**UNITED
                    STATES******
                **SECURITIES
                    AND EXCHANGE COMMISSION******
                **WASHINGTON,
                    D.C. 20549**********
                **FORM
                    10-Q****x**
                **QUARTERLY
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                    EXCHANGE ACT OF 1934****For
                    the quarterly period ended September 30, 2007****OR**o
                **TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                    EXCHANGE ACT OF 1934****For
                    the transition period from to****Commission
                    file number: 001-13279****Intermec,
                    Inc.**(Exact
                    name of registrant as specified in its charter)





**Delaware**
            
            **95-4647021**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)**6001
                36th Avenue West, Everett, WA**
            
            **98203-1264**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(425) 265-2400**


(Registrant’s telephone number, including area
      code)





**[None]**


(Former name, former address and former fiscal
      year, if changed since last report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes x
            No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.


Large
                accelerated filer x
            
            Accelerated
                filer o
            
            Non-accelerated
                filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o
            No x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.





**Class**
            
            **Outstanding
                at October 26, 2007**Common
                Stock, $0.01 par value per share
            
            61,016,919
                shares












**INTERMEC,
      INC.**


**TABLE
      OF CONTENTS**


**REPORT
      ON FORM 10-Q**


**FOR
      THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007**





**Page**
              **Number****PART I.
                FINANCIAL INFORMATION****ITEM
                1.**
            Financial
                StatementsCondensed
                Consolidated Statements
                of Operations (unaudited)
              Three
                and Nine Months Ended
                September 30, 2007 and October 1, 2006
            
            3Condensed
                Consolidated Balance
                Sheets (unaudited)
              September
                30, 2007, and December
                31, 2006
            
            4Condensed
                Consolidated Statements of Cash Flows (unaudited)
              For
                the
                Nine Months Ended September 30, 2007, and October 1,
                2006
            
            5Notes
                to
                Condensed Consolidated Financial Statements
                (unaudited)
            
            6
                -
                10**ITEM
                2.**
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            11 -
                16**ITEM
                3.**
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            17**ITEM
                4.**
            Controls
                and
                Procedures
            
            17**PART
                II. OTHER INFORMATION****ITEM
                1.**
            Legal
                Proceedings
            
            17**ITEM
                1A.**
            Risk
                Factors
            
            17**ITEM
                6.**
            Exhibits
            
            18Signature











**PART I.
      FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**INTERMEC,
      INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(thousands
      of dollars, except per share amounts)**


**(unaudited)**







**Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30, 2007**
            
            
            **October
                1, 2006**
            
            
            **September
                30, 2007**
            
            
            **October
                1, 2006**Revenues:Product
            
            $
            169,219
            
            $
            156,951
            
            $
            480,669
            
            $
            515,741Service
            
            
            36,787
            
            
            38,996
            
            
            115,178
            
            
            115,474Total
                revenues
            
            
            206,006
            
            
            195,947
            
            
            595,847
            
            
            631,215Costs
                and expenses:Cost
                of product
                revenues
            
            
            105,536
            
            
            98,807
            
            
            306,454
            
            
            315,811Cost
                of service
                revenues
            
            
            22,404
            
            
            21,026
            
            
            65,611
            
            
            65,311Selling,
                general and
                administrative
            
            
            73,533
            
            
            70,573
            
            
            211,867
            
            
            226,862Gain
                on intellectual property
                settlement
            
            
            -
            
            
            -
            
            
            -
            
            
            (16,538
            )Restructuring
                charge
            
            
            -
            
            
            1,758
            
            
            -
            
            
            4,000Total
                costs and
                expenses
            
            
            201,473
            
            
            192,164
            
            
            583,932
            
            
            595,446Operating
                profit from continuing operations:
            
            
            4,533
            
            
            3,783
            
            
            11,915
            
            
            35,769Gain
                on sale of investments
            
            
            -
            
            
            -
            
            
            -
            
            
            2,305Interest
                income
            
            
            2,910
            
            
            4,178
            
            
            7,930
            
            
            11,517Interest
                expense
            
            
            (2,204
            )
            
            (2,473
            )
            
            (6,847
            )
            
            (6,902
            )Earnings
                from continuing operations before income taxes
            
            
            5,239
            
            
            5,488
            
            
            12,998
            
            
            42,689Provision
                for income taxes
            
            
            847
            
            
            2,043
            
            
            5,108
            
            
            12,878Earnings
                before discontinued operations
            
            
            4,392
            
            
            3,445
            
            
            7,890
            
            
            29,811Earnings
                (loss) from discontinued operations, net of tax
            
            
            -
            
            
            1,352
            
            
            (1,283
            )
            
            (667
            )Net
                earnings
            
            $
            4,392
            
            $
            4,797
            
            $
            6,607
            
            $
            29,144Basic
                earnings (loss) per share:Continuing
                operations
            
            $
            0.07
            
            $
            0.05
            
            $
            0.13
            
            $
            0.47Discontinued
                operations
            
            
            -
            
            
            0.02
            
            
            (0.02
            )
            
            (0.01
            )Net
                earnings per
                share
            
            $
            0.07
            
            $
            0.07
            
            $
            0.11
            
            $
            0.46Diluted
                earnings (loss) per share:Continuing
                operations
            
            $
            0.07
            
            $
            0.05
            
            $
            0.13
            
            $
            0.46Discontinued
                operations
            
            
            -
            
            
            0.02
            
            
            (0.02
            )
            
            (0.01
            )Net
                earnings per
                share
            
            $
            0.07
            
            $
            0.07
            
            $
            0.11
            
            $
            0.45Shares
                used in computing earnings (loss) per shareBasic
            
            
            60,484
            
            
            62,749
            
            
            60,242
            
            
            63,009Diluted
            
            
            61,325
            
            
            64,061
            
            
            61,099
            
            
            64,428





See
      accompanying notes to condensed
      consolidated financial statements.




**3**






**INTERMEC,
      INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(amounts
      in thousands of dollars)**


**(unaudited)**








**September
                30, 2007**
            
            
            **December
                31, 2006****ASSETS**Current
                assets:Cash
                and cash
                equivalents
            
            $
            185,305
            
            $
            155,027Short-term
                investments
            
            
            28,950
            
            
            29,510Accounts
                receivable, net of allowance for doubtful accounts and sales returns
                of $10,946 and $7,796
            
            
            168,950
            
            
            158,369Inventories
            
            
            112,806
            
            
            119,027Net
                current deferred tax
                assets
            
            
            49,875
            
            
            49,623Assets
                held for sale
            
            
            8,217
            
            
            8,661Other
                current assets
            
            
            25,763
            
            
            28,913Total
                current
                assets
            
            
            579,866
            
            
            549,130Property,
                plant and equipment, net
            
            
            45,256
            
            
            43,453Intangibles,
                net
            
            
            6,871
            
            
            3,978Net
                deferred tax assets
            
            
            175,893
            
            
            190,683Other
                assets
            
            
            23,321
            
            
            23,096Total
                assets
            
            $
            831,207
            
            $
            810,340**LIABILITIES
                AND SHAREHOLDERS' INVESTMENT**Current
                liabilities:Accounts
                payable and accrued
                expenses
            
            $
            116,652
            
            $
            113,207Payroll
                and related
                expenses
            
            
            24,602
            
            
            32,008Deferred
                revenue
            
            
            50,508
            
            
            45,021Current
                debt
            
            
            100,000
            
            
            -Total
                current
                liabilities
            
            
            291,762
            
            
            190,236Long-term
                deferred revenue
            
            
            20,244
            
            
            17,318Long-term
                debt
            
            
            -
            
            
            100,000Other
                long-term liabilities
            
            
            77,778
            
            
            85,184Shareholders'
                investment:Common
                stock
            
            
            610
            
            
            598Additional
                paid-in-capital
            
            
            673,852
            
            
            657,468Accumulated
                deficit
            
            
            (213,240
            )
            
            (212,903
            )Accumulated
                other comprehensive
                loss
            
            
            (19,799
            )
            
            (27,561
            )Total
                shareholders'
                investment
            
            
            441,423
            
            
            417,602Total
                liabilities and shareholders' investment
            
            $
            831,207
            
            $
            810,340




See
      accompanying notes to condensed consolidated financial statements.




