Sierra Wireless’ Potential Problem in THREE charts
Sierra Wireless brings in revenue from two businesses: OEM Solutions and Enterprise Solutions.
And both are moving in the right direction.
OEM Solutions grew 29.7% year-on-year, in Q3, while Enterprise Solutions grew 15.4%.
But here’s the problem:
OEM Solutions makes up about 87% of revenue right now, while Enterprise Solutions makes up just 13%.
This hasn’t been all bad. But it could be better.
Because Sierra’s margins are much higher for Enterprise Solutions than for OEM Solutions.
Gross margins are about 30% for OEM Solutions and nearly 54% for Enterprise Solutions.
Sierra’s revenue streams need more balance.
The company makes lower margins on OEM Solutions because its larger customers have lots of negotiating power.
Sierra knows this, and has tried to diversify its revenue. But so far OEM revenue is growing about two times faster than enterprise revenue.
While it’s not a major problem right now, investors need to see more enterprise growth soon.
Simply put, Sierra Wireless needs to earn more revenue from managing the connections it sells to companies.
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