Sierra Wireless Deal Signals Shift in Data Cards

header_sierra_logo_2008Sierra Wireless, the maker of wireless data cards, today said it’s agreed to spend about 218 million euros ($274.9 million) to buy Wavecom, the Paris-based maker of machine-to-machine communications chips. It’s a good move for Sierra, which is paying a 108-percent premium over Wavecom’s last trading price, in order to beat rival bidder Gemalto. For Sierra, the deal gives it the ability to follow the growth of the web as it moves beyond people to machines. The deal also provides a new avenue for growth as Sierra sees interest in wireless cards fade as communications chips are embedded directly into laptops.

A leader in this trend is Qualcomm with its Gobi platform. Gobi contains a variety of wireless chips embedded into the laptop that are activated by the user if and when they need them. Like any other external card for computers, as wireless networks become more commonplace, and users are willing to pay for connectivity everywhere, the card’s functionality gets embedded into the machine. This is already happening, albeit slowly.

That means rather than working with Qualcomm to buy chips for the Sierra wireless cards, Sierra finds itself competing with Qualcomm’s Gobi platform. The deal for Wavecom offers Sierra an entry into the growing market for Internet connectivity for other devices — from the telematics in cars to point of sales systems — as its wireless card business faces its likely decline.

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