**4**






**INTERMEC,
      INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(thousands
      of dollars)**


**(unaudited)**




**Nine
                Months Ended****September
                30,**
            
            
            **October
                1,****2007**
            
            
            **2006**Cash
                and cash equivalents at beginning of year
            
            $
            155,027
            
            $
            256,782Cash
                flows from operating activities of continuing operations:Net
                earnings from continuing operations
            
            
            7,890
            
            
            29,811Adjustments
                to reconcile net earnings to net cash provided by operating
                activitiesof
                continuing operations:Depreciation
                and amortization
            
            
            9,601
            
            
            7,818Provision
                for bad debt
            
            
            1,551
            
            
            117Change
                in prepaid pension costs, net
            
            
            705
            
            
            3,458Gain
                on sale of property, plant and equipment
            
            
            (51
            )
            
            -Deferred
                taxes
            
            
            3,598
            
            
            7,085Stock-based
                compensation and other
            
            
            6,754
            
            
            5,147Excess
                tax benefits from stock-based payment arrangements
            
            
            (2,232
            )
            
            (4,183
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (11,907
            )
            
            22,707Inventories
            
            
            6,221
            
            
            (55,983
            )Other
                current assets
            
            
            2,060
            
            
            10,825Accounts
                payable and accrued expenses
            
            
            6,465
            
            
            2,410Payroll
                and related expenses
            
            
            (7,406
            )
            
            (3,892
            )Other
                long-term liabilities
            
            
            5,301
            
            
            2,236Other
                operating activities
            
            
            2,381
            
            
            2,415Net
                cash provided by operating activities of continuing
                operations
            
            
            30,931
            
            
            29,971Cash
                flows from investing activities of continuing operations:Capital
                expenditures
            
            
            (10,136
            )
            
            (17,276
            )Purchases
                of investments
            
            
            (1,465
            )
            
            (19,695
            )Sale
                of investments
            
            
            1,407
            
            
            565Note
                receivable, discounted
            
            
            1,351
            
            
            -Patent
                legal fees capitalized
            
            
            (1,562
            )
            
            (408
            )Other
                investing activities
            
            
            (140
            )
            
            (128
            )Net
                cash used in investing activities of continuing operations
            
            
            (10,545
            )
            
            (36,942
            )Cash
                flows from financing activities of continuing operations:Excess
                tax benefits from stock-based payment arrangements
            
            
            2,232
            
            
            4,183Stock
                options exercised
            
            
            5,654
            
            
            5,819Stock
                repurchase
            
            
            -
            
            
            (49,948
            )Other
                financing activities
            
            
            1,756
            
            
            2,187Net
                cash provided by (used in) financing activities of continuing
                operations
            
            
            9,642
            
            
            (37,759
            )Net
                cash provided by (used in) continuing operations
            
            
            30,028
            
            
            (44,730
            )Net
                cash provided by investing activities of discontinued
                operations
            
            
            250
            
            
            6,562Resulting
                increase (decrease) in cash and cash equivalents
            
            
            30,278
            
            
            (38,168
            )Cash
                and cash equivalents at end of period
            
            $
            185,305
            
            $
            218,614**Supplemental
                Information**Effect
                of exchange rates on cash and cash equivalents
            
            $
            8,609
            
            $
            4,651




See
      accompanying notes to condensed consolidated financial statements.




**5**







**INTERMEC,
      INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**




1.
      Basis
      of Presentation




Our
      interim financial periods are based on a thirteen-week internal accounting
      calendar. In our opinion, the accompanying balance sheets, interim statements
      of
      operations and statements of cash flows include all adjustments, consisting
      only
      of normal recurring items, necessary for their fair presentation in conformity
      with accounting principles generally accepted in the United States of America
      (“U.S. GAAP”). The financial statements include the accounts of Intermec and our
      subsidiaries. Intercompany transactions and balances have been eliminated.
      Equity investments in which we exercise significant influence but do not
      exercise control and are not the primary beneficiary are accounted for using
      the
      equity method. Investments in which we are not able to exercise significant
      influence over the investee are accounted for under the cost method. Preparing
      our financial statements requires us to make estimates and assumptions that
      affect the reported amounts of assets, liabilities, revenue, expenses, and
      financial data included in the accompanying notes to the financial statements.
      Actual results and outcomes may differ from our estimates and
      assumptions.





Interim
      results are not necessarily indicative of results for a full year. The
      information included in this Form 10-Q should be read in conjunction with
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations and the Condensed Consolidated Financial Statements and notes
      thereto included in our 2006 Form 10-K.




**Reclassification**




Prior
      to
      the fourth quarter of 2006, we recognized certain amounts arising from
      Intellectual Property (“IP”) settlements as revenue and direct costs related to
      the settlements as cost of revenue. We have determined that these IP settlements
      should more appropriately be recorded as “Gain on intellectual property
      settlement” in operations rather than as revenue and cost of revenue and
      accordingly have reclassified $23.0 million previously recorded as IP settlement
      revenue and $6.5 million of IP settlement cost as a net gain on intellectual
      property settlement of $16.5 million within the Condensed Consolidated Statement
      of Operations for the nine months ended October 1, 2006.





**Accounting
      Changes**





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48 “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement 109” (“FIN 48”). FIN 48 establishes a single
      model to address accounting for uncertain tax positions. FIN 48 clarifies the
      accounting for income taxes by prescribing a minimum recognition threshold
      that
      a tax position is required to meet before being recognized in the financial
      statements. FIN 48 also provides guidance on derecognition, measurement,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition.





Upon
      adoption of FIN 48, as of January 1, 2007, we recognized a charge of
      approximately $6.9 million to accumulated deficit in shareholders’ investment.
      As of January 1, 2007, we had $21.3 million of unrecognized tax benefits, and
      if
      recognized, these amounts would be recorded as a component of income tax
      benefit. There have been no significant changes to these amounts during the
      nine
      months ended September 30, 2007.





We
      file
      our tax returns as prescribed by the tax laws of the jurisdictions in which
      we
      operate. In the United States, our tax years 1997 - 2006 remain open to
      examination by the Internal Revenue Service, as well as various state
      jurisdictions. In the normal course of business, we are subject to examination
      by taxing authorities throughout the world, including such major jurisdictions
      as Canada, France, Germany, Italy, Mexico, the Netherlands, Spain, Sweden and
      the United Kingdom. In many cases, our uncertain tax positions are related
      to
      tax years that remain subject to examination by the relevant taxing
      authorities.





Based
      on
      the outcome of relevant examinations, or as a result of the expiration of
      statute of limitations for specific jurisdictions, it is not reasonably possible
      that the related unrecognized tax benefits for tax positions taken regarding
      previously filed tax returns will materially change within the next twelve
      months from those recorded as liabilities for uncertain tax positions in our
      financial statements at January 1, 2007.





Estimated
      interest and penalties related to the underpayment of income taxes are
      classified as a component of provision for income taxes in the Condensed
      Consolidated Statement of Operations and accrued interest and penalties were
      $0.2 million as of January 1, 2007, and $0.3 million as of September 30,
      2007.




In
      May
      2007, the FASB issued Staff Position No. FIN 48-1, "Definition of
      Settlement in FASB Interpretation No. 48," which provides guidance on how a
      company should determine whether a tax position is effectively settled for
      purposes of recognizing previously unrecognized tax benefits.  We adopted
      this Staff Position during the first quarter of 2007, and it had no effect
      on
      our Condensed Consolidated Financial Statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities, Including an Amendment of FASB Statement No. 115,” which will
      become effective in 2008. SFAS No. 159 permits entities to measure eligible
      financial assets, financial liabilities and firm commitments at fair value,
      on
      an instrument-by-instrument basis, that are otherwise not permitted to be
      accounted for at fair value under other generally accepted accounting
      principles. The fair value measurement election is irrevocable and subsequent
      changes in fair value must be recorded in earnings. We will adopt this Statement
      in fiscal year 2008, and we are currently evaluating if we will elect the fair
      value option for any of our eligible financial instruments and other
      items.





In
      September 2006, the FASB finalized SFAS No. 157, “Fair Value Measurements,”
which will become effective in 2008. This Statement defines fair value,
      establishes a framework for measuring fair value and expands disclosures about
      fair value measurements; however, it does not require any new fair value
      measurements. The provisions of SFAS No. 157 will be applied prospectively
      to
      fair value measurements and disclosures beginning in the first quarter of
      2008.





