Gemalto to pay nearly $200M for M2M module maker Cinterion

Gemalto (GTO) is buying module maker Cinterion Wireless Modules GmbH for $198.7 million, adding to its machine-to-machine business strategy by bringing the world’s leading M2M module maker to the world’s largest Subscriber Identity Module manufacturer.
The acquisition moves Gemalto beyond the SIM business to what it is calling the MIM business (M2M Identity Module business, said Ray Wizbowski, Gemalto’s director of marketing strategy for North America. Initially, the company plans to target the automotive industry, the metering industries (smart grids and parking meter solutions) as well as M2M opportunities in healthcare, he said in an interview with RCR Wireless News. As penetration rates for people climb near and even above 100%, wireless players view the M2M business as a new area for growth. Research group Gartner Inc. is predicting year over year growth of 25% in the M2M segment through 2013.
While M2M products have lower average monthly revenues, the devices can be lucrative for operators because machines rarely churn to a different operator so the life of the contract can be substantially longer. Further, Gemalto is targeting the M2M space with its Over The Air update technology, which can bring new functionality to devices in the field without physically having to change them. Gemalto tried to buy Wavecom in 2008 but the offer was rejected because Wavecom felt it was too low. Sierra Wireless acquired Wavecom in 2009.
Cinterion has about 20% of the M2M module business, Wizbowski said, and makes modules for a wide variety of applications. “We had the identity part of the business but to make modules would have required significant R&D,” he said. Thus, the company made the decision it was better to purchase Cinterion, which will operate as a business unit within Gemalto. The companies do not overlap in any areas. The acquisition gives Gemalto an end-to-end solution, Wizbowski noted.
For its part, Cinterion signed a strategic agreement with Deutsche Telekom earlier this year to collaborate on M2M solutions.
Cinterion has offices in Berlin and Munich, Germany, and counts 335 employees and 2009 earnings before interest and taxes of $4.88 million last year. It started as a division of Siemens but was spun off in 2008.