I have
been tracking corporate developments in the M2M market over the past few years. They are useful for
performance benchmarking while also providing insights as to how companies are
implementing strategy and committing to this market.
To date,
every initiative has been expansionary involving a mix of acquisitions, distribution
agreements, innovation and partnering. The divestiture by Sierra Wireless of
its AirCard business, announced on 28 Jan 2013, therefore triggered something
of a database classification challenge. In essence, the company sees a tremendous growth
opportunity in the M2M market while also acknowledging that the data-card
business is on the decline, especially as increasing numbers of Internet
enabled devices already include ‘embedded mobile’. Sierra Wireless has
therefore chosen to exit this business and to direct its investment capacity towards
more promising M2M opportunities.
The company’s most recent financial
statements for its M2M and its Mobile Computing (primarily AirCard) business segments go some way to justifying this course of action.
Specific points to note are:
1. The M2M business unit grew at an annual rate of 19% between 2009 and 2011, after
adjusting for one-off customer developments (Barnes & Noble’s e-Reader).
2. The
company’s faith in platform solutions (to facilitate provisioning and
managed connectivity, for example) looks promising with a 32% annual growth
rate.
3. However, the
Mobile Computing (AirCard) business unit has experienced annual revenue falls
of 6% after adjusting for one-off customer developments (Clearwire) between 2009 and 2011. While AirCard device revenues have fallen,
Sierra Wireless did benefit to some degree from the shift from 'plug-in' to 'embedded' modules.
Sierra Wireless’
divestiture coincides remarkably with another January announcement. This came from
Option, one of the pioneers of the data card market. In a formal financial
notification, Option announced that it is looking to raise cash in order to
secure itself as a going concern while the company continues to focus on
reducing its cost base and diversifying its sales- and marketing efforts.
In an
important message to other companies in the mobile eco-system, Option’s CEO has
previously commented that “Mobile broadband is increasingly seen as a utility. The
market has moved to a point where today it is not enough to simply enable
broadband connectivity, it has to be connectivity with a purpose”. This dynamic
does not apply exclusively to ‘mobile broadband’ and is an important lesson for
executives in the M2M (and LTE) markets.
Sierra Wireless
is not the only module supplier to have taken this message to heart. Over the
past few years, its main competitors have also sought to strengthen their
competitive position in the M2M market. This has been addressed by extending
their role along the value chain and by entering the market for M2M enabling
services.
The
following extract from our corporate initiatives database illustrates, by way of a timeline of events, how Cinterion
(which has recently started to trade under its parent brand, Gemalto) and Telit
have expanded their presence in the M2M market employing industry-consolidation
and new-service oriented strategies; each block-entry indicates the focus for each given transaction e.g. acquisition of M2M-module capabilities, M2M service support platforms,
GPS and M2M value-added services.
The management of Sierra Wireless has demonstrated
considerable proficiency to consolidate its position
through some sizeable acquisitions in pursuit of its M2M strategy. Its current challenge is to decide on how
much of its divestiture gains, if any, should flow directly to shareholders and how
much should be invested in business expansion initiatives.
Platform services look
attractive based on Sierra Wireless revenue growth record. However, many of the large mobile operators in its addressable market
have already announced platform commitments. Now that horizontal consolidation opportunities look limited, there
do remain several other possibilities to explore. These include, for example: value propositions in areas such as
M2M outsourcing; value-added connectivity and applications services; and, IoT related markets (I view IoT as
a different category of business from traditional M2M).
23 Aug 2022 update
ReplyDeleteBehind the green curtain – Semtech reveals magic to merge cellular and non-cellular IoT
In conversation with Enterprise IoT Insights, Alistair Fulton, senior vice president of Semtech’s wireless and sensing products group (responsible for the LoRa radio technology and LoRaWAN wireless protocol), says, as before, the deal is less about joining cellular and non-cellular in hardware, and more about making them work the same way for developers. “It is about the horizontal platform layer, more so than the device – just because of the physics,” he says.
He was asked on a conference call with analysts, after the deal had been confirmed, whether Semtech will look to build a single hybrid chip with a twin radio to run cellular LTE-M in licensed spectrum, alongside non-cellular LoRaWAN in unlicensed spectrum, he recalls. “And, you know, if I said that to one of our radio engineers, they’d fall over laughing because it’s not physically possible. It’s less about driving integration, and more about enabling choice.”
Which explains the trick, if not exactly how it works. But, quite helpfully, Fulton rewinds, as well, and says to look at how far the IoT industry has already come to simplify its ragged mechanics for the developer crowd – to make IoT easier to sell, install, and use. “If you go back 20 years, and consider all the challenges of IoT… well, kind of everything was difficult,” he says. The biggest headache, he explains, was the absence of easily available public cloud services.
“It was a nightmare,” he says. The game was mostly about data management – how to connect sensors, and gather and process data, just create order out of chaos. “Things have improved dramatically since then. On the cloud side, there are really powerful toolkits. I would hazard a guess the development time for a standard IoT solution in the cloud has reduced by 90 percent. Data is more manageable now. But connectivity is still hard.”
He explains: “Twenty years ago, everyone talked about 50 billion IoT devices (a reference to the infamous 2020 forecast by Ericsson and Cisco, actually from a decade ago, which, in ways, set the IoT market up to fail) – and we all meant cellular. Cellular was supposed to be the sledgehammer to crack the IoT nut. Which obviously wasn’t the case. Just basic availability of connectivity was a major challenge. And LoRa and other tech stepped in to fill the gap.
https://enterpriseiotinsights.com/20220825/internet-of-things-4/behind-the-green-curtain-semtech-reveals-magic-trick-to-merge-cellular-and-non-cellular-iot
Semtech on Sierra deal – ‘We are siding with the developer, and siding with the planet’
https://enterpriseiotinsights.com/20220823/internet-of-things-4/semtech-were-not-siding-with-cellular-were-siding-with-the-developer-and-siding-with-the-planet