RFID tag and reader manufacturer, Alien Technology, filed for an intial public offering (IPO) in April 2006, but then last week withdrew its plans.

The company gave as its reason the poor stock market conditions for IPOs. Alien is one of nine firms that withdrew their IPOs in July. None of the rest of the firms are in the RFID space. The "brutal" conditions of the IPO market have been well documented this summer.

But let's face it: Alien was not the most attractive IPO candidate anyway. First there is the fact that Alien is losing money buying market share, by cutting price, and that despite all the hype since 2003 about Passive UHF RFID, Alien's sales have been less than impressive. According to IPO Home, Alien lost $63 million last year, on sales of only $19 million -- not exactly attractive numbers for investors. As Seeking Alpha wrote, for a 12 year old company Alien is not an impressive growth story.

And then there is that pesky litigation with Intermec, where the lawyers are probably sucking up cash with a straw -- not because lawyers are bad, mind you, but just because that's the nature of high-stakes patent litigation. It doesn't come cheap.

So, it's not hard to see why the IPO was withdrawn, especially in the current stock market environment.

The big question everyone wants answered now is "what does this mean for the RFID industry?" It is human nature to want to read deeper meaning into small data points.

Does the failure of Alien's IPO spell the end to the RFID industry's promise?

Does it signify a bearish outlook for RFID?

Industry analysts are jumping up and down to reassure us, claiming the IPO failure means nothing for the RFID industry.

However, I do not exactly agree with that.

One failed IPO does not an industry death-knell make, that's true.

But it is clear that since Wal-Mart first announced its RFID mandate in 2003, much has changed. The expectations were wildly hyped and even though we knew they were hyped (how many times did we write about the Gartner Hype Cycle here at the RFID Weblog?), they continued to be blown out of proportion.

But the upshot is that when it comes to passive RFID for the supply chain, we have an entire group of fledgling (mostly) companies with their hopes and business plans riding on customer adoption of the technology. Yet, customers and prospective customers are still learning and realizing that the implementation issues are more complex than first anticipated. Adoption plans are not nearly as aggressive as some would wish. Customers are not exactly grabbing hold of RFID in their supply chains like white on rice.

Other uses and applications of RFID have seen good adoption rates, but the much-vaunted passive RFID for the supply chain is sputtering right now from a market perspective.

So, on the one hand, I agree that Alien's withdrawn IPO does not mean the entire UHF passive RFID industry is going down the tubes. On the other hand, it does say a lot about the current state of the industry when one of what we consider the major players has small sales, huge losses and now has lost access to public capital it surely needs. Almost certainly it will be mean deep cost cutting at Alien, possible reductions in staff, and maybe even putting the company on the auction block -- not that I have any inside information on Alien's situation, but the writing on the wall is pretty obvious.

Here's to hoping we pass through the Gartner Hype Cycle trough of disillusionment for passive RFID in the supply chain, quickly.