LONDON Analysts have welcomed the decision by Siemens AG to spin out its wireless modules business, a part of its Automation & Drives division, into an investment consortium called the "Joint Operations for Mobile Applications" (JOMA) and consisting of Deutsche Telecom's T-Mobile Venture Fund and two private equity firms, including Granville Baird.
Financial details of the deal were not revealed, but Siemens said the entire management and all of the 400-plus employees would be transferred over to the new entity.
"Together with T-Mobile, we plan to make great use of this growth, which will allow us to expand our leading position in the market," said Norbert Muhrer, president, Siemens Wireless Modules business segment.
Siemens Wireless Modules has been a significant player in the growing M2M business.
"This new partnership is the best of all worlds. We are able to become a more flexible organization to further stimulate product and service innovation while maintaining our strong portfolio of products, operations, R&D and staff across the board," commented Peter Fowler, general manager NAFTA, Siemens Wireless Modules.
ABI Research senior analyst Sam Lucero tends to agree. "This is a timely deal that happened for several reasons. First, the M2M market is much broader in scope than is the focus of Siemens' industrial controls business, of which Wireless Modules was formerly a part. Second, T-Mobile is dramatically increasing its efforts to develop its M2M business, and this investment is a further sign of this strategy. Finally, the wireless module market itself, while growing rapidly, is also an exceptionally challenging environment in which to operate, and given the difference in focus between Siemens' industrial sensor control business and its Wireless Modules business unit, it's not surprising that Siemens AG would choose to divest itself of the Wireless Modules business."
Lucero notes there are several implications for the M2M sector following the buyout. For Siemens AG, any positive impact on the Wireless Modules business is likely to be muted.
However, as a standalone business it may be freer in its strategy to pursue a broader set of market applications, and the analyst stresses the tie-up with T-Mobile "certainly gives it a path to product/solution differentiation and avoiding the commoditization that appears to be creeping into the overall wireless modules segment."
He cautions the potential pitfall of the T-Mobile tie-up is that it associates the former Siemens unit very closely with a traditional carrier; in contrast, Wavecom's looser deals with Jasper Wireless and Numerex provide inherent advantages over a Siemens/T-Mobile tie-up.
Lucero also notes the impact on competitors will be limited as well. "The spin-off presents less of a direct challenge to competitors than an acquisition of a standalone wireless modules business by Siemens AG would have presented. The buyout will further raise the issue of wireless module commoditization, however, and ABI Research would not be surprised to see further M&A activity in this space in 2008."