If you have been following the M2M/IoT (Internet of Things) space at all, then the recent acquisition of Axeda, www.axeda.com by PTC, www.ptc.com certainly is no big revelation. Candidly, I am surprised that Axeda was able to survive this long without being gobbled up sooner.
In fact, rumors have been swirling about it being acquired dating back to 2011. (that was right about the time SensorLogic was closing its doors.) From where I sit, this purchase was more of a Hail Mary for Axeda that has paid some amazing dividends for its founders and investors. Management knew after several previous attempts and numerous rounds of financing, the door has been rapidly closing on it as a standalone company. But more importantly than Axeda being acquired, was what the company fetched; approximately $170 million in cash.
As we have said so many times before, the M2M/IoT-platform space is up for grabs. However, after PTC acquired ThingWorx, www.thingworx.com at the end of last year, PTC made a pretty strong statement that it wants to be a real player in the M2M/IoT market. According to the Needham, Mass.,-based company, the Axeda acquisition is deigned to complement PTC’s existing SLM (service-lifecycle management) and extended PLM (product lifecycle management) solution portfolio.
After receiving several emails from people asking me comment on PTC’s purchase, I thought it was time to assess the platform space and my spiel about this will impact the M&A race once again.
First and foremost, in speaking with my good friend and industry analyst Dan Miklovic we both agreed that PTC is determined to build a deep portfolio in M2M/IoT technology and this move is a good one to do just that. But it does beg the question if this is good news or bad news for customers?
There is no question that Axeda has built a strong manufacturing customer base and it’s done an impressive job of kissing up to partners, but whether that will all truly complement the Thingworx business only time will tell.
We’ve known for quite some time that single-point solution companies like Axeda are headed for the chopping as they continue to show their vulnerabilities. The larger companies are not necessarily acquiring these companies for the technology per se, but for the customer base they possess or their ability to help them penetrate new markets. It’s pretty obvious that both platform purchases will help PTC become real M2M/IoT player.
I have many questions about what PTC hopes to gain by integrating Axeda’s offering with ThingWorx. I still consider Axeda to be too much of a one-trick pony. And I have to wonder why PTC would want to? ThingWorx has done a stiller job of building its platform on the latest and greatest and was shaking things up in the manufacturing marketplace. In the early days it built its foundation on what people called Web 2.0 and or a SaaS (Software-as-a-Service) model right from the onset; things like social networking or even search concepts—i.e., using the idea of tagging to tag and relate people’s data. Part of the social networking technology comes as a result of a very strategic acquisition in Palantiri Systems. It then went on to really build on a strong cloud-based system.
Then you have Axeda’s foundation which comes from a legacy system, so to speak. Again it has done a good job of building partners and talking up a big game, but in reality it didn’t do enough to clearly distinguish itself as being a stellar platform provider. It did eventually develop a SaaS model, but there’s the overlap with ThingWorx. But again, Axeda has proven to be very competent within the manufacturing sector developing some good manufacturing customers, but let’s not forget so did nPhase.
Remember that acquisition? Steve Pazol made himself a lot of money selling that company, twice. (I know I’m exaggerating, but industry observers get my point). But in the end what did Qualcomm and Verizon really get? Some key customers? Are they using the platform to grow the business today? The real beneficiary of that deal was Pazol who laughed all the way to the bank.
Axeda stockholders really benefited out of this deal, no doubt. But let’s be fair here. PTC is a shrewd company with really smart execs. They will take this partner network, manufacturing customers (estimated at about 15,000-18,000 customers) and truly leverage them into a successful operation. So in the end, Axeda customers will benefit from this deal knowing that they were just adopted by a much healthier company.
So where does this leave the industry as a whole? This is just the beginning of a lot more shakeups. For instance, platform companies such as Wyless, www.wyless.com, and Kore Telematics www.korewireless.com, are also susceptible. Even though Kore made headlines when it announced it had acquired Jazz Wireless Data and its six-figure subscriber base, rumors say it’s only a matter of time before a big announcement is made.
We’ve been hearing for the past couple of years that Numerex is also very exposed or even on the block. But as industry watchers always say a great way to help prevent stock prices from going sideways is to acquire and rumor has it that’s what Numerex did with the purchase of Omnilink several months ago. So that begs the question are these platform companies potential targets for the right price?
John Horn, president of Raco Wireless says he gets interesting offers all the time. He admits the market is ripe for consolidation and more on the horizon.
The numbers speak volumes. In 2011, the CW 100 had approximately 20 platform players on the list. Looking at the 2015 list that will be revealed shortly, puts the count at less than 10 and that number is down from a year earlier. There is no doubt there will be a lot more M&As coming before the year comes to a close. At this point we can’t even put the new CW 100 on the Website before we hear of yet another merger or purchase. We anticipate at least 10 more before 2014 comes to a close. Let’s see if the rumor mill is on target.
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