Canada’s Sierra Wireless is getting out of the AirCard business, announcing plans to sell its wireless modem business to NetGear for $138 million. The deal includes all assets and operations from Sierra’s AirCard operations, including customer relationships, products, intellectual property, inventory and fixed assets, and the assumption of warranty commitments and other customer obligations. Sierra will also transfer 160 employees to NetGear.
Sierra Wireless’ stock (SWIR) was trading up more than 15% early Tuesday. Conversely, NetGear’s stock (NTGR) was trading down nearly 9%.
Sierra, which was one of the initial players in the wireless modem space – as evidence by the term “AirCard” nearly becoming the “Kleenex” of the market, said the move was part of its continuing transition. The firm will continue to operate its AirPrime embedded modules operations, which it acquired in 2003; AirLink gateway and router business; and AirVantage machine-to-machine cloud product lines.
“This transaction is the next step in our transformation into a company focused on enabling the ‘Internet of Things’ – a strategy we have been pursuing with great success since 2007,” explained Jason Cohenour, president and CEO of Sierra, in a statement. “In addition to realizing a solid return for the AirCard business, this transaction will provide significant financial resources and capacity to accelerate our growth in M2M and connected device solutions.”
Sierra noted that it expects to pocket around $100 million from the sale of the division following expenses. The company said it plans to use proceeds from the sale on potential acquisitions in the M2M space as well as possibly returning some of the money to its shareholders. Sierra made a big move into the M2M space in 2008 with its $277 million acquisition of Wavecom, beating out a competing offer from Gemalto.
The wireless modem business is currently dominated by rival Novatel Wireless as well as seeing increased competition from Asian vendors. The overall market for wireless modem devices has gradually moved from single devices designed to link one computing device to the Internet to newer devices that allow multiple computing devices to link through a single connection using Wi-Fi.
NetGear noted the deal will further its efforts to enter the LTE device business.
“We believe that LTE network technology represents a huge market opportunity, especially in emerging markets and rural areas where high speed broadband Internet access is currently limited,” explained Patrick Lo, chairman and CEO of NetGear.
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