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Sierra Wireless (NASDAQ: SWIR) and CalAmp Corp. (NASDAQ: CAMP) have set their sights on the growing Internet of Things (IoT) -- where formerly unconnected devices are connected to the Internet. It's a market expected to generate more than $6 trillion in revenue and cost savings by 2025.
These two companies have both invested their resources into building some of the most sophisticated hardware, software, and services for the IoT. But which one looks like the better long-term bet? To answer this, let's take a quick look at what both of the companies are doing in the IoT market and how they're performing right now.
Image source: Getty Images.
What's happening with CalAmp
CalAmp divides its revenue between its telematics business (which includes hardware) and its software and subscription services. For example, CalAmp sells routers to its customers, including industrial equipment giant Caterpillar, so that they can bring their devices and equipment online. But then CalAmp goes a step further and sells analytics software and cloud-computing services to it clients as well.
This marriage of hardware and services has created a strong IoT ecosystem for the company. CalAmp now connects more than 20 million devices to its services and has more than 730,000 subscribers.
The company's sales weren't as impressive as they could have been in the fiscal 2018 fourth quarter, though. Telematics sales grew 29%, and software and subscription services were up 5.8% year over year. Total sales grew by just 9.6% in the quarter.
But potential CalAmp investors should remember that the IoT is still a burgeoning industry that has plenty of room for more growth, and CalAmp's moderate growth in the most recent quarter doesn't necessarily reflect its full long-term potential. The company has done a fantastic job building out sales with its most important customer, Caterpillar, which accounted for $11.6 million of the company's total revenue in the quarter.
CalAmp's shares are also trading at an alluring 15 times the company's forward earnings. That makes the stock relatively inexpensive compared to the overall tech industry. Investors should remember that the company's relatively small size (its market cap is just $760 million) and its big bet on an emerging tech trend mean that it could experience more volatility ahead.
Image source: YCharts.
What's happening with Sierra Wireless
Like CalAmp, Sierra Wireless makes devices that connect things to the Internet. Sierra's wireless chips (everything from Bluetooth connections to 2G, 3G, and 4G modules) dominate the embedded wireless market.