Does Sierra Accel in a Growing Market?

By James Brehm

Last Thursday, Sierra Wireless announced record earnings again, which is no surprise in a high growth market. But though the module and equipment manufacturer continues to fast track to higher revenues it also announced something that is quite confusing to me, the acquisition of fixed wireless provider, Accel Networks. While Accel is not a true MVNO like Sierras’ previous acquisition Maingate, because of its geography, it could be viewed as competitive by some MVNO partners and even larger MNO customers. As a provider of 4G LTE managed connectivity service for distributed enterprises, Accel’s customer base includes companies such as IHOP, World Telecom Group, Dunkin Donuts, Trader Joe’s, Valero  and BandWave Systems, Inc.

We also believe some of Sierras’ customers may view the Accel acquisition as competitive, because Accel uses a lot of Cradlepoint and Cisco gear. Is this a situation of “if you can’t sell to them, buy them”? Or will Sierra purchase Cradlepoint gear to support legacy Accel customers? We doubt that very much. But what’s next for Sierra? CEO Jason Cohenour is doing a great job of finding small companies, searching for a home in a larger, well-funded owner. We believe they paid close to 10 m plus a small earn out which leaves Sierra flush with cash.

Meanwhile down the coast in Southern California, Alex Mashinsky at Novatel, who also announced great numbers for the quarter, is busy integrating Feeney after acquiring them recently. While Feeney and Accel aren’t direct competitors, both acquisitions provide their respective hardware parent, with a level of service-based business which is packed with margin; and nearly immune to generated hardware price declines. And with backing from Harbinger, we wonder what is next for Novatel.