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Microsoft Makes an IoT Push With a New Acquisition

Billy Duberstein, The Motley Fool

The largest tech investments today are being driven by a few huge megatrends: artificial intelligence, cloud computing, 5G communications, and the Internet of Things. All large cloud players are chasing opportunities in these areas, and Microsoft (NASDAQ: MSFT) just made a significant move to bolster its IoT offerings.

On Thursday, Microsoft acquired Express Logic, a California-based company that makes real-time operating systems for tiny microcontrollers inside IoT devices. These microcontrollers -- tiny, low-power computers designed for a specific task -- allow systems to run real-time applications. In the context of the Internet of Things, this can mean machines ingesting data and then processing it in real time (or close to it) -- perhaps even reacting as well -- without needing directions from an outside party.

One year ago, Microsoft announced that it would be investing $5 billion over four years specifically in the Internet of Things. One year in, the company has already developed some impressive features internally, such as Azure IoT Central, which allows companies to quickly deploy IoT software across their organization; Azure Sphere, an end-to-end security solution for IoT devices and the cloud; and geospatial and mixed-reality design tools fed by data from IoT devices. So how does Express Logic fit into this equation?

A man works a tablet in front of animation with icons suggesting internet of things.

Image source: Getty Images.

ThreadX

Express Logic is an early leader in IoT, having been around since 1996. Its ThreadX real-time operating system (RTOS) is already embedded in 6.2 billion devices across the world. Though Microsoft already has a similar product in its Sphere operating system, ThreadX appears to be a clear leader in "constrained" devices. Constrained devices are those that have extremely small storage capacity and power, such as light bulbs. ThreadX technology provides safety and security to devices with low battery power and as little as 64 KB of flash memory, as well as much larger connected devices.

Microsoft said it is now recommending ThreadX to customers for these resource-constrained devices and remote environments over Azure Sphere, though it maintains a recommendation of Sphere for devices that need to be highly secure and which have more direct connections to the cloud. Therefore, it appears Microsoft is filling a product gap in its IoT portfolio.

Since ThreadX is obviously a very popular product, the acquisition may also spur additional customers who like and use ThreadX to opt for the complete Azure suite over potential competitors. Microsoft will work with the Express Logic team to seamlessly integrate ThreadX devices with the Azure IoT Hub. The companies will also work to allow the two types of devices -- Sphere and ThreadX -- to communicate with each other for deployments requiring edge computing (processing that happens at the device level, without being sent back to the cloud).

Finally, the acquisition is also a bit of an "acqui-hire" for Microsoft. Express Logic only had 38 employees listed on LinkedIn, and that team will now come over to Microsoft's research and development team in order to help the software giant continue its multi-year IoT journey.

Microsoft looks to be an IoT leader

According to Gartner, there will be over 20 billion connected devices by 2020, and all of the big three cloud leaders are in a battle for Internet of Things supremacy, since the cloud will be the main platform where IoT data will be stored and analyzed. However, as Microsoft's purchase has showed, edge computing will be an important differentiator for these full suites of IoT solutions.

In a recent blog post, Microsoft provided an impressive list of current IoT customers and described how they're using these new capabilities. For instance, Starbucks is using Azure IoT to automate many tasks for employees, generate beverage consistency, and test equipment for predictive maintenance. Volkswagen will be using Azure as its official automotive IoT cloud from 2020 onward. Other customers include heavyweights Chevron, which is using Azure IoT in its refineries, and Walmart, which uses Azure IoT to monitor its refrigeration systems and HVAC systems.

A lot has happened already at Microsoft with IoT, but Microsoft is still only one year into its four-year investment plan. The Internet of Things race will be a long one, and it's just getting started. It looks as though Microsoft's acquisition of Express Logic is another moment in that long journey.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Billy Duberstein owns shares of Microsoft and SBUX. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Microsoft and SBUX. The Motley Fool recommends IT. The Motley Fool has a disclosure policy.