforts to find a buyer and the present owners may change their minds after they have trawled for buyers awhile, so the "For Sale" signs may be taken down. In one sense businesses are always for sale....if the offer price is good enough. After all even this newsletter...we'll split broker's fees. And you won't be forced to take the office dog... (Contact for AT/Comm sale, Tucker Anthony, T/A Associates, Boston. Hughes sale is being handled out of Boston by Advent, another broker.)

Four years ago the city of 70,000 I live in had 5 specialist computer stores, bright splashy places with all the models on display. Now it has 2 and they are stuck away in fringe industrial areas and they don't have much on display and don't really sell to the general public, mainly to businesses. But personal computers and their accessories take up a couple of aisles out of several hundred in a huge 3-year old membership warehouse store called Sam's Club (a spinoff of Wal-Mart) where I go to buy bulk groceries and clothes every week or so. And PCs are sold in general appliance stores and office supply stores and by catalog and direct delivery. I'm sure there are similar stories all over the world. The ways technology is packaged and sold, changes quickly, and also who sells it best. Electronic toll equipment will probably be much the same.