More IoT consolidation as Semtech snaps up Sierra

IoT chip maker Semtech has struck a $1.2 billion deal to acquire IoT module specialist Sierra Wireless.

The transaction brings together the worlds of cellular IoT and non-cellular LoRaWAN, and comes just days after Telit scooped up Cinterion, Thales’ cellular IoT business.

While that deal was primarily about expanding Telit’s presence in various industrial IoT verticals, Semtech’s Sierra purchase is more about complimentary technologies. Semtech in recent years has been a big proponent of LoRa, which offers an energy efficient, low-bandwidth, broad coverage option for IoT connectivity.

With its use of unlicensed spectrum, LoRa has won a lot of fans for being a cheap and relatively simple means of connecting things like sensors, and for doing stuff like asset tracking. But there is only so much that can be done with LoRa before the bandwidth runs out. Cue cellular, specifically networks like LTE and 5G, which have the capacity to support more bandwidth-hungry applications.

This is one of the many strings to Sierra’s bow. It makes modules spanning 5G and LTE, as well as cellular low-power, wide-area (LPWA) networking tech including NB-IoT and its higher-capacity stable-mate, LTE-M. It also offers short-range connectivity solutions, including industrial-grade Wi-Fi and BlueTooth modules.

Research firm Transforma Insights said in a report late last year that cellular technology will account for two thirds of the predicted 4 billion LPWA connections by 2030. Furthermore, in a separate report last week, Transforma forecast that public IoT networks – which are dominated by cellular tech – will account for 19 percent of global IoT connections by the end of the decade, with private networks – which tends to include non-cellular networking tech like LoRa and Wi-Fi – accounting for the remainder. What this suggests then is that the market will demand a blend of IoT various different connectivity solutions.

Semtech said acquiring Sierra puts it in a stronger position it to chase down more opportunities in several verticals. These include: supply chain, logistics and asset management; utilities such as water, gas and electric metering; smart cities and buildings; and smart agriculture and species protection – which includes things like keeping track of wild animals and monitoring the perimeter of a conservation area, for example.

“We believe the next era of technology growth is the full digitisation of our industrial world – the Internet of Everything. Our vision is to build a simple, horizontal platform with the goal of accelerating this transformation and to bring about a smarter and more sustainable planet,” explained Semtech president and CEO, Mohan Maheswaran, in a statement on Tuesday. “This exciting strategic acquisition of Sierra Wireless is a critical part of bringing this vision to life through the combination of cellular, LoRa and cloud services. Together, with the world-class Sierra Wireless engineering team, we will be positioned to advance the market with multi-radio solutions that bring new chip-to-cloud services to support customers and grow our business.”

As per the terms of the agreement, Semtech will pay $31 per share for Sierra Wireless, representing a 25 percent premium on Sierra’s closing price at the end of last week, and valuing the company at $1.2 billion. The transaction will be paid for with cash on hand and debt-financing courtesy of J.P. Morgan. Semtech said the acquisition will approximately double its annual revenue – which came in at $740.9 million last year – and will generate around $40 million of operational synergies within 12-18 months of completion. Speaking of which, Semtech said it expects the deal to close some time during its current fiscal year, which runs to the end of January.

“Together with Semtech, we will be able to extend the reach of IoT solutions by scaling, optimising and ultimately delivering an even stronger product portfolio and service model to customers,” said Sierra CEO Phil Brace. “, president and chief executive officer of Sierra Wireless. “Joining Semtech will also allow us to bring cellular and LoRa technology together to create innovative solutions that exceed the expectations of our customers around the world while delivering exciting career opportunities to our talented employees as part of the combined company.”

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