Sierra Wireless (SWIR, Financial) illustrated superior fourth-quarter results and acquired Wireless Maingate by December end, adding to its already robust portfolio of wireless offerings including data management services for the Internet of Things.
The growth drivers
The internet of Things is believed to be the greatest innovation in the technology industry as of now, and Sierra has successfully capitalized on this key growth opportunity by supporting machines in sharing information among themselves through cellular wireless connections.
Sierra is developing innovative products to serve the machine to machine connectivity market and the release of bundled products is expected to enhance cross-selling prospects.
Moving ahead, Sierra is expanding into several new areas of the machine-to-machine connectivity market, enhancing its chances of capturing key growth.
Key design wins
Sierra’s key design wins include Itron for smart metering. Itron targets utilizing AirPrime embedded modules of Sierra in its open and intelligent smart grid solution for utility customers worldwide. In addition, Sierra entered into a key contact with Octo Telematics in Insurance Telematics for offering wireless connectivity for user-based insurance solutions in Europe. Further, Sierra has marked design wins in the connected car market in North America, Europe and Asia.
Sierra is mainly focused on market diversification and has signed a deal with the Denver Regional Transportation District for leveraging its In Motion mobile gateway solution to provide mobile access for enabling the automatic vehicle location of 1,100 buses and allowing smartcard fare payments.
The Westminster Police Department of Colorado has also chosen the In Motion mobile gateway solutions for allowing mission critical cellular connectivity in police vehicles. This gateway solution is expected to allow police departments to connect several other devices to their in-vehicle systems for major applications such as video surveillance, license plate recognition and electronic ticketing.
Sierra primarily benefited from the 18% organic growth of its business and significant contribution from the acquisition of In Motion technology and AnyData businesses during the quarter.
These key strategic acquisitions are believed to accelerate the business for Sierra Wireless, enabling it to diversify the product options and service offerings.
Sierra witnessed widespread growth in its primary market divisions, including mobile computing, networking, transportation and automotive. Sierra is leading next generation technology market by offering superior 3G and 4G networking services.
Sierra’s futuristic smart modules designed on its Legato embedded software platform are receiving solid market traction particularly in automotive markets.
Strong product portfolio
The accelerated acceptance of innovative product and service offerings of Sierra are forecasted to bring in significant revenue for the company and thus enhanced shareholder returns.
Sierra’s Legato embedded software platform coupled with its high powered multi core hardware platforms is gaining significant traction among major developers and key OEMs.
Further, its innovative HL line of critical products is constantly strengthening its position in key market segments, like transportation and energy. The new scalable and flexible HL product line is allowing it to seize key design wins and expand market share.
The uniquely designed technology platforms along with the major product launches, highly demanded in the market is estimated to enable Sierra to lead the competition.
In the quarter, public safety and regional transit markets proved to be the highest contributors to revenue growth. Sierra also captured many new customer wins for the quarter, including in the retail, utility, power systems and public safety segments.
Sierra reported significant new product launches during the fourth quarter, including its superior AirLink gateways. Both the innovative ES450 enterprise gateway and GX450 mobile gateway offer support for widespread LTE frequency bands, allowing customers to install only one gateway solution throughout various regional markets.
The success of Sierra in capturing several new customers for different operating segments and the release of innovative products during the quarter is forecast to help the company in expanding the business and gain popularity among the key investors.
Sierra is particularly benefiting from the ongoing transition from 2G to highly sophisticated 3G and 4G technologies.
The consensus estimate among 21 polled investment analysts evaluating Sierra Wireless, Inc. recommend investors to hold their position in the company owing to the decline in the analyst investment sentiments in August 2014. The earlier consensus estimate recommended Sierra Wireless to outperform the market.
Conclusion
Overall, the investors are advised to invest into Sierra Wireless, Inc. looking at the impressive valuation levels with forward P/E of 21.35. The PEG ratio of 0.31 represents significant company growth. However, the profit margin of -3.07% poor and suggest no profit but loss. Still, the company’s operations are estimated to be robustly supported by a solid balance sheet with total cash of $207.06 million with virtually zero total debt.
