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Could BlackBerry Ltd. Buy Sierra Wireless Inc.?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) to merge with Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR) and create global IoT powerhouse!”

Wouldn’t that be a great headline?

Well, maybe it’s a bit over the top, but the idea of getting these two Canadian IoT hotshots together under one roof might actually make some sense.

BlackBerry CEO John Chen has repeatedly stated that he wants the company to be a key player in the development of the Internet of Things. For some time, the experts in BlackBerry’s QNX group have been hard at work creating what is now known as the BlackBerry IoT Platform. The cloud-based system is designed to enable companies around the world to easily engage IoT in a secure and scalable way.

In January, BlackBerry unveiled a new system designed to help fleet managers efficiently monitor their cargo containers. BlackBerry will provide its trucking customers with a device that contains Wi-Fi connectivity, a microprocessor, a cellular radio, and sensors. The unit will transmit critical data back to the customer using BlackBerry’s secure cloud-based platform.

IoT fans view the transportation industry as a key area where companies like BlackBerry can really have an impact.

Here’s where the story gets interesting.

Sierra Wireless Inc. is already the market leader in machine-to-machine (M2M) wireless communication, and it also has a strong transportation focus. Sierra currently offers the industry’s most comprehensive portfolio of 2G, 3G, and 4G embedded modules and gateways that are integrated with its M2M cloud services.

Through its AirVantage product, Sierra provides fleet-management solutions to companies that want to locate, monitor, and track their mobile assets.

Sierra Wireless has built its dominant position in the M2M space through strategic acquisitions. The most recent is the purchase of Sweden-based Wireless Maingate, a company that provides M2M connectivity and data management services to clients that want to avoid being “locked-in” by a single mobile network operator.

The data that companies want to access using M2M technologies must be transmitted securely, efficiently, and in a way that is cost-effective. This is why an IoT platform should be both scalable and easy to engage. The world’s best-known provider of secure wireless communication is arguably BlackBerry, and while Sierra has scalable solutions, a merger or partnership with BlackBerry could be a smart way to go as the IoT market expands.

Is a BlackBerry takeover of Sierra Wireless feasible?

Sierra Wireless has a market cap of $1.4 billion and no debt. BlackBerry has $1.5 billion in cash and cash equivalents, according to the most recent earnings report, and a market cap of $6.5 billion. Even at a significant premium, BlackBerry should have the means to do a deal.

Would it make sense?

Gaining traction in the new IoT world will require making acquisitions, like the ones Sierra Wireless has completed over the last few years. The challenge for both BlackBerry and Sierra Wireless is their size. Both are very small companies compared to their much larger American peers, who are also keen on dominating the IoT space and have the financial firepower to attract top talent and buy up new players.

The combination of Sierra’s hardware capabilities with BlackBerry’s security expertise would certainly be an interesting mix. Together, the two companies could create attractive end-to-end IoT solutions that would avoid the bottlenecks often encountered when companies try to integrate products and software systems from different suppliers.

Whether or not BlackBerry and Sierra are interested is a whole other issue, but it would be nice to see a couple of Canadian tech survivors pool together to take a run at the IoT market, instead of independently disappearing in the next few years as mere tuck-in acquisitions for the global behemoths.

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Fool contributor Andrew Walker has no position in any stocks mentioned. David Gardner owns shares of Sierra Wireless.

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