Sierra Wireless’ Potential Problem

The Presentation inside:

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Sierra Wireless’ Potential Problem in THREE charts

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Sierra Wireless brings in revenue from two businesses: OEM Solutions and Enterprise Solutions.

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And both are moving in the right direction.

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OEM Solutions grew 29.7% year-on-year, in Q3, while Enterprise Solutions grew 15.4%.

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But here’s the problem:

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OEM Solutions makes up about 87% of revenue right now, while Enterprise Solutions makes up just 13%.

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This hasn’t been all bad. But it could be better.

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Because Sierra’s margins are much higher for Enterprise Solutions than for OEM Solutions.

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Gross margins are about 30% for OEM Solutions and nearly 54% for Enterprise Solutions.

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Sierra’s revenue streams need more balance.

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The company makes lower margins on OEM Solutions because its larger customers have lots of negotiating power.

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Sierra knows this, and has tried to diversify its revenue. But so far OEM revenue is growing about two times faster than enterprise revenue.

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While it’s not a major problem right now, investors need to see more enterprise growth soon.

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Simply put, Sierra Wireless needs to earn more revenue from managing the connections it sells to companies.

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To find out more about Sierra Wireless’ opportunity in the Internet of Things, read this:

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