June 18, 2012 / 6:48 PM / in 5 years

Sierra Wireless expands M2M business with purchase

TORONTO (Reuters) - Canada’s Sierra Wireless is moving to cement its business of connecting devices to each other with the planned purchase of machine-to-machine (M2M) assets from France’s Sagemcom.

The Vancouver-based company said it would pay 44.9 million euros ($56.5 million) for the acquisition, which will add customers in railway signaling and automated highway tolls and give it access to the booming Brazilian economy’s sales and payment market.

Sierra’s biggest M2M markets are in sales and payments, automotive, energy and networking.

Sierra has teetered on either side of profitability in recent quarters - eking out $345,000 last quarter after four straight losses. Its shares traded 3.4 percent higher at C$9.69 by Monday afternoon.

Sierra said the deal, which it expects will close by September, will be immediately accretive to its adjusted earnings. It is also expected to grow its leading 30 percent share of the global M2M market to more than 34 percent.

Sagemcom is owned by Carlyle Group, with employees holding a 30 percent stake.

Sierra gets roughly half its revenue from M2M while the other half is from sales of mobile modems and other components used in smartphones, tablets and laptop computers.

That mobile computing unit was last year hit by loss of business from Barnes & Noble’s e-book readers and from U.S. cellular service provider Clearwire, which delayed network upgrades amid a funding drought.

“Over time we are migrating to be more heavily weighted to machine-to-machine,” said Sierra’s chief financial officer, David McLennan. “We’re using that part of our business to balance the more volatile part,” he said.

He said the machine-to-machine industry would likely grow by 15 percent a year over the next five years.

($1 = 0.7949 euros)

Reporting by Alastair Sharp in Toronto; editing by Carol Bishopric

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