High-speed 3G network rollouts benefiting Sierra Wireless

The rollout of high-speed 3G networks such as EvDO and HSDPA in many global markets presents opportunities for Sierra Wireless Inc. Speaking at Scotia Capital’s Telecom & Tech 2007 event, president and CEO Jason Cohenour explained that not only do these networks offer penetration growth in traditional markets, but they also open doors to securing new customers in non-traditional segments. "We’re seeing expansion police, field service and transportation," he said, noting that the company is also experiencing growth in non-traditional vertical markets, including consultants, insurance claims adjusters, real estate agents, and even financial analysts. "Beyond that, there’s the mobile professional – the non-application specific user…who just happens to be on the road a lot and needs access to their email or corporate applications." In the immediate future the largest growth potential comes from North America, where the CDMA and GSM players are battling it out, but Europe is picking up steam, stated Cohenour. "In Europe, HSDPA deployment is happening, but is happening definitely at a more deliberate pace . There is the unique competitive arm’s race, if you will, that you see in the US," he said. "But I do think deployment will continue at a pretty healthy clip in Europe." For the third quarter ended September 30, Sierra Wireless generated $52.5 million in revenue, a decline of $3 million compared to second-quarter results, but an increase of more than 90% compared to revenue of $27.5 million in the third quarter of 2005. Future revenue potential also bodes well not just for Sierra Wireless, but for its rivals as well. Cohenour highlighted a recent ABI Research statistic that pegged revenue growth for the sector at 50% compounded annually over the next five years. Sierra Wireless generates the majority of revenue from two product lines: the AirCard series and its embedded module business. The AirCard product line generates approximately 69% of revenue, while revenue from embedded modules bring in about 26% of the company’s overall topline. Embedded modules represent a solid growth opportunity for the company according to Cohenour, who added that having both GSM and CDMA technologies is a definite advantage, particularly for laptop OEMs looking to do multi-region product launches. "If you want to launch in Europe and you want to launch in North America, you need both technologies and it makes sense to consider going with the same supplier for both of those technologies because you get a lot of vendor leverage," he said. "It’s not table stakes, but it’s definitely an advantage covering both." Of cources, growth in the future isn’t guaranteed despite the opportunity predicted by some research firms. The company is facing increasing competition from a number of rivals including new Asian competitors offering discounted products, as well as a new partnership between Intel and Nokia. Cohenour acknowledged that competition is part of the game and that competing on price is going to happen as a result of the lowering of the price floor by competitors. But the challenge, he said, is to find the right balance "between growth, continued share gains and gross margin. We’re going to have to continue to innovate ahead of our direct peer group and certainly ahead of the Asian price leaders."

High-speed 3G network rollouts benefiting Sierra Wireless

News | November 17, 2006

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