On the global scale, China and US are tipped to become the largest markets for M2M by the end of 2022.This is mainly due to consistently growing technology awareness coupled with a rapid decline in the availability of human labor, which is needed for the execution of various critical tasks. This further underpins my bullish view on Sierra Wireless, Inc. (USA) (NASDAQ:SWIR), as the company generates the highest percentage of its revenues through the Asia-Pacific region.
The charts clearly exhibit a promising future for the M2M industry, as it is expected to grow with a CAGR at around 26.08 % from 2012 to 2016.
At present, in the Wireless M2M Module market Sierra Wireless enjoys the lion’s share of the global market, as it holds 34.4% in market share. This is followed by Gemalto and Telit at around 23.5% and 18.5%, respectively. The remaining market is addressed by Novatel Wireless Inc (NASDAQ:NVTL), Option and U-Blox.
Novatel Wireless Inc (NASDAQ:NVTL) has a growing presence in the Wireless M2M Module market, thought it is relatively smaller than Sierra Wireless. During the first quarter of 2013, Novatel Wireless Inc (NASDAQ:NVTL) experienced robust growth in both its business verticals. It is noteworthy that Mobile computing and M2M revenues increased sequentially by 18% and 52%, respectively. In addition, during the fourth quarter of the previous fiscal year consolidated revenue also reported a 22% increase.
The company is well positioned to establish itself as a key player in the industry, as it recently launched Mifi 2, which is the first mobile hotspot with a touch screen display and the most feature-rich mobile hotspot in the market.
Relative to Sierra Wireless, Novatel’s market share is much smaller; hence, it does not compete with Sierra in the mainstream. Furthermore, Sierra Wireless has adopted a highly aggressive M&A strategy in order to outcast smaller companies such as Novatel.
Nevertheless, Novatel has now shifted its focus on strengthening its core-competences and innovating through investing heavily in R&D; therefore, I still keep an optimistic view on its stock.
Digi International Inc. (NASDAQ:DGII) is another up and coming player in the wireless communications space. The company is completely focused on expanding its footprint in the international wireless space as, it recently initiated strategic partnerships with Freescale and Intel Technology.
It is noteworthy for potential investors that the company has performed consistently over the last few years, as it delivered forty one profitable quarters in a row.
However, in contrast the revenue generated during 2012 declined marginally from the previous year, predominantly due to lower one time project sales and general economic weakness in the European markets. In addition, its “Rabbit” product line, which entered the mature cycle ahead of its time, further contributed to the declining sales.
Nonetheless, the company has now strengthened its portfolio of M2M offerings by adding wireless design services enabling its clients (OEMs) the flexibility to add wireless capabilities to new and existing products and develop cloud enabled services at a more accelerated pace.
Foolish assessment
Sierra Wireless is a market leader in M2M Modules by a considerable margin. As the company is expected to report robust organic growth and form key strategic alliances from time to time, I believe Sierra Wireless is primed for a strong performance in the following quarters.
Since the company divested from the AirCard business, it clearly exhibits its focus on developing and further penetrating the wireless M2M market. With such a focused approach the company will steadily enhance its expertise in order to improve product performance, resulting in a bolstered bottom line.
In my opinion, with the global wireless market poised for exponential growth and well on its way to becoming a trillion dollar market, Sierra Wireless is a worthwhile investment.
The article Sierra Wireless Is Set to Grow Exponentially originally appeared on Fool.com.
Ashit Gulati has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ashit is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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