In
      June
      2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on
      EITF Issue No. 06-03, “How Taxes Collected from Customers and Remitted to
      Governmental Authorities Should Be Presented in the Income Statement” (“EITF
      06-03”). The scope of EITF 06-03 includes any tax assessed by a governmental
      authority that is directly imposed on a revenue-producing transaction between
      a
      seller and a customer, and provides that a company may adopt a policy of
      presenting taxes either gross within revenue or on a net basis. For any such
      taxes that are reported on a gross basis, a company should disclose the amounts
      of those taxes for each period for which an income statement is presented if
      those amounts are significant. This statement is effective with respect to
      financial reports for interim and annual reporting periods beginning after
      December 15, 2006. We adopted EITF 06-03 on January 1, 2007. Various taxes
      and
      fees on the sale of products and services to customers are collected by us
      as an
      agent and remitted to the respective taxing authority. These taxes and fees
      have
      been presented on a net basis in the accompanying Condensed Consolidated
      Statement of Operations and recorded as a liability until remitted to the
      respective taxing authority.


**6**






**2.****Inventories**




Inventories
      comprise the following (thousands of dollars):





**September
                30, 2007**
            
            
            **December
                31, 2006**Raw
                materials
            
            $
            61,796
            
            $
            69,769Work
                in process
            
            
            1,882
            
            
            450Finished
                goods
            
            
            49,128
            
            
            48,808Inventories
            
            $
            112,806
            
            $
            119,027





**3. Notes Receivable**




In
      connection with the sale of Cincinnati Lamb, we received a $12.5 million
      long-term note receivable bearing interest at an annual rate of LIBOR plus
      three
      percent (8.12% as of September 30, 2007) with interest payable quarterly. We
      have five remaining principal payments on the note that are due semiannually
      in April and October of $2.0 million, $2.0 million, $2.5
      million, $2.0 million and $2.5 million. As of September 30, 2007, the estimated
      fair value of the note is $10.3 million, based on the estimated cash flows
      from
      the note and a risk-adjusted discount rate equal to LIBOR plus eight percent.
      Our Condensed Consolidated Balance Sheet as of September 30, 2007, classifies
      the current and long-term portions of the $10.3 million note receivable as
      other
      current assets and other assets.





As
      part
      of the sale of Landis Grinding Systems, we received a $10.0 million two-year
      note at an interest rate of five percent per annum guaranteed by the buyer’s
      parent company, due December 2007. As of September 30, 2007, the estimated
      fair
      value of the note is $9.9 million, based on the estimated cash flows from the
      note and a risk-adjusted discount rate equal to LIBOR plus 2.25% (7.15 % as
      of
      September 30, 2007). This note receivable is included in other current assets
      on
      our Condensed Consolidated Balance Sheet.




4. Debt




On
      September 27, 2007 we closed on a new unsecured Revolving Credit Facility (the
      “Revolving Facility”) with a maximum amount available under the Revolving
      Facility of $50.0 million. Net of outstanding letters of credit and limitations
      on availability, we had borrowing capacity at September 30, 2007, of $47.6
      million under the Revolving Facility. We made no borrowings under the Revolving
      Facility as of September 30, 2007. The first measurement date for our financial
      covenants is December 31, 2007. The Revolving Facility matures in October
      2012.




The
        key
        terms of the Revolving Facility are as follows:
 
 ·
              Loans
                  will bear interest at a variable rate equal to (at our option)
                  (i) LIBOR
                  plus the applicable margin, which ranges from 0.60% to 1.00%, or
                  (ii) the
                  Bank’s prime rate, less the applicable margin, which ranges from 0.25%
                  to
                  1.00%.  If an event of default occurs and is continuing, then
                  the interest rate on all obligations under the Revolving Facility
                  may be
                  increased by 2.0% above the otherwise applicable rate, and the
                  Bank may
                  declare any outstanding obligations under the Revolving Facility
                  to be
                  immediately due and payable.
  ·
              A
                  fee ranging from 0.60% to 1.00% on the maximum amount available
                  to be
                  drawn under each letter of credit that is issued and outstanding
                  under the
                  Revolving Facility will be required.  The fee on the unused portion
                  of the Revolving Facility ranges from 0.125% to
                  0.20%.
  ·
              Certain
                  of our domestic subsidiaries will guaranty the Revolving
                  Facility.
  ·
              The
                  Credit Agreement contains various restrictions and covenants, including
                  restrictions on our ability and the ability of our subsidiaries
                  to
                  consolidate or merge, make acquisitions, create liens, incur additional
                  indebtedness or dispose of assets.
  ·
              Financial
                  covenants include a Maximum Leverage test and a Minimum Tangible
                  Net Worth
                  test, each as defined in the Credit
                  Agreement.


As
      of
      September 30, 2007, we have $100.0 million of current ten-year senior unsecured
      debt outstanding, due in March 2008. Interest payments at 7.0% are due
      semi-annually in March and September. Including underwriting fees, discounts
      and
      other issuance costs, the effective interest rate is 7.175%.





We
      also
      had letter-of-credit reimbursement agreements totaling $4.5 million at September
      30, 2007, compared to $7.4 million at December 31, 2006.


5.
      Discontinued
      Operations




We
      completed our divestiture of the IAS businesses with the sale of the Cincinnati
      Lamb business in the first quarter of 2005 and the sale of the Landis Grinding
      Systems business in the fourth quarter of 2005. There were no earnings or losses
      from discontinued operations for the quarter ended September 30, 2007. There
      was
      a net loss of $1.3 million from discontinued operations for the nine months
      ended September 30, 2007 as a result of the resolution of a purchase price
      arbitration.





The
      earnings from discontinued operations for the three months ended October 1,
      2006, and the loss from discontinued operations for the nine months ended
      October 1, 2006, includes period expenses related to finalizing the sale of
      the
      Landis Grinding Systems and changes to the estimated purchase price adjustment,
      net of tax benefits. Also included in the earnings from discontinued
      operations for the three months ended October 1, 2006, is a $1.4 million benefit
      related to our true up of the tax provision.




6. Restructuring Costs




In
      March
      2006, we announced our plan to close our design centers in Goteborg and Lund,
      Sweden. The activities previously assigned to the design centers in Sweden
      have
      been reassigned to other parts of our business or moved to third-party vendors
      to improve efficiencies, benefit from reduced cost, and realign resources to
      increase new product development capacity. This restructuring resulted in
      charges of $1.8 million and $4.0 million for the three and nine months ended
      October 1, 2006, respectively, and was substantially completed by the end of
      2006.





In
      November 2006, we committed to a business restructuring plan intended to reduce
      costs, streamline operations and improve productivity. The restructuring
      includes headcount reductions and consolidation of certain facilities on a
      regional and/or global basis. The restructuring activities were substantially
      completed as of September 30, 2007 at approximately the amount we had
      accrued.


**7**


**7.
      Operating Gains**




In
      March
      2006, we settled an intellectual property lawsuit relating to our battery
      power-management patents. The terms of this settlement are confidential. We
      recorded a gain on intellectual property settlement of $16.5 million, which
      is
      net of $6.5 million of intellectual property settlement cost, within our
      Condensed Consolidated Statement of Operations for the nine months ended October
      1, 2006. There were no IP settlements for the three or nine months ended
      September 30, 2007.




Included
      as an offset against general and administrative expenses for the nine months
      ended September 30, 2007, is an insurance death benefit gain of approximately
      $1.5 million, which was recorded when cash was received. There was no insurance
      death benefit gain for the three months ended September 30, 2007.




8. Provision for Income Taxes




The
      tax
      expense for the three and nine months ended September 30, 2007, reflects an
      effective tax rate for continuing operations of 16.2% and 39.3%, respectively,
      compared to a U.S. statutory rate of 35%. In the third quarter of 2007, the
      tax provision was decreased to record benefits primarily resulting from certain
      changes in foreign and state tax law and for deferred taxes related to tax
      amortizable goodwill. Our expected effective tax rate for fiscal year 2007,
      excluding the impact of discrete items, is approximately 36%.





The
      tax
      provision for the three and nine months ended October 1, 2006, reflects an
      effective tax rate for continuing operations of 37.2% and 30.2%, respectively,
      compared to a U.S. statutory rate of 35%. The effective tax rate for the
      three months ended October 1, 2006, reflects the U.S. statutory rate and state
      income tax implications. The tax provision for the nine months ended
      October 1, 2006, was reduced by $2.1 million, primarily due to the
      favorable conclusion of a Canadian tax audit during the first quarter of
      2006.






9. Shares Used in Computing Earnings (Loss) per
      Share




Basic
      earnings (loss) per share is calculated using the weighted average number of
      common shares outstanding and issuable for the applicable period. Diluted
      earnings (loss) per share is computed using basic weighted average shares plus
      the dilutive effect of unvested restricted stock and outstanding stock options
      using the “treasury stock” method.




