The Internet of Things or “IoT” was once a little known segment of the tech sector, but it has been emerging into the spotlight over the past couple of years. This technology is the software and hardware that enables devices, cars, machinery, and many other items to communicate with each other.
Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR) has emerged as one of the industry’s top players, but things may be changing as BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is pushing deeper and deeper into the IoT market.
Could the IoT save Blackberry?
Recently BlackBerry unveiled its plans to expand its IoT capabilities through its QNX operating system. This will allow companies to use Blackberry’s system to track things such as shipping containers and medical devices. A potentially large market could be realized when this technology is coupled with vehicles, as fleet managers and companies could use the technology to monitor usage in real time. This isn’t a farfetched concept as the hardware is already preinstalled in 50 million vehicles.
BlackBerry sees this expansion as a natural step as it is borrowing from its device management software and security infrastructure to create its IoT infrastructure. If successful the added revenues from IoT products could help mitigate losses from BlackBerry’s hardware division.
Sierra Wireless acquisition
Meanwhile, Sierra Wireless is continuing to shore up its market share following the completion of the US$90 million acquisition of Swedish firm Maingate. This will give Sierra Wireless an additional 500 customers in Europe with a combined 500,000 devices on its network. This acquisition will also add a modest $6 million in EBITDA per year to the company’s books.
Maingate was founded in 1998 and is one of those rare companies that specializes in machine-to-machine and cloud-to-device communications, making it a natural fit for Sierra Wireless. While this acquisition is positive news, it will take much more than this to hold off a sizeable push from BlackBerry.
Many people are wary of tech stocks because of how fast technology seems to change these days, but with the Internet of Things and machine-to-machine technology it is less about hardware and more about the structure beneath the technology. The industry is projected to grow tenfold over the next five years as more and more devices become connected.
When we look at the individual stocks, we see that Sierra Wireless has enjoyed a year of exponential growth on the TSX. On the other hand, BlackBerry continues its roller coaster ride through the stock market, and its price recently dropped by 20% following the quashing of rumors of a takeover by Samsung. This just highlights the fact that it could still be some time before BlackBerry could see its stock stabilize.
Currently, Sierra Wireless remains as the best option in the short term for investors, while BlackBerry could use the Internet of Things to completely rebrand itself, if its pockets are deep enough.
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