Snapping Up Startups: Internet Of Things Buying Spree Has Only Just Begun

As Internet of Things technologies move from buzz to reality, acquisitions of companies with key offerings in the space are ramping up.

"We're seeing a lot more [IoT] acquisitions, more than we've ever seen before, and that's only going to continue," said John Byrne, senior principal analyst of Internet of Things at Infonetics.

As evidence of that trend, San Diego-based Novatel Wireless Monday acquired IoT product maker Feeney Wireless for $25 million in a cash and stock deal.

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"For 20 years you've been hearing everybody talk about that this year is the year for IoT, and every year they were wrong," said Alex Mashinsky, CEO of Novatel. "The reason this time is different is because we didn't have the cloud and cheap analytics before. If you look at the cost of computing and how fast it's dropped in the last few years, it's just mind-boggling how much you can do now cheaply."

Novatel designs and develops machine-to-machine solutions and delivers IoT and cloud Software-as-a-Service services, while Feeney is an IoT products, systems integration and services company based in Eugene, Ore. Mashinsky said Feeney isn't the only IoT acquisition the company will make this year.

"Feeney was the first one but definitely not the last one," he said. "We're thinking at least two more acquisitions this year. We already have a bunch of targets … professional services and hardware companies, all based around IoT."

Infonetics' Byrne points to Amazon's March acquisition of Denver-based startup 2lementry, a developer of IoT solutions, as more evidence of the IoT buying spree.

"Amazon has this cloud network, they've got a lot of customers on AWS and what 2lemetry does is it beefs up their capabilities in what's called machine data -- gathering, storing and eventually applying analytics coming from sensors and modules," said Byrne. "So this puts Amazon much more front and center as an IoT player than they were before."

Large companies snatching up smaller IoT startups is going to be the trend for the foreseeable future, according to Byrne.

"Larger companies need to have a more well-rounded story in IoT, and a lot of times they are finding that the startups out there have already invested the R&D that they themselves would need to invest to develop whatever capability that they think they need. So [IoT acquisitions] are definitely heating up," said Byrne.

The biggest reason why IoT is front and center this year is because the offerings are becoming more affordable, according to Mashinsky. Hardware costs have dropped dramatically and quality sensor technology is now easily obtainable and less expensive, he said.

"Sensors and devices that were only existent on missions to the moon or missions to the solar system are now in every smartphone and could be put in an IoT box that could be sold for a few dollars a pop," said Mashinsky. "The cost of deployment used to be tremendous -- starting stuff from scratch, scaling. … Now a lot these solutions are already integrated, preconfigured. And structural fundamental things are now enabled that did not exist even five years ago."

Infonetics' Byrne agreed, saying it is getting more affordable to create an IoT solution. "The cost of connectivity is also continuing to decline, which is important," he said.

Solution providers also say they're seeing a rise in IoT adoption and more acquisitions in the space.

Vince Giacomini, CEO of Sunnyvale, Calif.-based solution provider Premier Wireless Solutions, which partners with Novatel and Sierra Wireless, said manufacturers are focusing on more than the device itself.

"It's the trend for what customers are asking for, it's not just parts or devices -- they're asking for solutions," said Giacomini. "In order to grow this space and capture market share in IoT, it's going to be through solutions, not devices that are a part of the solution."

"Novatel is switching from being just a supplier of devices to a supplier of solutions and services, which I think is the general trend," said Giacomini. "There are a lot more IoT acquisitions to come."