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30, 2007**
            
            
            **October
                1, 2006**
            
            
            **September
                30, 2007**
            
            
            **October
                1, 2006**Weighted
                average shares - basic
            
            
            60,483,794
            
            
            62,748,714
            
            
            60,241,602
            
            
            63,008,778Dilutive
                effect of unvested restricted shares and stock options
            
            
            840,780
            
            
            1,312,122
            
            
            857,730
            
            
            1,418,883Weighted
                average shares - diluted
            
            
            61,324,574
            
            
            64,060,836
            
            
            61,099,332
            
            
            64,427,661





Our
      employees and directors held options to purchase 863,331 and 768,898 shares
      of
      our common stock for the three and nine months ended September 30, 2007, and
      599,901 and 426,484 shares for the three and nine months ended October 1, 2006,
      respectively, that were not included in weighted average shares diluted because
      they were antidilutive to the diluted earnings per share computation. These
      options could become dilutive in future periods if the average market price
      of
      our common stock exceeds the exercise price of the outstanding options and
      we
      report net earnings.




10. Equity




In
      the
      three months ended September 30, 2007, we granted 326,250 options to employees
      with a Black-Scholes value of $11.07 a share.  In the nine months
      ended September 30, 2007, we granted 950,200 options to employees with a
      Black-Scholes value of $9.87 a share. The Black-Scholes assumptions used for
      this calculation were as follows:




**Fair
                value assumptions**
            
            
            **Three
                Months Ended September 30, 2007**
            
            
            **Nine
                Months Ended  September 30, 2007**Expected
                life in years
            
            
            4.80
            
            
            4.87Annualized
                volatility
            
            
            38.15
            %
            
            38.28
            %Annual
                rate of quarterly dividends
            
            
            0.00
            %
            
            0.00
            %Discount
                rate - bond equivalent yield
            
            
            4.940
            %
            
            4.740
            %




Our
      accumulated other comprehensive loss comprised the following (thousands of
      dollars):




**September
                30, 2007**
            
            
            **December
                31, 2006**Currency
                translation adjustment, net
            
            $
            8,259
            
            $
            2,933Unamortized
                benefit plan costs, net of tax benefit of $15,234 and $16,446,
                respectively
            
            
            (28,128
            )
            
            (30,543
            )Unrealized
                gain on securities, net
            
            
            70
            
            
            49Accumulated
                other comprehensive loss
            
            $
            (19,799
            )
            $
            (27,561
            )




11. Segment Reporting




We
      design, develop, manufacture, integrate, sell, resell and service wired and
      wireless automated identification and data collection (“AIDC”) products,
      including radio frequency identification (“RFID”) products, mobile computing
      products, wired and wireless bar code printers and label media products. Our
      reportable segments comprise products and services. The product segment
      generates revenue from the design, development, manufacture, sale and resale
      of
      AIDC products, including RFID products and license fees. The service segment
      generates revenue from customer support, product maintenance and other services
      related to the products and systems integration.





The
      accounting policies of our two reportable segments are the same as those used
      to
      prepare our condensed consolidated financial statements. Performance and
      resource allocation are primarily measured by sales and standard gross profit.
      All other earnings, costs and expenses are aggregated and reported on a
      consolidated basis.





For
      the
      three and nine months ended September 30, 2007 and October 1, 2006, one customer
      accounted for more than 10% of our revenues. Total sales to this customer were
      $29.7 million and $70.7 million for the three and nine months ended September
      30, 2007, respectively, compared with sales of $20.1 million and $69.8 million
      for the corresponding prior-year period.


**8**





As
      described in Note 1, certain amounts in our prior-year condensed consolidated
      financial statements related to IP settlements have been reclassified to conform
      to the current-year presentation. The effect of such reclassification on segment
      amounts for the nine months ended October 1, 2006, was to reduce product revenue
      by $23.0 million and reduce product gross profit by $16.5 million.





The
      following table sets forth our operations by reportable segment (millions of
      dollars):




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30,
                2007**
            
            
            **October
                1, 2006**
            
            
            **September
                30,
                2007**
            
            
            **October
                1, 2006**Revenues:Product
            
            $
            169.2
            
            $
            157.0
            
            $
            480.6
            
            $
            515.7Service
            
            
            36.8
            
            
            39.0
            
            
            115.2
            
            
            115.5Total
            
            $
            206.0
            
            $
            196.0
            
            $
            595.8
            
            $
            631.2Gross
                profit:Product
            
            $
            63.7
            
            $
            58.1
            
            $
            174.2
            
            $
            199.9Service
            
            
            14.4
            
            
            18.0
            
            
            49.6
            
            
            50.2Total
            
            $
            78.1
            
            $
            76.1
            
            $
            223.8
            
            $
            250.1






The
      following table sets forth our revenues by product lines (millions of
      dollars):


**Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,
                2007**
            
            
            **October
                1, 2006**
            
            
            **September
                30,
                2007**
            
            
            **October
                1, 2006****Revenues:**Systems
                and solutions
            
            $
            118.4
            
            $
            105.6
            
            $
            329.4
            
            $
            357.3Printer
                and media
            
            
            50.8
            
            
            51.4
            
            
            151.2
            
            
            158.4Service
            
            
            36.8
            
            
            39.0
            
            
            115.2
            
            
            115.5$
            206.0
            
            $
            196.0
            
            $
            595.8
            
            $
            631.2




12. Commitments and
      Contingencies




Provisions
      for estimated expenses related to product warranties are made at the time
      products are sold. These estimates are established using historical information
      on the nature, frequency, and average cost of warranty claims. We actively
      study
      trends of warranty claims and take action to improve product quality and
      minimize warranty claims. The following table indicates the change in our
      warranty accrual included in current liabilities (thousands of
      dollars):




**Nine
                Months Ended****September
                30, 2007**
            
            
            **October
                1, 2006**Beginning
                balance
            
            $
            6,800
            
            $
            5,542Payments
            
            
            (3,234
            )
            
            (5,727
            )Increase
                in liability (new warranties issued)
            
            
            2,297
            
            
            6,425Ending
                balance
            
            $
            5,863
            
            $
            6,240




We
      have
      entered into a variety of agreements with third parties that include
      indemnification clauses, both in the ordinary course of business and in
      connection with our divestitures of certain product lines. These clauses require
      us to compensate these third parties for certain liabilities and damages
      incurred by them.





FASB
      Interpretation No. 45, “Guarantors’ Accounting and Disclosure Requirements for
      Guarantees, Including Indirect Guarantees of Indebtedness of Others” requires
      that we estimate and record the fair value of guarantees as a liability. We
      do
      not believe that we have any significant exposure related to such guarantees
      and
      therefore have not recorded a liability as of September 30, 2007, or December
      31, 2006. We have not made any significant indemnification payments as a result
      of these clauses.




We
      currently, and from time to time, are subject to claims and lawsuits arising
      in
      the ordinary course of business. Such claims and lawsuits may take the form
      of
      counter claims in lawsuits we bring to enforce our rights. The ultimate
      resolution of currently pending proceedings is not expected to have a material
      adverse effect on our business, financial condition, results of operations
      or
      liquidity.


**9**


13. Pension and Other Postretirement Benefit
      Plans




The
      information in this note represents the net periodic pension and post-retirement
      benefit costs and related components in accordance with SFAS 132(R), “Employers’
Disclosures about Pensions and Other Postretirement Benefits (as amended).” The
      components of net pension and postretirement periodic benefit cost (credit)
      for
      the three and nine months ended September 30, 2007, and October 1, 2006, are
      as
      follows (thousands of dollars):




**U.S.
                Defined Benefit Plans**
            
            
            **Non-U.S.
                Defined Benefit Plans**
            
            
            **Other
                Postretirement Benefit Plans****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Quarter
                Ended September 30, 2007, and October 1, 2006**Service
                cost
            
            $
            453
            
            $
            1,741
            
            $
            -
            
            $
            281
            
            $
            -
            
            $
            4Interest
                cost
            
            
            2,678
            
            
            2,988
            
            
            689
            
            
            567
            
            
            44
            
            
            66Expected
                return on plan assets
            
            
            (2,610
            )
            
            (2,508
            )
            
            (894
            )
            
            (777
            )
            
            -
            
            
            -Amortization
                and deferrals:Transition
                asset
            
            
            -
            
            
            -
            
            
            (45
            )
            
            (40
            )
            
            -
            
            
            -Actuarial
                loss
            
            
            941
            
            
            1,241
            
            
            110
            
            
            115
            
            
            -
            
            
            27Prior
                service cost
            
            
            144
            
            
            177
            
            
            -
            
            
            -
            
            
            -
            
            
            -Curtailment
                loss (gain)
            
