Sierra Wireless' Opportunities and Obstacles In 5 Slides

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Slide 1

The opportunity Sierra Wireless’ modules connect everything from cars to coffee makers to the Internet, making it a major player in the Internet of Things (IoT). And ABI Research says the company has been a leader in the wireless embedded module market for the past four years. But in addition to its hardware offerings, Sierra also sells data analytics software. The combination of selling both hardware and software solutions gives the company massive potential in the Internet of Things space. Image Source: Nespresso, Sierra Wireless, and Tesla.

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The opportunity By 2020, the wireless embedded mobile market is projected to hit $214 billion, according to Radiant Insights. And Cisco Systems predicts that nearly 50 billion things will be connected to the Internet by that same year, up from 25 billion right now. Of course, Sierra won’t be able to tap all of this growth, but as a leader in the space the company is in a great position to benefit. Image Source: Sierra Wireless.

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The problem is that even with all of its IoT potential, Sierra still has lots of variables that have caused the company to stumble. The company’s small-cap status — currently under $600 million — means that its stock price can often be more volatile than larger tech companies. Additionally, Sierra is an Internet of Things pure play, so its fate is tied to one market segment. If it fails to sell IoT hardware and software services, then there’s nothing to fall back on. Image source: Yahoo Finance.

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Sierra needs to balance its revenue streams better, and bring in more revenue from its Enterprise Solutions segment. Right now, the company’s Original Equipment Manufacturer (OEM) Solutions revenue dominates, but brings in lower margins (30%) than Enterprise Solutions (54%). The company also faces growing competition in the Internet of Things. Chinese vendors entering the machine-to-machine module space could hurt the company’s margins. Additionally, larger tech companies waking up to IoT’s potential could hurt Sierra’ current advantage.

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