For Irvine-based CalAmp Corp. the advice to transport companies is this: get with Amazon’s technology requirements or risk losing business.
Michael Burdiek, chief executive of the Irvine-based vehicle software and telematics provider (Nasdaq: CAMP), cited what he called the “Amazon effect” in a recent Business Journal interview.
“If you don’t play by Amazon rules as a transport company, then you’re going to be disintermediated by Amazon,” he said, referring to the elimination or reduction of the use of intermediaries in business.
That has an impact across the board.
“The UPS’s, the DHLs, the FedEx’s of the world, and anybody else that is in the freight transport marketplace are really trapped by Amazon,” said Burdiek. “They can either play by Amazon rules and be a partner, which suggests they have to make investments in technology, or Amazon is going to vertically integrate and displace them.”
In other words, Amazon might take over that part of the supply chain.
CalAmp’s Role
“Our role is to try to help all of those players to become much more efficient and adopt technologies which will allow them to be contemporary players and have a role to play in that Amazon future,” according to Burdiek, whose company—best known for its LoJack product line—has a market value of about $370 million.
He said CalAmp is working directly with one of those major players, but said he wasn’t allowed to provide the name.
“We’re providing a trailer monitoring service so they can see where all of their various trailer assets are at any moment in time, so they can run a more efficient distribution network. This also gives that entity the ability not only to know where their trailers are, but what’s in the trailer, and whether the trailers are being operated safely,” said Burdiek.
That monitoring includes whether the brakes work and the tires have proper pressure with optimal loads.
Burdiek said the ultimate goal is to become “a much more efficient overall enterprise for partnering with Amazon or whoever else” and that project is “definitely a high priority for us.”
CalAmp, he said, is pivoting into more of a software and services company. For instance, working on transport logistics, municipal governments’ fleets, and the K-12 school bus market.
He said the hardware business with telematics devices remains “very large.”
“For telematics devices, in the fleet space, we have a huge market share. In the U.S., it’s probably 50%,” he said. The trend will be toward more software “even if it means we would lose some hardware revenue in the transition.”
Looking Ahead
He sees software and subscription revenue at a little more than 30% of the consolidated revenue mix at the end of this year, with a goal of at least 40%, compared with 20% last year. The company posted revenue of $364 million for the fiscal year that ended this year on Feb. 28.
CalAmp will continue international expansion primarily in Europe and Latin America, but the company is also making some investments in the Asia-Pacific region.
Still, the pivot to more software will take time.
“It’s very difficult to transform a company in the public markets,” Burdiek said. “No matter how hard you try, capital markets tend to look at you in the rearview mirror, not where you’re going.”
