Clearly a hot issue on this board. I've considered buying ITRI as it fell as it clearly has a huge edge on installed legacy metering base which ELON doesn't have. It also is a Wall Street darling because of these contacts and it has positive earnings. Now it seems to be getting on board with technology providers which can strenghten its offerings in the AMI space. Here is why I've held off on buying ITRI and loaded up on ELON which may, or may not, prove to be a good decision. I would like to hear where where my arguments are weak.
(i) ELON created Lonworks 20 years ago to allow M2M communication. M2M communication is the basic DNA in the smart grid and requires a networking background to master.
(ii) In 2001 ELON created the first fully functioning AMI system. At the same time, ITRI was creating RF driveby meters. ELON understood that AMI was a critical enabler in the home LAN market space well before any of its competitors were sniffing the potential. On the last Analyst call, ELON's CFO states that ITRI's European metering company is a "non-factor" in the European AMI market.
(iii) In 2007 ELON creates the networked street lighting market using its power line technology. By the beginning of next year it will be clear to all that ELON is the defacto leader in this industry.
Late 2009, ELON executives are stating that the market for DLC technology is at a "tipping point" where utilities are becoming more convinced of the value of the NES system. ELON executives are making the case that RF technologies are unneccessarily costly for utilities, require the utilities to get into the communication business and manage that network and are unproven at scale. The NES system relies on the existing wireless infastructure combined with the utilities existing wires to communicate. ELON claims that more information is gathered by their system then RF and it is reliable up to 99.7% of the time on first reads. Oh yeh, the system is capable of communicating with Zigbee devices as well as most other networking standards.
I'll sum up my decision with a question posed by ELON's CFO at the same analyst call mentioned above, "do you think it is easier for a metering company to become a networking company or a networking company to make a meter?". I believe it is more difficult for companies like GE an ITRI to quickly turn their sights on becoming networkers. Given this, and ELON's history of innovation, I believe the fortunes of these two companies are about to change.
As all investors should, I would like to hear contrary thinking which identifies where my logic is lacking. The minute I'm too stubborn to admit I could be wrong is when I need to get out of the markets altogether.
Another benefit for ELON is an installed base of smart devices that use the tech already installed in buildings. Further, I agree ELON kills everyone right now in street light apps. Even boxes like McD's are using LON tech in the building. The only detractors for buildings are this ASHRAE crowd which push bacnet. They have been successful in derailing saturation of LON in buildings.
However, if the ELON power play moves through and it's more convenient for services to have LON in the building.... we will see. Even Echelon has a Zigbee add-on for the home.
Great post! ELON is the Smarter Smart-Grid Play here, and ELON has a higher chance of doubling to $30 than Itron has of hitting $120.
If Itron was smart, they would of made an offer for ELON instead of that European metering company, but I think ELON's tech is over their head, they're scared, and Itron risks becoming an extinct company 5 years from now.
I am amazed that people like Cramer who are well aware of ELON, continue to talk about Itron as some Holy Grail of the Smart Meter market, cause they are clearly playing catch up.
For ex. ELON has rolled out the largest AMI system in 30 million homes for Enel in Italy, and has done roll-out in most all of the early adopter "clog countries", these are countries that know technology well, Finland, Norway, Nederlands, Sweeden, Denmark...and Germany & France.
ELON's tech such as their powerline tranceivers can be found in all 7-11's convenient stores in Japan, thier tech can be found on BART(Bay Area Rapid Transit), New York Transit Authority has made thier tech the defacto standard, event the fountain at The Belagio on Las Vegas is controlled by ELON's Lonworks tech, Audi's factories, Sears Tower, the largest building in Asia, the last 2 or 3 Olympic stadiums have been networked using ELON's tech.
And I firmly believe Cisco or Siemens will get into a bidding war for ELON. GE, UTX, Honeywell, Johnson Controls, would also be decent suitors, as well as IBM, however IBM would rather get the back end business, rather than support the best tech, they'd rather bat clean-up and work with all Smart Meter players.
Well, I see Athertonmuscle head is back. Has tried pumping Elon numerous times in the past. Problem is Elon is a small company that has some insignificant unique applications, i.e. street lights and McDonalds load control, that has little to do with the smart metering technology necessary to control the grid and provide metering services for major utilities. Wow, looks like he is really excited promoting Itron to buy Elon: "If Itron was smart, they would of made an offer for ELON instead of that European metering company,” Itron may very will buy Elon, but not a $14.00.