Not all the opportunities in the smart grid are about big data, analytics and software. On Monday Siemens and ABB, two power gear giants, unveiled separately that they plan to make large acquisitions in buying up more hardware to add intelligence deep in the grid. Siemens will buy RuggedCom for $382 million, and ABB will buy Thomas & Betts Corp. for $3.9 billion.
RuggedCom isn’t strictly a smart grid company, but it makes ruggedized routers and Ethernet cables, used in outdoor environments like the power grid. The company competes with Cisco in terms of power grid routers, and RuggedCom has utility and power company customers like Central Maine Power Co., Memphis Light Gas & Water, Burlington Electric Department and a massive solar panel project in China.
Last month RuggedCom was the subject of a hostile takeover bid by Canadian network company Belden. The Siemens offer is a 50 percent premium over the Belden bid.
Thomas & Betts
Thomas & Betts is over a century old and based in Tennessee. It makes low voltage gear, distribution network equipment, towers for transmission networks, and heating and cooling systems. The deal essentially helps ABB expand its footprint into the North American power equipment market.
According to BusinessWeek, “By 2015, ABB wants to generate as much as 30 percent of revenue from the region [America], compared with 19 percent in 2010.” ABB has offered Thomas & Betts a 24 percent premium over its per share price that closed on Jan. 27.
The deals should remind all of us who cover the smart grid industry in Silicon Valley, especially from a startup perspective, that the utility business is all about scale and distribution. Massive companies that can sell low-cost grid gear with high margins are oftentimes the key players — not necessarily the hot new companies like learning-thermostat maker Nest.