By Chris Neiger | More Articles | Save For Later
April 9, 2014 | Comments (0)
It's not easy finding stocks that are on the cutting edge of their industry, publicly traded, and poised for more growth. Sierra Wireless (NASDAQ: SWIR ) is a quiet tech company that's leading the machine-to-machine communication market, also called the Internet of Things, and it's upside can't be overlooked.
Although Sierra has been on Wall Street since 2000, its business has shifted since then, with some of its technology now powering innovations in Tesla's (NASDAQ: TSLA ) Model S. And as the company's focus has shifted over the years, so has its potential.
So, Sierra does what exactly?
Let's keep this simple. If the Internet of Things, or IoT, is the connection of everyday objects to the Internet, then Sierra Wireless is the company that makes that connection possible. IoT will allow cars to communicate with each other, vending machines to tell companies when they need to be refilled, and energy systems to manage power usage on their own. Sierra's wireless modules and cloud management services both allow formerly non-connected devices to connect to the Internet and be easily controlled.
Tesla's Model S is a perfect example of a connected car, in which Sierra provides the 3G-connection module that allows the car's infotainment system to tap into AT&T's wireless network. Tesla can then access data about the car's systems and make upgrades and adjustments based on feedback from the vehicle. Tesla is clearly a leader in automobile connectivity, but it's not the only company moving in this direction. Other car companies such as Ford, Toyota, BMW and others use Sierra's technology as well.
But cars aren't the only thing Sierra puts its modules into. Nespresso's coffee makers also have Sierra's connected devices, as do energy systems, wireless payment devices, and much more.
The company's goal is to take away all the technical aspects of the connecting devices to the Internet of Things, so that companies can focus on making their products. And Sierra Wireless is in a great position to do it.
Right now, Sierra Wireless holds about 34% of the embedded cellular M2M module business worldwide.
Although it has worldwide IoT reach, the company is still nimble with a market cap under $700 million, $180 million in cash, and virtually no debt. In its fiscal fourth quarter 2013, ending in February, Sierra posted revenue of $118.6 million, up 8.4% year over year. Revenue for the full fiscal 2013 year hit a record high of $441.9 million, up 11.2%.
The upside for Sierra is that it recently sold its AirCard business, which was dragging down its focus on the Internet of Things. Sierra's CEO, Jason Cohenour, said in an earnings statement that:
We achieved record revenue in the fourth quarter, closing out a year in which we delivered solid operational results, sold our AirCard business, and began putting the proceeds to work on acquisitions that extend our leadership position in M2M.