Sierra Wireless: Connecting to profit

Alex Alexandrov | Apr 04, 2008 4:52pm EDT | Comment

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Sierra Wireless Inc. (Nasdaq:SWIR)
Vancouver, Canada
http://www.sierrawireless.com

52-week low / high: $11.98 / $28.10
Shares Outstanding: 31.3 million
Market Capitalization: $540 million

Mounties and maple syrup aren’t the only things Canada is famous for: tech companies also have their place in the country’s bustling cities. Vancouver-based Sierra Wireless Inc. (Nasdaq:SWIR), a maker of software and devices that facilitate mobile broadband networks, is one standout from the bunch with its constantly improving financials.

Revenue for the fourth quarter ended Dec. 31, 2007 increased an impressive 98% to a record $135.6 million, compared with $68.3 million in the fourth quarter of 2006. Earnings increased to $11.5 million, or $0.37 per share, compared with earnings of $2.4 million, or $0.09 per share, a year earlier.

The improvement was primarily due to the early launch of laptop cards for wireless access.

“Our momentum with these new products helped lead the way to record revenue in each of our three main business regions: The Americas, Asia and Europe,” president and CEO Jason Cohenour said in a statement on Jan. 31.

Founded in 1993, Sierra Wireless has offices in Canada, the United States, England and Hong Kong. It has distributors in approximately 30 countries, located in all continents except South America. The company frequently offers its products to manufacturers of computer and communications hardware, who in turn integrate the technology into their products.

In February, Sierra Wireless announced that its embedded module has been selected by German communications equipment maker LANCOM Systems GmbH to provide broadband connectivity for one of its routers. Later that month, Becker Marine Systems Communication said that it will take advantage of the technology to help mariners stay in touch with each other.

More recently, Sierra Wireless and telecommunications giant Sprint Nextel Corp. (NYSE:S) announced the launch of a USB modem for mobile broadband networks. Billed as the “nation’s smallest,” the Sierra Wireless Compass 597 USB is about the size of a pack of gum and operates on Sprint’s network to provide users with Internet access from their desktops or laptops.

“Our industry is in the midst of a transition from a niche, low-volume business focused primarily on corporate and industrial users, to a mainstream, high-volume segment increasingly serving consumers, in addition to traditional business users,” Sierra Wireless said in its 2007 annual report.

“This new environment offers the potential for strong revenue growth, but it also brings added competition and the challenge of maintaining solid margins,” the report continues. Despite those difficulties, the company’s gross margin was 28% in 2007.

Revenue for the year ended Dec. 31, 2007, jumped 99% to $439.9 million from $221.3 million in 2006. Profit more than tripled to $32.5 million, or $1.16 per share, compared with earnings of $9.8 million, or $0.38 per share, in 2006.

Wall Street expects the company’s financial results to continue improving: for 2008, 18 analysts polled by Thomson Financial expect net income to climb 17.2% to $1.36 per share, while revenues are projected to increase 30% to $571.83 million.

Note: Sierra Wireless (Nasdaq:SWIR) is on the “Watch List” of Rising Star Stocks, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Sierra Wireless displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Rising Star Stocks portfolio at a later date.