            
            -
            
            
            (2,146
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                pension and postretirement periodic benefit cost (gain)
            
            $
            1,606
            
            $
            1,493
            
            $
            (140
            )
            $
            146
            
            $
            44
            
            $
            97**Nine
                Months Ended September 30, 2007, and October 1,
                2006**Service
                cost
            
            $
            1,358
            
            $
            5,223
            
            $
            -
            
            $
            817
            
            $
            -
            
            $
            12Interest
                cost
            
            
            8,034
            
            
            8,964
            
            
            1,997
            
            
            1,650
            
            
            132
            
            
            198Expected
                return on plan assets
            
            
            (7,832
            )
            
            (7,524
            )
            
            (2,592
            )
            
            (2,260
            )
            
            -
            
            
            -Amortization
                and deferrals:Transition
                asset
            
            
            -
            
            
            -
            
            
            (130
            )
            
            (117
            )
            
            -
            
            
            -Actuarial
                loss
            
            
            2,825
            
            
            3,721
            
            
            317
            
            
            335
            
            
            
            
            
            82Prior
                service cost
            
            
            433
            
            
            531
            
            
            -
            
            
            -
            
            
            -
            
            
            -Curtailment
                loss (gain)
            
            
            -
            
            
            (2,146
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Special
                termination benefits
            
            
            -
            
            
            1,350
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                pension and postretirement periodic benefit cost (gain)
            
            $
            4,818
            
            $
            10,119
            
            $
            (408
            )
            $
            425
            
            $
            132
            
            $
            292




**10**


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS**





**Forward-Looking
      Statements and Risk Factors**




Forward-looking
      statements contained in this filing are subject to the safe harbor created
      by
      the Private Securities Litigation Reform Act of 1995 (alternatively: Section
      27A
      of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
      of
      1934) and are dependent upon a variety of important factors that could cause
      actual results to differ materially from those reflected in such forward-looking
      statements.





Forward-looking
      statements include but are not limited to statements about: maintaining or
      improving our revenues, gross margins or profits of our continuing operations,
      for the current period or any future period; competing effectively with our
      current products and planned products, and introducing new products; effectively
      completing restructuring activities, including the closure of certain facilities
      and redeployment of related functions; maintaining or reducing expenses;
      maintaining or improving operational efficiency; increasing product development
      capacity; using our investment in research and development to generate future
      revenue; and the applicability of accounting policies used in our financial
      reporting. When used in this document and in documents it references, the words
      “anticipate,” “believe,” “will,” “intend,” “project” and “expect” and similar
      expressions as they relate to Intermec or our management are intended to
      identify such forward-looking statements. We undertake no obligation to publicly
      update or revise any forward-looking statements, whether as a result of new
      information, future events, changed circumstances or any other reason after
      the
      date of this quarterly report.





Forward-looking
      statements involve and are dependent upon certain risks and uncertainties and
      are not guarantees of future performance. A number of factors can impact our
      business and determine whether we can or will achieve any forward-looking
      statement made in this report. Any one of these factors could cause our actual
      results to differ materially from those expressed or implied in a
      forward-looking statement. We outline these risk factors in reports that we
      file
      with the SEC, in press releases and on our website, www.intermec.com. You are
      encouraged to review the discussion below in Part I, “Item 2, Management’s
      Discussion and Analysis of Financial Condition and Results of Operations,” and
      Part II, “Item 1A Risk Factors,” of this filing, which discuss risk factors
      associated with our business.




**11**


**Results
      of Operations**





The
      following discussion compares our results of operations for the three and nine
      months ended September 30, 2007, and October 1, 2006. Results of operations
      and
      percentage of revenues were as follows (millions of dollars):




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30, 2007**
            
            
            **October
                1, 2006**
            
            
            **September
                30, 2007**
            
            
            **October
                1, 2006****Amounts**
            
            
            **Amounts**
            
            
            **Amounts**
            
            
            **Amounts**Revenues
            
            $
            206.0
            
            $
            195.9
            
            $
            595.8
            
            $
            631.2Costs
                and expenses:Cost
                of revenues
            
            
            127.9
            
            
            119.8
            
            
            372.0
            
            
            381.1Selling,
                general and administrative
            
            
            73.6
            
            
            70.5
            
            
            211.9
            
            
            226.8Gain
                on intellectual property settlement
            
            
            -
            
            
            -
            
            
            -
            
            
            (16.5
            )Restructuring
                charge
            
            
            -
            
            
            1.8
            
            
            -
            
            
            4.0Total
                costs and expenses
            
            
            201.5
            
            
            192.1
            
            
            583.9
            
            
            595.4Operating
                profit from continuing operations
            
            
            4.5
            
            
            3.8
            
            
            11.9
            
            
            35.8Gain
                on sale of investments
            
            
            -
            
            
            -
            
            
            -
            
            
            2.3Interest
                income, net
            
            
            0.7
            
            
            1.7
            
            
            1.1
            
            
            4.6Earnings
                from continuing operations, before income tax
            
            
            5.2
            
            
            5.5
            
            
            13.0
            
            
            42.7Provision
                for income tax
            
            
            0.8
            
            
            2.1
            
            
            5.1
            
            
            12.9Earnings
                from continuing operations, net of tax
            
            
            4.4
            
            
            3.4
            
            
            7.9
            
            
            29.8Gain
                (loss) from discontinued operations, net of tax
            
            
            -
            
            
            1.4
            
            
            (1.3
            )
            
            (0.7
            )Net
                earnings
            
            $
            4.4
            
            $
            4.8
            
            $
            6.6
            
            $
            29.1**Percent
                of Revenues**
            
            
            **Percent
                of Revenues**
            
            
            **Percent
                of Revenues**
            
            
            **Percent
                of Revenues**RevenuesCosts
                and expenses:Cost
                of revenues
            
            
            62.1
            %
            
            61.2
            %
            
            62.4
            %
            
            60.4
            %Selling,
                general and administrative
            
            
            35.7
            %
            
            36.0
            %
            
            35.6
            %
            
            35.9
            %Gain
                on intellectual property settlement
            
            
            -
            
            
            -
            
            
            -
            
            
            -2.6
            %Restructuring
                charge
            
            
            -
            
            
            0.9
            %
            
            -
            
            
            0.6
            %Total
                costs and expenses
            
            
            97.8
            %
            
            98.1
            %
            
            98.0
            %
            
            94.3
            %Operating
                profit from continuing operations
            
            
            2.2
            %
            
            1.9
            %
            
            2.0
            %
            
            5.7
            %Gain
                on sale of investments
            
            
            *
            
            
            *
            
            
            *
            
            
            *Interest
                income, net
            
            
            *
            
            
            *
            
            
            *
            
            
            *Earnings
                from continuing operations, before income tax
            
            
            2.5
            %
            
            2.8
            %
            
            2.2
            %
            
            6.8
            %Provision
                for income tax
            
            
            *
            
            
            *
            
            
            *
            
            
            *Earnings
                from continuing operations, net of tax
            
            
            2.1
            %
            
            1.7
            %
            
            1.3
            %
            
            4.7
            %Gain
                (loss) from discontinued operations, net of tax
            
            
            *
            
            
            *
            
            
            *
            
            
            *Net
                earnings
            
            
            2.1
            %
            
            2.5
            %
            
            1.1
            %
            
            4.6
            %




*****
      Calculation is not meaningful




**12**


*Revenues*





Revenues
      by category and geographic region and as a percentage of total revenues from
      continuing operations for the three and nine months ended September 30, 2007,
      and October 1, 2006, were as follows (millions of dollars):





**Three
                Months Ended****September
                30, 2007**
            **October
                1, 2006****Amount**
            
            
            **Percent
                of Revenues**
            
            
            **Amount**
            
            
            **Percent
                of Revenues**
            
            
            **Change**
            
            
            **Percentage
                Change**Revenues
                by category:Product
            
            $
            169.2
            
            
            82.1
            %
            $
            156.9
            
            
            80.1
            %
            $
            12.3
            
            
            7.8
            %Service
            
            
            36.8
            
            
            17.9
            %
            
            39.0
            
            
            19.9
            %
            
            (2.2
            )
            
            -5.6
            %Total
                revenues
            
            $
            206.0
            
            
            100.0
            %
            $
            195.9
            
            
            100.0
            %
            $
            10.1
            
            
            5.2
            %Revenues
                by geographic region:North
                America
            
