How Sierra Wireless, Inc. Is Helping Make Drones Safer

Shares of Sierra Wireless (NASDAQ: SWIR) are up a stunning 76% so far in 2017, including a nearly 30% single-day pop last month after the Internet of Things pure play released exceptional fourth-quarter 2016 results. But you won't find Sierra Wireless pumping the brakes anytime soon.

In fact, if one of its latest design wins is any indication, Sierra Wireless is literally ready to take flight. Late last month, the company was selected by unmanned aerial vehicle (UAV) specialist PrecisionHawk to "enable drone safety and traffic management." More specifically, PrecisionHawk is using Sierra Wireless's AirPrime MC Series embedded modules to enable global LTE connectivity for its Low Altitude Traffic and Airspace Safety (LATAS) platform.


"Cellular connectivity is key"

For perspective, current radar and ADS-B surveillance technologies are incapable of effectively locating or tracking most drones, given their relatively small sizes and low flying altitudes. This makes it tough for air traffic controllers to manage the increasing trends of commercial and recreational drone use. With Sierra Wireless's help, PrecisionHawk is tackling that problem by introducing LATAS as the only platform to link those drones, 3D ground data, and live manned-aircraft data from the FAA and global authorities, all into a single system that tells those commercial or hobbyist drone pilots where they can safely fly.

"As tens of thousands of new operators join the drone space around the world," explained Tyler Collins, PrecisionHawk's VP of airspace services, "our goal is to provide an easy to use and reliable safety tool that gives drone operators a complete picture of their surroundings and how those surroundings are changing in real-time. This wouldn't be possible without the cutting-edge innovation in cellular connectivity that Sierra Wireless provides."

Dan Schieler, senior VP and GM of OEM solutions for Sierra Wireless, noted that his company's are the "first cellular modules flying on drones to make the skies safer," adding, "With near-ubiquitous coverage, cellular connectivity is key to innovative applications like PrecisionHawk's LATAS being able to scale across the globe."

What this means for Sierra Wireless

Sierra Wireless modules are currently only installed in drones operating in Australia and New Zealand. Meanwhile, Sierra Wireless and PrecisionHawk also demonstrated the platform at the 2017 Mobile World Congress, giving attendees the chance to pilot a drone around Barcelona with LATAS simulators highlighting potential hazards.

But investors should keep in mind that market acceptance of the LATAS platform is still in its early stages, so we shouldn't expect to see any significant contributions to Sierra Wireless's top or bottom lines in the near term. More than anything, Sierra Wireless's central role in enabling the LATAS platform is indicative of its broader design-win success and traction with new customers -- both strengths that helped prop up the overall business last year, even as the company endured temporary soft demand and tighter inventory management from some of its established OEM customers and programs.

That's not to say it should come as a big surprise. Sierra Wireless delighted investors last quarter by returning to top-line growth on both a sequential and a year-over-year basis, notably as revenue in its core OEM solutions segment jumped 11.2% year over year. Management credited a combination of both the continued ramp-up from new OEM customers, and normalizing demand from those existing customers. Meanwhile, Sierra Wireless lauded the strongest design-win momentum of the year for its newer cloud and connectivity business in the fourth quarter.

All things considered, it seems safe to bet that Sierra Wireless will continue racking up more new-customer wins like this as the Internet of Things inevitably grows. For investors willing to buy shares now and watch this story continue to unfold, I think the price of Sierra Wireless stock will follow suit.

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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. The Motley Fool has a disclosure policy.