When the wireless device networking market ignited a few years ago, niche start-ups, backed by venture capitalists, rushed onto the scene like a school of minnows. Now, as the market matures and opportunities abound, the big fish are eating up the guppies before they get too big to swallow.
Although it's not quite a feeding frenzy, at least one company has seen its fair share of the activity. Digi International Inc., in its fourth acquisition in 14 months, recently announced a $38.5 million deal to acquire Utah-based MaxStream Inc. The Minnetonka, MN, device networking company paid $19.25 million in cash and an equal amount in stock for a company that it says is completely complementary to its existing product portfolio.
MaxStream is a maker of RF-based wireless modules that span distances of 100 feet to 40 miles and can be used in applications like automated meter reading. Digi, which has also built a strong stable of wired network devices, has adopted a wireless strategy centered around wide area cellular technology.
"Now we will have a complete range of wireless solutions, from low speed, short distance to high speed products," says Larry Kraft, Digi's senior vice president of sales and marketing. "Our goal as a company is to be the best in the world at commercial-grade device networking. To that end, we believe wireless will be a significant growth area."
Indeed it will, predicts InStat, a high-tech market research firm. InStat estimates that the wireless mesh network infrastructure equipment market will grow from $33.5 million in 2004 to $974.3 million in 2009. And Digi expects to be part of that expansion. The company reported $125 million in revenue last year, and with its acquisition of MaxStream, which generated $10.4 million in 2005 revenue, Digi expects revenue growth of 20% for 2007.
"Digi has executed on strategic acquisitions to create revenue and earnings growth over the past two years," the company's president and CEO Joe Dunsmore told financial analysts during a phone briefing in July. "MaxStream fuels that growth."
In 2005, Digi acquired Rabbit Semiconductor Inc., a maker of microprocessors for endpoint devices, as well as FS Forth-Systeme GmbH and Sistemas Embebidos SA, both providers of embedded modules and software for networking. In 2002, it acquired NetSilicon, a maker of integrated hardware and software for intelligent networked devices. Digi does not appear to be putting on the brakes; in fact, its acquisition strategy appears to be accelerating.
"We consider Digi 'best-in-class' when it comes to corporate development," noted Glen Allmendinger, president of Harbor Research, in a statement. So the obvious question is: What's next for this burgeoning wireless company?
For now, it will work on integrating MaxStream, which will operate as a wholly owned subsidiary of Digi, retaining its name, its 49-person workforce, and its Lindon, UT, office. MaxStream CEO Brad Walters will transition into the role of vice president of business development, reporting to Dunsmore.
This article originally appeared in the September 2006 issue of Managing Automation magazine.