            $
            100.8
            
            
            48.9
            %
            $
            113.2
            
            
            57.8
            %
            $
            (12.4
            )
            
            -11.0
            %Europe,
                Middle East and Africa(EMEA)
            
            
            74.2
            
            
            36.0
            %
            
            51.5
            
            
            26.3
            %
            
            22.7
            
            
            44.1
            %All
                others
            
            
            31.0
            
            
            15.1
            %
            
            31.2
            
            
            15.9
            %
            
            (0.2
            )
            
            -0.6
            %Total
                revenues
            
            $
            206.0
            
            
            100.0
            %
            $
            195.9
            
            
            100.0
            %
            $
            10.1
            
            
            5.2
            %





Revenue
      increased $10.1 million for the three months ended September 30, 2007 compared
      to the prior year period, primarily from the $12.3 million increase in product
      revenue, offset by a $2.2 million decrease in service revenue. The increase
      in
      product revenue was attributable to a $14.8 million increase in systems and
      solution product sales and a $2.5 million decline in printer and media product
      sales. The reduction in North America is due primarily to a reduction in
      government product sales of $5.5 million and a decrease in Service revenue
      of
      $2.6 million maintenance and repair services. The higher product revenue is
      primarily a result of the increase in sales in the EMEA market, which was
      up 44.1% from the prior year quarter. The changes in foreign currency conversion
      rates favorably impacted EMEA by $4.0 million.


**13**




**Nine
                Months Ended****September
                30, 2007**
            **October
                1, 2006****Amount**
            
            
            **Percent
                of Revenues**
            
            
            **Amount**
            
            
            **Percent
                of Revenues**
            
            
            **Change**
            
            
            **Percentage
                Change**Revenues
                by category:Product
            
            $
            480.6
            
            
            80.7
            %
            $
            515.7
            
            
            81.7
            %
            $
            (35.1
            )
            
            -6.8
            %Service
            
            
            115.2
            
            
            19.3
            %
            
            115.5
            
            
            18.3
            %
            
            (0.3
            )
            
            -0.3
            %Total
                revenues
            
            $
            595.8
            
            
            100.0
            %
            $
            631.2
            
            
            100.0
            %
            $
            (35.4
            )
            
            -5.6
            %Revenues
                by geographic region:North
                America
            
            $
            299.8
            
            
            50.4
            %
            $
            378.4
            
            
            60.0
            %
            $
            (78.6
            )
            
            -20.8
            %Europe,
                Middle East and Africa(EMEA)
            
            
            205.8
            
            
            34.5
            %
            
            173.8
            
            
            27.5
            %
            
            32.0
            
            
            18.4
            %All
                others
            
            
            90.2
            
            
            15.1
            %
            
            79.0
            
            
            12.5
            %
            
            11.2
            
            
            14.2
            %Total
                revenues
            
            $
            595.8
            
            
            100.0
            %
            $
            631.2
            
            
            100.0
            %
            $
            (35.4
            )
            
            -5.6
            %




Revenue
      for the nine months ended September 30, 2007, compared to the prior year period
      declined $35.4 million, or 5.6%, primarily due to a $35.1 million, or 6.8%,
      decline in product revenues. The decline in product revenues was due to a $26.0
      million decline in systems and solution product sales and a $9.1 million decline
      in printer and media product sales. The lower product revenue is primarily
      a
      result of the decline in sales in the North America market, which was down
      26.1%
      from the prior year. Our analysis of the causal factors for the decline
      suggests our introduction of several new products and the related
      transition to these products is the most significant factor. The marked
      difference in performance by regions was driven in part by the EMEA and All
      Other regions having earlier availability of our next generation mobile
      computer, the CN3, compared to the North American region.





Service
      revenue for the nine months ended September 30, 2007, decreased $0.3
      million or 0.3%, and was comparable to the prior year period.





*Gross
      Profit*





Gross
      profit and gross margin by revenue category for the three and nine months ended
      September 30, 2007, and October 1, 2006, were as follows (millions of
      dollars):




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September
                30, 2007**
            
            **October
                1, 2006**
            
            
            **September
                30, 2007**
            
            **October
                1, 2006****Gross
                Profit**
            
            
            **Gross
                Margin**
            
            
            **Gross
                Profit**
            
            
            **Gross
                Margin**
            
            
            **Gross
                Profit**
            
            
            **Gross
                Margin**
            
            
            **Gross
                Profit**
            
            
            **Gross
                Margin**Product
            
            $
            63.7
            
            
            37.6
            %
            $
            58.1
            
            
            37.0
            %
            $
            174.2
            
            
            36.2
            %
            $
            199.9
            
            
            38.8
            %Service
            
            
            14.4
            
            
            39.1
            %
            
            18.0
            
            
            46.1
            %
            
            49.6
            
            
            43.0
            %
            
            50.2
            
            
            43.4
            %Total
                gross profitand
                gross margin
            
            $
            78.1
            
            
            37.9
            %
            $
            76.1
            
            
            38.8
            %
            $
            223.8
            
            
            37.6
            %
            $
            250.1
            
            
            39.6
            %




The
      total
      gross profit was $78.1 million and $223.8 million for the three and nine months
      ended September 30, 2007, respectively, compared with gross profit of $76.1
      million and $250.1 million for the corresponding prior-year period. The decrease
      for the nine months ended September 30, 2007, compared to the corresponding
      prior-year period is attributable to the lower product revenue and a decrease
      in
      product gross margin percentage. The product gross margin of 36.2% for the
      nine months ended September 30, 2007, is a 2.6 percentage point decrease
      compared to the prior year period. The reduction in product gross margin is
      primarily due to lower unit volume, lower average selling prices and lower
      absorption on lower volumes. Product gross margin of 37.6% for the third quarter
      of 2007 reflects a 0.6 percentage point improvement from the same quarter
      of 2006.





Service
      gross profit decreased $3.6 million and $0.6 million for the three and nine
      months ended September 30, 2007, respectively, as a result of a slight
      decline in revenue and a decrease in gross margin.


**14**






*Selling,
      General and Administrative*





The
      total
      selling, general and administrative (“SG&A”) expenses were $73.6 million and
      $211.9 million for the three and nine months ended September 30, 2007,
      respectively, compared with SG&A expenses of $70.5 million and $226.8
      million for the corresponding prior-year period. The three months ended
      September 30, 2007 included management transition costs of $3.1 million, while
      the three months ended October 1, 2006, included a curtailment gain which
      reduced SG&A expenses by $2.1 million.





*Gain
      on Intellectual Property Settlement*




In
      March
      2006, we settled an intellectual property lawsuit relating to our battery
      power-management patents. The terms of this settlement are confidential. We
      recorded a gain on intellectual property settlement of $16.5 million, which
      is
      net of $6.5 million of intellectual property settlement cost, within our
      Condensed Consolidated Statement of Operations for the nine months ended October
      1, 2006. There were no IP settlements for the three or nine months ended
      September 30, 2007.




*Restructuring
      Charge*




In
      March
      2006, we announced our plan to close our design centers in Goteborg and Lund,
      Sweden. The activities previously assigned to the design centers in Sweden
      have
      been reassigned to other parts of our business or moved to third-party vendors
      to improve efficiencies, benefit from reduced cost, and realign resources to
      increase new product development capacity. This restructuring resulted in
      charges of $1.8 million and $4.0 million for the three and nine months ended
      October 1, 2006, respectively, and was substantially complete by the end of
      2006.




*Interest,
      Net*





Net
      interest income was $0.7 million and $1.1 million for the three and nine months
      ended September 30, 2007, compared to net interest income of $1.7 million and
      $4.6 million for the corresponding prior-year period. The decrease in net
      interest income reflects the reduction in average cash and cash equivalent
      balances.





*Provision
      for Income Taxes*





The
      tax
      expense for the three and nine months ended September 30, 2007, reflects an
      effective tax rate for continuing operations of 16.2% and 39.3%, respectively,
      compared to a U.S. statutory rate of 35%. In the third quarter of 2007, the
      tax provision was decreased to record benefits primarily resulting from certain
      changes in foreign and state tax law and for deferred taxes related to tax
      amortizable goodwill. Our expected effective tax rate for fiscal year 2007,
      excluding the impact of discrete items, is approximately 36%.





The
      tax
      provision for the three and nine months ended October 1, 2006, reflects an
      effective tax rate for continuing operations of 37.2% and 30.2%, respectively,
      compared to a U.S. statutory rate of 35%. The effective tax rate for the three
      months ended October 1, 2006, reflects the U.S. statutory rate and state income
      tax implications. The tax provision for the nine months ended October 1, 2006,
      was reduced by $2.1 million, primarily due to the favorable conclusion of a
      Canadian tax audit during the first quarter of 2006.





