Why Sierra Wireless Is a Winner

Sierra Wireless (SWIR) announced fourth quarter ended December 31, 2015 total revenue of $144.8 million, down 3 percent year-over-year from $149.1 million during the same period last year. Going forward, the company has also provided revenue guidance for first quarter of 2016 and estimates revenue to be in $135 million to $145 million range.

Sierra Wireless declared fourth quarter of 2015 net loss of $0.383 million or $0.01 of loss per diluted share compared to a net loss of $1.7 million or $0.05 of loss per diluted share in fourth quarter of 2014.
Also, the company has provided earnings guidance for first quarter of 2016 and estimates adjusted earnings per share to be somewhat negative to somewhat positive.

The key wireless solutions provider reported continued year-over-year decline in its top line mainly due to weaker demand at some key OEM customers, reflecting greater caution that needs to be taken with some customers during unstable global macroeconomic conditions.

Sierra is continuously delivering year-over-year expanding annual revenue, adjusted EBITDA and operational earnings, driven by superior cost control efforts being undertaken by the company throughout its key operations.

Driving strong growth

The advanced wireless technology provider has impressively grown its fourth quarter of 2015 cash and cash equivalents to $93.9 million, up 6 percent sequentially from $88.4 million in third quarter of 2015 and with no debt, giving significant room to Sierra for delivering attractive long-term company growth while offering impressive shareholder returns.

Sierra Wireless is continuing to illustrate solid year-over-year financial results with significant cash flow from operations and minimal total debt, driven by ongoing cost optimization initiatives of the company which are expected to drive sustainable long-term company growth.

The wireless connectivity provider is believed to be the top player in the market segment for cellular devices designed for the IoT with approximately 35.0% of cellular embedded module revenue market share for 2014 with the company. In addition, Sierra is also expected to be the industry-leading enabler of innovation in wireless technology including, advanced 4G services (LTE, LTE-A, LTE-M), superior embedded app platforms, tiniest scalable modules, MangOH™ Open Hardware and over 400 patents.

Sierra Wireless is expected to be extremely well-positioned in all the major IoT segments with a robust international base of strategic blue-chip customers. These key segments include, automotive and transport providing services such as automotive OEM, fleet management, user-based insurance and toll collect, energy and industrial segment allowing smart metering, smart grid, industrial equipment and public infrastructure, enterprise segment enables sales and payment, distributed enterprise, mobile computing and surveillance and finally, residential and healthcare segment provides services like home security, residential automation, health diagnostics and wearables.

The already strong market position of Sierra Wireless among the global wireless services providers is further strengthened by hugely diversified products and services portfolio of the company, attracting several of the key global clients and thus, positioning Sierra for sustainable long-term growth.

During 2015, Sierra Wireless notably grew its cloud and superior connectivity services business segment by strategically concluding three well-planned connectivity acquisitions including, MobiquiThings SAS, Accel Networks LLC and Wireless Maingate AB coupled with the acquisition of an end of life 2G module in huge volume to enable long-term prospective sales of some legacy products.

Making smart moves      

Sierra Wireless is slightly realigning its growth plans for delivering sustainable long-term growth and attractive value creation by strategically expanding the cloud and connectivity services, enterprise solutions business segments while lowering the revenue contributions from OEM solutions business segment. Moreover, Sierra Wireless is focusing on delivering growth both through the optimization of its daily operations as well as through strategic mergers and acquisitions. The company is expanding gross margins by following an accretive shift of focus on the key business segments and thus, targeting longer term gross margin and operating margin of over 35% and over 10% respectively.

Although, Sierra Wireless is targeting to achieve solid overall company growth both organically and through acquisitions but, this approach is further pushing the company into a debt trap which is also expected to grow further as Sierra continue to offer attractive shareholder returns through planned share repurchase programs, making it devoid of cash and estimated to be forcing the company to minimize its operational expenditures which might impact growth.


Overall, the investors are advised to “Hold” their position in Sierra Wireless Inc. considering the company’s notably strong long-term growth prospects being supported by its robust total cash position of $93.94 million with no debt till date. The PEG ratio of 1.07 also indicate healthy company growth. However, the profit margin of -0.44% seems disappointing for the short-term investors.
Published on Mar 23, 2016
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

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