IoT, or Internet of Things, is the concept of communicating with and between multiple devices or things that have historically lacked any connectivity. That connectivity is used to accomplish what are otherwise mundane tasks and, in theory, make our lives easier. Some examples of popular IoT scenarios that were unheard of just a few years ago include having your vehicle message you about an issue, such as low tire pressure or a window being left open when rain is in the forecast, and more intriguing uses, such as controlling your lights and electronics via voice control.
Two of the biggest companies leading the charge in this area are BlackBerry (TSX:BB)(NYSE:BB) and Sierra Wireless (TSX:SW)(NASDAQ:SWIR), but which of these two represents the better investment at this point?
Let’s take a look at both and try to answer that question.
The case for BlackBerry
BlackBerry is the stock everyone loved to hate. After losing a commanding market share to both iOS and Android devices, BlackBerry adopted Android, stopped developing hardware directly, and turned its focus to supporting its enterprise clients, security, and working on a variety of IoT product concepts, including BlackBerry’s asset-tracking system, BlackBerry Radar, and QNX — the highly modular, scalable, and secure operating system that the company hopes to one day power the autonomous driving market.
To the unsuspecting investor, that’s a tall order to fill, especially considering the number of Silicon Valley tech companies that are all vying for that same goal, but BlackBerry has a major advantage or two over its peers.
QNX has an established history of providing a stable and secure operating system for a myriad of different segments of the economy, from the aerospace industry and medical equipment to nuclear power plants and mission-critical infrastructure systems around the world. Also noteworthy is the fact that QNX is already installed in over 120 million vehicles around the world, powering the infotainment systems.
BlackBerry announced results recently that may have finally silenced its critics. Revenue in the most recent quarter hit US$210 million, representing a drop over the US$238 million reported in the same quarter last year. That drop in revenue was more than made up for by the impressive 126% improvement in net income, which topped $43 million in the quarter. A key component of BlackBerry’s drive to success has been a razor-like focus on software and services, which now accounts for the bulk of BlackBerry’s revenue and is over 80% recurring.
The case for Sierra
In recent years, Sierra Wireless has become a pure-play IoT company that just screams of long-term potential. The company develops the embedded modules and modems required for all the “things” to connect to the internet. That’s an important piece of any IoT solution, and as one of the largest and most well-known companies in the field, Sierra has a massive advantage over would-be competitors.
In addition to its pure-play IoT-focused modules for otherwise dumb devices, Sierra’s modems can be found in a massive number of products, encompassing nearly all areas of the market from automotive to cellular manufacturers. The cellular market in particular poses as yet another massive long-term growth option for the company, as the highly touted adoption of 5G networks, are slated to begin rolling out in some areas before the end of the year. Besides being reliant on Sierra’s technology to achieve 5G speeds, the faster network that 5G brings will translate into greater possibilities for IoT devices to consume and transmit data at an increased speed.
Bottom line: Where should you invest?
Both companies represent intriguing options for long-term tech investors, but investors looking for more immediate gains should consider Sierra. The upcoming 5G transition as well as the continued advancement of IoT devices will continue providing growth for the company, and with the stock down nearly 10% over the course of the past calendar year, there could be a window of opportunity.
Iain Butler has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his almost 20 years as a professional investor.
This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again.
Fool contributor Demetris Afxentiou has no position in any stocks mentioned. BlackBerry is a recommendation of Stock Advisor Canada. David Gardner owns shares of Sierra Wireless. The Motley Fool owns shares of BlackBerry and Sierra Wireless.