*Loss
      from Discontinued Operations*





The
      loss
      from discontinued operations for the nine months ended September 30, 2007,
      reflects the outcome of an arbitration settlement related to the sale of
      Cincinnati Lamb. The earnings from discontinued operations for the three months
      ended and the loss from discontinued operations for the nine months ended
      October 1, 2006, include period expenses related to finalizing the sale of
      Landis Grinding Systems and changes to the closing balance sheets and estimated
      purchase price adjustments, net of tax benefits. Also included in the earnings
      from discontinued operations for the three months ended October 1, 2006, is
      a
      $1.4 million benefit related to our true up of the tax provision.





**Liquidity
      and Capital Resources**





Cash,
      cash equivalents and short-term investments as of September 30, 2007, totaled
      $214.3 million, compared to $184.5 million as of December 31, 2006. Operating
      activities of continuing operations for the first nine months of 2007 provided
      $30.9 million of cash flow, primarily through net earnings from operations
      of $7.9 million, noncash expenses of $20.0 million and prepaid license fees
      of
      $8.0 million. Investing activities of continuing operations for the first nine
      months of 2007, used $10.5 million related primarily to $10.1 million of capital
      expenditures. Financing activities of continuing operations provided
      $9.6 million, primarily due to $5.7 million of proceeds from stock option
      exercises and other related stock awards during the nine months ended September
      30, 2007.





On
      September 27, 2007 we closed on a new unsecured Revolving Credit Facility (the
      “Revolving Facility”) with a maximum amount available under the Revolving
      Facility of $50.0 million. In connection with entering into the Revolving
      Facility, we terminated a previous secured credit arrangement with other
      parties, as reported in our Current Report on Form 8-K dated September 27,
      2007.
      Net of outstanding letters of credit and limitations on availability with the
      same bank, we had borrowing capacity on September 30, 2007, of $47.6
      million under the Revolving Facility. We made no borrowings under the Revolving
      Facility as of September 30, 2007. The first measurement date for our financial
      covenants is December 31, 2007. The Revolving Facility matures in October
      2012.


The
      key
      terms of the Revolving Facility are as follows:





·
            Loans
                will bear interest at a variable rate equal to (at our option) (i)
                LIBOR
                plus the applicable margin, which ranges from 0.60% to 1.00%, or
                (ii) the
                Bank’s prime rate, less the applicable margin, which ranges from 0.25%
                to
                1.00%.  If an event of default occurs and is continuing, then
                the interest rate on all obligations under the Revolving Facility
                may be
                increased by 2.0% above the otherwise applicable rate, and the Bank
                may
                declare any outstanding obligations under the Revolving Facility
                to be
                immediately due and payable.




·
            A
                fee ranging from 0.60% to 1.00% on the maximum amount available to
                be
                drawn under each letter of credit that is issued and outstanding
                under the
                Revolving Facility will be required.  The fee on the unused portion
                of the Revolving Facility ranges from 0.125% to
                0.20%.




·
            Certain
                of our domestic subsidiaries will guaranty the Revolving
                Facility.




·
            The
                Revolving Facility contains various restrictions and covenants,
                including restrictions on our ability and the ability of our subsidiaries
                to consolidate or merge, make acquisitions, create liens, incur additional
                indebtedness or dispose of assets.




·
            Financial
                covenants include a Maximum Leverage test and a Minimum Tangible
                Net Worth
                test, each as defined in the Revolving
                Facility.




As
      of
      September 30, 2007, we had $100.0 million of current ten-year senior unsecured
      debt outstanding, due March 2008. Interest payments at 7.0% are due
      semi-annually in March and September. Including underwriting fees, discounts
      and
      other issuance costs, the effective interest rate is 7.175%.




**15**


We
        believe that cash and cash equivalents on hand, combined with projected cash
        flow from operations and available borrowings under our Revolving Facility
        will
        be sufficient to fund our operations, research and development efforts,
        anticipated capital expenditures, liabilities, commitments, senior debt maturity
        and other capital requirements, for at least the next twelve
        months.


**Contractual
      Obligations**





Our
      contractual commitments as of September 30, 2007, have not changed materially
      from those disclosed in Item 7 of our annual report on Form 10-K for the year
      ended December 31, 2006, other than the uncertain tax positions totaling $21.5
      million.




As
      of
      September 30, 2007, we have classified $1.6 million of unrecognized tax
      benefits, including interest and penalties, as a
      current liability.  The remainder of our unrecognized tax benefits are
      classified as noncurrent liabilities. At this time, the settlement period for
      the noncurrent portion of our unrecognized tax benefits cannot be determined;
      however, it is not expected to be due within the next twelve
      months.




**Critical
      Accounting Policies**





“Management’s
      Discussion and Analysis of Financial Condition and Results of Operations”
(“MD&A”) discusses our consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States. The preparation of these financial statements requires us to
      make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities, the disclosure of contingent assets and liabilities, and the
      reported amounts of revenues and expenses. Actual amounts could differ from
      those estimates under different assumptions or conditions. Management’s beliefs
      regarding significant accounting policies have not changed significantly from
      those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended
      December 31, 2006.




Significant
      estimates and assumptions were used to determine the provisions for
      uncollectible accounts receivable, excess and obsolete inventory, tax valuation
      allowances, recoverability of intangible assets, warranty costs, retiree medical
      and pension obligations, estimated net realizable value of assets held for
      sale
      and litigation loss contingencies.





**New
      Accounting Pronouncements**





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48 “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement 109” (“FIN 48”). FIN 48 establishes a single
      model to address accounting for uncertain tax positions. FIN 48 clarifies the
      accounting for income taxes by prescribing a minimum recognition threshold
      a tax
      position is required to meet before being recognized in the financial
      statements. FIN 48 also provides guidance on derecognition, measurement,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition.





Upon
      adoption of FIN 48, as of January 1, 2007, we recognized a charge of
      approximately $6.9 million to accumulated deficit in shareholders’ investment.
      As of January 1, 2007, we had $21.3 million of unrecognized tax benefits, and
      if
      recognized, these amounts would be recorded as a component of income tax
      benefit. There have been no significant changes to these amounts during the
      nine
      months ended September 30, 2007.





We
      file
      our tax returns as prescribed by the tax laws of the jurisdictions in which
      we
      operate. In the United States, our tax years 1997 - 2006 remain open to
      examination by the Internal Revenue Service, as well as various state
      jurisdictions. In the normal course of business, we are subject to examination
      by taxing authorities throughout the world, including such major jurisdictions
      as Canada, France, Germany, Italy, Mexico, the Netherlands, Spain, Sweden and
      the United Kingdom. In many cases, our uncertain tax positions are related
      to
      tax years that remain subject to examination by the relevant taxing
      authorities.





Based
      on
      the outcome of relevant examinations, or as a result of the expiration of
      statute of limitations for specific jurisdictions, it is not reasonably possible
      that the related unrecognized tax benefits for tax positions taken regarding
      previously filed tax returns will materially change within the next twelve
      months from those recorded as liabilities for uncertain tax positions in our
      financial statements at January 1, 2007.





Estimated
      interest and penalties related to the underpayment of income taxes are
      classified as a component of Tax Expense in the Condensed Consolidated Statement
      of Operations and accrued interest and penalties were $0.2 million as of January
      1, 2007, and $0.3 million as of September 30, 2007.




In
      May
      2007, the FASB issued Staff Position No. FIN 48-1, "Definition of
      Settlement in FASB Interpretation No. 48," which provides guidance on how a
      company should determine whether a tax position is effectively settled for
      purposes of recognizing previously unrecognized tax benefits.  We adopted
      this Staff Position during the first quarter of 2007, and it had no effect
      on
      our Condensed Consolidated Financial Statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities, Including an Amendment of FASB Statement No. 115,” which will
      become effective in 2008. SFAS No. 159 permits entities to measure eligible
      financial assets, financial liabilities and firm commitments at fair value,
      on
      an instrument-by-instrument basis, that are otherwise not permitted to be
      accounted for at fair value under other generally accepted accounting
      principles. The fair value measurement election is irrevocable and subsequent
      changes in fair value must be recorded in earnings. We will adopt this Statement
      in fiscal year 2008 and we are currently evaluating if we will elect the fair
      value option for any of our eligible financial instruments and other
      items.





