"Fool contributor David Meier highlights Sierra Wireless, which makes chips and equipment that is making a reality of the "Internet of things." David believes Sierra Wireless (NASDAQ: SWIR ) is a great way to play the proliferation of sensors, which is a huge trend for investors to be aware of."
M2M is just another catch phrase to describe connecting devices to other devices. Sierra Wireless offers OEM embedded wireless modules, gateway and modems, and solutions that connect devices to the cloud. In the second quarter, Sierra Wireless grew revenue in each of these segments. Devices supporting 4G and LTE are the next areas experiencing stronger demand. Solutions made by Sierra Wireless support this, but this is not the only reason why investors are bullish.
The cloud solutions platform is unique, and holds the promise for growth. Sierra Wireless sells these solutions under the AirVantage brand. An example of an offering is its service for utilities like water purification companies that monitor their equipment in real-time. These firms require system uptime for water treatment services. Sierra Wireless helped customers monitor water purification levels by using AirVantage to monitor water quality through the cloud.
Strong Balance Sheet Excites Investors
Sierra Wireless plans to grow by acquiring other companies, thanks to plentiful cash levels and no debt. The divesture of AirCard added $120.7 million in the second quarter to Sierra Wireless’s balance sheet, up from $55.9 million in Q1.
Sierra Wireless improved its margin profile in the last 5 years. Organic growth and acquisitions helped the company grow revenue from $158 million in 2008 to $421 million in the last 12 months. The moat will get bigger through merger and acquisition activities. The competitive edge is improving in North America, but Europe continues to be a challenge. The PC OEM market is also another area of continued difficulty. Year-over-year, this segment declined, although Sierra Wireless benefited from enterprise launches for PC OEM in Japan