Just a few weeks ago, the company completed its purchased a company called In Motion for $21 million. The company made rugged in-vehicle mobile routers and a secure platform to manage connected devices. Because of the acquisition, Sierra said it now has "the products, channels, and technology needed to offer the most comprehensive suite of solutions to our customers and expand our market share in high growth, high value markets such as public safety and commercial fleets." In 2013, In Motion generated $15 million in revenue, and its gross margin was 50% of revenue.
In addition to its M2M leadership position, the company just launched a new open source platform named Legato. The new platform allows companies to develop applications for machine-to-machine devices and manage them from Sierra Wireless' cloud.
Both Legato and the In Motion acquisition are aimed at adding to the company's machine-to-machine offerings, while shoring up its leadership position in the segment. And with the company selling its AirCard business, it's better positioned to focus on Internet of Things.
A few things to consider
As the Internet of Things grows, costs for connected devices will fall and hurt Sierra's margins. In fiscal 2013, gross margin was at 30.1%. Investors should continue to keep tabs on how Sierra is staying ahead of other M2M businesses, and how that impacts the cost of wireless modules. Another thing to consider is that Sierra isn't profitable right now, although that should change in fiscal 2014. If Sierra can't expand into new areas and generate more revenue, the company's prospects could turn.
Digging deeper into Sierra Wireless
The Motley Fool's put together a free report on Sierra Wireless and why it's poised to make big gains in the Internet of Things. Investors looking for a pure machine-to-machine play can be sure Sierra Wireless is ahead of the competition. To find out more of the risks and rewards for this stock, download the free report now.
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