In
      September 2006, the FASB finalized SFAS No. 157, “Fair Value Measurements” which
      will become effective in 2008. This Statement defines fair value, establishes
      a
      framework for measuring fair value and expands disclosures about fair value
      measurements; however, it does not require any new fair value measurements.
      The
      provisions of SFAS No. 157 will be applied prospectively to fair value
      measurements and disclosures beginning in the first quarter of
      2008.





In
      June
      2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on
      EITF Issue No. 06-03, “How Taxes Collected from Customers and Remitted to
      Governmental Authorities Should Be Presented in the Income Statement” (“EITF
      06-03”). The scope of EITF 06-03 includes any tax assessed by a governmental
      authority that is directly imposed on a revenue-producing transaction between
      a
      seller and a customer, and provides that a company may adopt a policy of
      presenting taxes either gross within revenue or on a net basis. For any such
      taxes that are reported on a gross basis, a company should disclose the amounts
      of those taxes for each period for which an income statement is presented if
      those amounts are significant. This statement is effective with respect to
      financial reports for interim and annual reporting periods beginning after
      December 15, 2006. We adopted EITF 06-03 on January 1, 2007. Various taxes
      and
      fees on the sale of products and services to customers are collected by us
      as an
      agent and remitted to the respective taxing authority. These taxes and fees
      have
      been presented on a net basis in the accompanying Condensed Consolidated
      Statement of Operations and recorded as a liability until remitted to the
      respective taxing authority.




**16**


**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





We
      are
      exposed to interest rate risk primarily from our short-term and long-term
      borrowings and to foreign exchange rate risk with respect to our foreign
      operations and from foreign currency transactions.





Due
      to
      our global operations, our cash flows and earnings are exposed to foreign
      exchange rate fluctuations. When appropriate, we may attempt to limit our
      exposure to changing foreign exchange rates by entering into short-term foreign
      currency exchange contracts. As of September 30, 2007, we held short-term
      contracts for the purpose of hedging foreign currency cash flows with a total
      amount of $119.8 million.





Except
      as
      noted in the preceding paragraph, as of September 30, 2007, there have been
      no
      material changes in information provided in Item 7A of our Annual Report on
      Form
      10-K for the year ended December 31, 2006, which contains a complete discussion
      of our material exposures to interest rate and foreign exchange rate
      risks.




ITEM 4. CONTROLS AND PROCEDURES




We
      maintain disclosure controls and procedures, which are designed to ensure that
      information required to be disclosed in the reports we file or submit under
      the
      Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
      and reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms, and that such information is accumulated and
      communicated to management, including the Chief Executive Officer, or CEO,
      and
      Chief Financial Officer, or CFO, as appropriate to allow timely decisions
      regarding required disclosure.





Under
      the
      supervision and with the participation of management, including the CEO and
      CFO,
      an evaluation was performed on the effectiveness of the design and operation
      of
      our disclosure controls and procedures as of the end of the period covered
      by
      this quarterly report. Based on that evaluation, management, including the
      CEO
      and CFO, concluded that our disclosure controls and procedures were effective
      as
      of September 30, 2007.





An
      evaluation was also performed under the supervision and with the participation
      of management, including the CEO and CFO, of any change in our internal controls
      over financial reporting that occurred during the last fiscal quarter and that
      has materially affected, or is reasonably likely to materially affect, our
      internal controls over financial reporting. That evaluation did not identify
      any
      change in our internal controls over financial reporting that occurred during
      the latest fiscal quarter and that has materially affected, or is reasonably
      likely to materially affect, our internal controls over financial
      reporting.







**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





We
      currently, and from time to time, are subject to claims and lawsuits arising
      in
      the ordinary course of business. Such claims and lawsuits may take the form
      of
      counter claims in lawsuits we bring to enforce our rights. The ultimate
      resolution of currently pending proceedings is not expected to have a material
      adverse effect on our business, financial condition, results of operations
      or
      liquidity.





**ITEM
      1A. RISK FACTORS**





You
      are
      encouraged to review the discussion of Forward Looking Statements and Risk
      Factors appearing in this report at Part I, “Item 2. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations.”




In
      addition to the other information set forth in this Report, you should carefully
      consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
      Report on Form 10-K for the year ended December 31, 2006, and the factors
      discussed in Part III, “Item 1A. Risk Factors” in our Quarterly Report on Form
      10-Q for the quarterly period ended July 1, 2007, which could materially affect
      our business, financial condition or operating results. The risks described
      in
      these periodic reports and in this Report are not the only risks facing our
      Company. Additional risks and uncertainties not currently known to us or that
      we
      currently deem to be immaterial also may materially adversely affect our
      business, financial condition or operating results.





The
      risk
      factor included in the Annual Report on Form 10-K for the year ended December
      31, 2006 under the caption “***Business combinations, private equity
      transactions and similar events have altered the structure of the AIDC industry
      and could intensify competition within the industry”***  is
      restated in its entirety as follows.




***Business
      combinations, private equity transactions and similar events are altering the
      structure of the AIDC industry and could intensify competition within the
      industry.*** Motorola’s acquisition of Symbol Technologies, Inc.,
      Metrologic Instruments’ private equity transaction, Honeywell’s proposed
      acquisition of Hand Held Products, Inc., Zebra Technologies’ acquisition of
      WhereNet and its proposed acquisitions of Navis Holdings LLC and Proveo AG
      and
      similar events have altered the structure of the automated identification and
      data capture (“AIDC”) industry and may spawn more transactions and additional
      structural changes. Separately or together, any of these events could intensify
      competition within the AIDC industry by expanding the presence in our industry
      of firms that have not traditionally participated extensively in this line
      of
      business, and by enhancing the business and financial resources of some firms
      in
      our industry. There is no assurance that any of the strategies we employ to
      react to the structural changes in our industry will be successful. If our
      strategies fail, that could have material adverse impacts to our revenues,
      revenue growth and results of operations.




The
      risk
      factor included in the Quarterly Report on Form 10-Q for the quarterly period
      ended July 1, 2007 under the caption ***“Export controls, import
      controls, security measures, and operating conditions in U.S. and foreign
      markets could adversely affect our revenues, gross profit margins and results
      of
      operations”*******is restated in its entirety as
      follows.




***Export
      controls, import controls, security measures, and operating conditions in U.S.
      and foreign markets could adversely affect our revenues, gross profit margins
      and results of operations.***  Intermec is a global
      business. U.S. and foreign government restrictions on the export or import
      of technology could prevent us from selling some or all of our products in
      one
      or more countries. Our sales could also be materially and adversely affected
      by
      burdensome laws, regulations, security requirements, tariffs, quotas, taxes,
      trade barriers or capital flow restrictions imposed by the U.S. or foreign
      governments. In addition, political and economic instability could reduce demand
      for our products or impair or eliminate our ability to sell or deliver those
      products to customers in those countries or put our assets at risk. There is
      no
      assurance that we will be able to continue or expand sales of our products
      in
      any market, and disruptions of our sales could materially and adversely impact
      our revenues, revenue growth, gross profit margins and results of
      operations.


**17**






**ITEM
      6.EXHIBITS**





10.1
            
            Cash
                Retention Agreement with Steven J. Winter, effective as of March
                30,
                200710.2
            
            Separation
                Agreement with Steven J. Winter, effective as of October 9,
                200710.3
            
            Amended
                and Restated Restricted Stock Unit Agreement with Lanny H. Michael,
                effective as of March 30, 200710.4
            
            Amended
                and Restated Restricted Stock Unit Agreement with Janis L. Harwell,
                effective as of March 30, 200710.5
            
            Restricted
                Stock Unit Agreement with Janis L. Harwell, effective as of March
                30,
                200710.6
            
            Wells
                Fargo Credit Agreement, dated as of September 27, 200710.7
            
            Wells
                Fargo Revolving Line of Credit Note, dated as of September 27,
                200710.8
            
            Intermec
                IP Corporation Continuing Guaranty, dated as of September 27,
                200710.9
            
            Intermec
                Technologies Corporation Continuing Guaranty, dated as of September
                27,
                200710.10
            
            Intermec
                Technologies Manufacturing, LLC Continuing Guaranty, dated as of
                September
                27, 200731.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of
              2002,
                dated as of November 5, 200731.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of
              2002,
                dated as of November 5, 200732.1
            
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of
              2002,
                dated as of November 5, 200732.2
            
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of
              2002,
                dated as of November 5, 2007


**18**






**SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.








Intermec,
                Inc.(Registrant)By
            /s/
                    Lanny H. MichaelLanny
                H. Michael*Chief
                Financial Officer*November
                5, 2007