Is Sierra Wireless Still a Bubble?
Sierra Wireless (SWIR) was once touted to be the next big thing in the Internet of Things market. However, the hype surrounding the stock has since died and Sierra Wireless has lost over half of its value since then.
Sierra Wireless reported its fourth quarter and full year 2015 results on 4th February 2016. The company did not have a good fourth quarter. The revenue was slightly below the company guidance of $ 148 to $ 151 million as well as many analysts’ estimates. The non-GAAP EPS also fell short of the company guidance of $ 0.09 to $ 0.11 per share.
SWIR split its business into three segments this quarter: viz.
“In the fourth quarter of 2015, our revenue was slightly below our expectations, as we experienced softer demand at select OEM customers. We believe this reflects increased caution on the part of some customers in the face of an uncertain macro-economic environment.” said Jason Cohenour, the company President and CEO. The macro weakness in markets may hurt customer demand for some of the IoT (Internet of Things) projects. In addition, the management said that they had program launches in 4Q which contributed to lower margins.
The company is focusing on driving growth with outsized contributions from both its Enterprise Solutions and Cloud and Connectivity businesses, which currently account for just 14 % of consolidated revenue. These are high-margin businesses and must contribute much more (approximately 30 %) to the company’s consolidated revenue if it has to reach the targeted $ 1 billion in annual revenue over the next few years.
In the OEM segment, Sierra continued design win success in Networking, Energy, Mobile Computing and Fleet. Further, the selection of its LTE-A module by Dell for enterprise laptops and the first LTE Category 1 device win with Maestro for fleet tracking was also announced by the company.
In the Enterprise Solutions segment, the company launched the new AirLink RV50 gateway. RV50 is Sierra’s latest 4G gateway and supports industry-leading power management, dual SIM capability and is cloud managed using its AirLink management application hosted in its AirVantage cloud.
Sierra has a fully integrated team comprised of Maingate, MobiquiThings, Accel and AirVantage team members engaged in implementing a single unified platform. The platform’s first release is expected to take place in the coming months. Such a platform will enable its customers to manage their devices and their other “things” faster and more cost-effectively than ever before.
The Sierra Smart SIM supports multiple mobile networks and can automatically select the appropriate network to connect to anywhere in the world, is also soon to be launched. This SIM is based on patented technology acquired with MobiquiThings.
Sierra also expects sales to "gain strength over the course of the year" by starting commercial production on new customer programs and launching new "industry-leading products and solutions."
Irrespective of Sierra Wireless’ performance over the past few quarters, I think the stock has upside potential due to the reasons mentioned above. Internet of Things still represents a great opportunity, making Sierra Wireless a buy.