Semtech to acquire Sierra Wireless; $1.2B deal spans chips, edge hardware to cloud

Semtech to acquire Sierra Wireless; $1.2B deal spans chips, edge hardware to cloud

Semtech Corporation, a supplier of high-performance analog and mixed-signal semiconductors, agreed to acquire Sierra Wireless, Inc. an IoT solutions provider offering managed services for devices and connectivity, wireless hardware, and software for edge device programming and orchestration.

Under the terms of the agreement, Semtech will buy all outstanding shares of Sierra Wireless for US$31 per share in an all-cash transaction for a total value of about US$1.2 billion. The acquisition will significantly extend Semtech’s market. The deal is expected to double Semtech’s annual revenue and create a comprehensive range of connectivity solutions for the expanding IoT industry, executives said.

This acquisition combines two essential technologies for the IoT’s future — LoRa and cellular — to create a comprehensive chip-to-cloud platform that can digitize the industrial sector. Sierra Wireless’ cellular capabilities across its gateways, modules and managed connectivity will combine with Semtech’s LoRa-enabled end nodes. This collaboration creates a differentiated IoT portfolio that will enable many new IoT use cases, the companies said.

The combination of Sierra Wireless’ Cloud services offerings and Semtech’s LoRa Cloud solutions will create a portfolio that includes provisioning, device management, enhanced security, and geolocation capabilities for power-optimized IoT applications. These new Cloud service features will produce more than US$100 million in high-margin IoT cloud services recurring income right away, according to Semtech.

The acquisition is subject to specific closing conditions and will close in Semtech’s fiscal year 2023. Until the closing, the two businesses will remain independent companies.

“Sierra Wireless has been at the forefront of cellular IoT for more than two decades, and our technology is used by many of the world’s leading enterprises in a wide range of industries,” said Kent Thexton, president and CEO of Sierra Wireless. “This transaction will allow us to accelerate the delivery of new IoT solutions to our customers on a much larger scale, backed by Semtech’s strong financial position. I am confident that as part of Semtech, we will be able to create even more value for our shareholders, customers and employees.”

Sierra Wireless complements Semtech’s strengths and resources in highly beneficial ways, the companies said. Sierra Wireless provides experience in IoT and cellular engineering, software and services, as well as a deep understanding of IoT channels and vertical markets. The merging of the two firms may be well-suited to serve high-growth categories that include:

  • Logistics, supply chain and asset management
  • Building and smart cities, including public safety and air quality monitoring
  • Metering of utilities, such as water, gas, and electricity
  • Species protection and smart agriculture

“This transformational acquisition combines Semtech’s industry-leading LoRa technology with Sierra Wireless’ cellular IoT expertise to create a comprehensive chip-to-Cloud platform that can digitize the industrial sector,” said Mohan Maheswaran, Semtech’s president and CEO. “This combination will bring together two market-leading IoT technologies to create a one-stop shop for enterprises looking for end-to-end IoT solutions. In addition, it significantly expands our total available market, more than doubles our revenue, and creates a new high-margin IoT Cloud services business.”

Analysis

This acquisition is a game-changer for Semtech. Not only does it significantly expand their market, but it also more than doubles their annual revenue. This is a big move for Semtech, and they paid a fairly generous multiple of 2.5x TTM revenue. For Sierra Wireless, this acquisition is an opportunity to speed up the delivery of new IoT solutions to their customers on a much larger scale. 

This acquisition could cause a ripple effect throughout the IoT industry. Will telcos like Telus, Singtel, NTT and others in the IoT connectivity market acquire connectivity platforms like Mongoto, Eseye and 1nce? Or will other chip companies move up the stack into services powered by the chips they produce? Competitors will be keeping an eye out to see if there’s any significant acceleration of growth that is coming from an atypical pairing like Semtech and Sierra Wireless. 

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