NEW YORK (AP) -- Shares of Sierra Wireless Inc., which makes wireless broadband modems, jumped Tuesday after it said it would sell the division that makes accessory modems.
THE SPARK: Late Monday, Sierra Wireless said it would sell its AirCard business for $138 million in cash to Netgear Inc.
THE BIG PICTURE: Sierra Wireless' remaining business is in so-called "machine-to-machine" connections: Modems that are built into devices like smart electricity meters. It expects to use some of the proceeds for acquisitions in this space.
THE ANALYSIS: Focusing solely on the machine-to-machine business should benefit Sierra Wireless, said Steven Li, an analyst at Raymond James. The company is a market leader in this field and is well positioned to gain from the trends toward the "Internet of Everything," where more devices are connected. Machine-to-machine modules are more profitable than the accessories business, he noted.
He raised his price target to $14 from $11.25, keeping his "Outperform" rating.
SHARE ACTION: Shares of the Canadian company rose $1.55, or 17 percent, to $10.71 in afternoon trading. The day's high of $11 was the highest price since mid-2011.
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