As the Internet of Things (IoT) — that is, the trend of enhancing everyday devices with internet connectivity — continues its relentless march forward, Sierra Wireless (NASDAQ:SWIR) is working hard to ensure that it plays an integral role in the process. And who better to help Sierra Wireless accomplish its mission than telecom juggernaut AT&T (NYSE:T)?
More specifically, Sierra Wireless recently announced that it has partnered with AT&T to pilot next-generation LTE-M network technologies “with several technology leaders in the San Francisco Bay Area” starting this November.
“A new generation of IoT applications”
“Our work with Sierra Wireless will help drive the benefits of LTE-M to a broad range of businesses and industries,” added Chris Penrose, AT&T’s senior vice president, Internet of Things solutions. “Our customers that use industrial, Smart Cities, and wearable solutions are eager to tap into these new tools.”
For perspective, the LTE-M standard was previously known as Cat-M1 under the GSM Assocation and, compared with traditional LTE, it offers lower costs for gateway modules to the LTE network, longer battery life (at least 10 years for enabled Internet of Things devices), and superior LTE coverage in previously hard-to-reach areas.
Incidentally, it was only earlier this summer that AT&T executives formally acknowledged the company had chosen LTE-M over competing standards to represent the future of its cellular Internet of Things network. And while AT&T noted that there were “many reasons” for its decision, it makes sense considering that standardizing on the LTE stack simplifies the work of OEMs making products for the network, uses its existing spectrum, and can be managed using existing infrastructure.
“Millions of new IoT devices and services require low-power, low-cost cellular connectivity, which Low Power Wide Area technologies like LTE-M are designed to deliver,” elaborated Dan Schieler, Sierra Wireless’ SVP, OEM solutions. “This pilot will show how LTE-M will connect a new generation of IoT applications.”
What LTE-M adoption means for Sierra Wireless
The core technology driving this pilot program will be Sierra Wireless’ HL Series LTE-M modules, which won’t be commercially available until early next year. But they’re already footprint-compatible across product lines and network technologies and are interchangeable with both current and future modules for easy upgrades.
If this pilot program is successful, it could go a long way toward bolstering Sierra Wireless’ core OEM solutions segment, where revenue fell 4% year over year last quarter, to $132.6 million, to represent nearly 85% of the company’s sales. And looking forward, Sierra Wireless management has outlined a cautious view of growth at OEM Solutions, as healthy contributions from new programs are expected to be partially offset by tight inventory management in the near term from existing customers.
That said, Sierra Wireless management also insisted in its most recent quarterly call that the company’s long-term growth story remains intact. And considering the proximity of this announcement following Sierra Wireless’ second-quarter results last month, it seems fair to say compelling early-stage programs such as this partnership with AT&T played a role in giving them the confidence to say as much. So although we probably won’t see the positive effects of this pilot show up in Sierra Wireless’ top or bottom lines until at least next year, I think patient, long-term investors should be more than pleased with where Sierra Wireless stands today.
Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.