Despite having two good quarters, Sierra Wireless (SWIR, Financial) has plummeted over 40% this year. The stock's underperformance is quite surprising as Sierra has performed nicely and is growing its presence in the Internet of Things market. The company has acquired many companies to accelerate growth, and it is continuing down the same road as the company recently moved in into a final agreement to acquire MobiquiThings. The transaction is projected to close in August 2015.
The company believes that the purchase of MobiquiThings will further accelerate its device-to-cloud strategy and is extremely complementary to its acquisition of Wireless Maingate accomplished in January. MobiquiThings has a vastly cutting-edge core network and technology platform, as well as robust image with swiftly escalating customer base. MobiquiThings will be strongly integrated with Maingate and company’s AirVantage cloud to deliver a leading-edge managed connectivity facility for pan-European clients.
MobiquiThings is an MVNO aimed on managed connectivity facilities for the Internet of Things, with broad segment experience comprising of, the energy, transportation, security, retail, and healthcare markets. MobiquiThings has an exclusive technology platform that contains MobiquiSIM, a dynamic attachment service that offers its clients with superior radio access network coverage and industry prominent QoS, as well as SIM provisioning and management for 2G, 3G and 4G connectivity. The company has more than 75 customers and more than 100,000 wireless connectivity subscribers.
Sierra Wireless has approved to buy all of the shares of MobiquiThings for €14 million in cash, plus a performance-based earnout formula that prolongs into 2017.
More positives
In addition to M&A, Sierra Wireless also has decent growth opportunities in the prosperous 4G-LTE market. The company recently came up with the next-generation of its AirLink Gateways. The AirLink ES450 4G enterprise gateway and the AirLink GX450 4G mobile gateway provides support for a wider range of LTE frequency bands, making them capable for numerous networks worldwide.
On the other hand, an additional positive for Sierra Wireless is its presence in the automotive industry. On the last conference call, the company's management appealed that its upcoming next-gen smart modules grounded on the Legato embedded software platform are obtaining outstanding traction in the automotive market and this can act as a long-term tailwind for the company.
Sierra's skill to obtain new OEM customers in the automotive market to increase its revenue and earnings as the automobile industry is developing. In 2014, the auto industry topped its best year for sales in the U.S. since 2006 and is projected to carry on the upsurge to over 17 million units in 2015. Sierra Wireless has a large client list that comprises of Ford, Toyota, Tesla, BMW and others, and its latest design wins should aid the company benefit from the developing automobile market.
Conclusion
Sierra Wireless is making smart acquisitions to gain traction in cloud and IoT market. The company is also benefiting from the growing automotive market. Given the prospects, I find Sierra Wireless’ underperformance quite surprising. Long-term investors should buy this stock at present prices.
