Get to Know Sierra Wireless -- In Just Eight Slides

The Presentation inside:

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Slide 1

Sierra’s wireless modules help connect an array of devices to the Internet, from Tesla’s cars to Nespresso’s coffee makers. And the company’s software platform helps businesses manage their IoT connections, while Sierra’s cloud services store collected data. What does Sierra Wireless do? The company has shipped more than 100 million machine-to-machine (M2M) modules worldwide and operates on more than 80 networks globally, in more than 130 countries. Sierra is No. 1 in wireless embedded modules market share for four years running, according to ABI Research. Image source: Sierra Wireless.

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OEM Solutions: Sierra’s original equipment manufacturer solutions refer to sales of its AirPrime embedded wireless modules, remote device management, and support for on-board embedded applications, like its Legato system. OEM Solutions makes up about 83% of Sierra’s total revenue and gross margins for OEM Solutions are at about 29%. Sierra Wireless’ key segments

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Enterprise Solutions: Sierra’s enterprise solutions refer to sales of its wireless embedded AirLink gateways, as well as its cloud and connectivity services for deploying and managing IoT applications. Enterprise Solutions makes up about 13% of Sierra’s total revenue and gross margins for Enterprise Solutions are at about 50%. Sierra Wireless’ key segments

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Image source: Sierra Wireless. In order to boost its Enterprise segment, Sierra Wireless has made a series of purchases over the past year, including: In Motion, for vehicle communications systems. Maingate Operating, for Internet of Things networks. Accel Networks, to improve 4G LTE wireless connections. MobiquiThings, to connect mobile devices to the IoT. While these purchases have helped boost Sierra’s revenue at times, some speculate that the company isn’t expanding its Enterprise Solutions segment on its own, apart from buying up companies.

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Revenue was up 7.9% to $154.6 million, with about half of that growth coming from acquisitions. Adjusted earnings were $7.4 million, or $0.23 earnings per share. Revenue from OEM Solutions was up 5.1% year over year, to $130.7 million Enterprise Solutions revenue jumped 26.3% year over year, to $23.9 million. The company failed to meet its own revenue guidance of $157 million to $160 million. Sierra said that, “… demand for 4G enabled enterprise notebooks encountered temporary headwinds as the industry transitions to a new processor platform.” Image source: Sierra Wireless.

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Sierra Wireless in an Internet of Things pure play so there’s not many companies doing exactly what it does, but there’s still plenty of competition. Gemalto, Telit Communications, U-blox Holdings, and Huawei pose a threat in the space, but bigger tech companies are also moving into the IoT. This means Sierra will need to watch out for tech leaders like Qualcomm and Intel. Image source: Sierra Wireless.

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Remember that Sierra Wireless makes the vast majority of its revenue from OEM Solutions, but its gross margins in the segment are much lower than they are in Enterprise Solutions. While the company’s Enterprise Solutions had fantastic revenue growth in Q3 2015, investors need to keep an eye on this segment to see if it continues to expand. With gross margins at about 49% for Enterprise Solutions (compared to about 29% for OEM Solutions) the company needs more revenue coming in from Enterprise. Enterprise Solutions margins aren’t moving in the right direction either — they’re down from 53% last year to 49% now. Image source: Sierra Wireless.

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