Itron, an energy and water resource management provider, has announced the acquisition of Silver Spring Networks (SSN) for approximately $830 million (£615.6m).
Silver Spring Networks is a San Jose, California-based provider of IoT connectivity platforms and solutions to utilities and cities. With its widespread global network in the smart utility and smart city sectors, the company has generated more than 20% of its revenues via its primarily recurring managed services and SaaS solutions, which is Itron’s area of strategic focus. The company has delivered more than 26.7 million network-enabled devices across five continents till date.
With the acquisition, Itron expects approximately $50 million in cost synergies on an annual basis to be substantially realised within three years of completing the transaction by optimising combined operations and expenses.
Pablo Tomasi, senior research analyst, smart cities and IoT at IHS Markit, said: “To further grow, Itron needs to continue improving on the trend set by SSN of more than 20% of its revenues generated through SaaS solutions and managed services. Expanding this revenue stream is crucial as this model fits well with the smart city market as it tailors around cities’ needs and budgets.
“This is also in line with the major IoT trend of transition from product-based solutions to service-based solutions. Such a business model eases the pain point of high expenses, and generates recurrent revenues which can be expanded with further services.”
Thomas Frashier, research analyst, smart utilities infrastructure at IHS Markit, said: “This is an intelligent strategic move for Itron. While reliability remains important, metering hardware has become increasingly commoditised. Future competitive advantage for meter OEMs will be gained through competency in communications networking and value-added services at the meter and in the distribution grid – and beyond, in the case of smart cities.”
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