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An Active Month of Investments into IoT

by Yiru Zhong, Principal Analyst

July

 

Over the last 2 months of May and June, the IoT market continued to witness several noteworthy acquisitions and investment flow news.  Based on the records in my IoT news diary, there were 14 instances of mergers and acquisitions (M&A) and another 10 reported funding investment flows.  The range of investment funds were as low as US$1mn and as much as US$7.5bn, flowing into three main types of companies.  First, businesses are buying technologies on the IoT stack, whether this is buying into greater platform capabilities, developer scale or connectivity services.  Secondly, businesses are buying adjacent capabilities, particularly those in security, edge computing or machine learning competencies.  Finally, businesses are betting on the innovations from start-up companies to claim a stake in the future.  Three companies stand out prominently from the near 25 investment news for different reasons.  

Microsoft announced that it will buy software development platform Github for US$7.5bn, thereby gaining needed software developer scale and depth to accelerate its reach of new customers onto its IoT portfolio.  Taking the recent announcements from the Microsoft Build event in May, it is clear that Microsoft is taking many new capabilities and services to the market.  First, Microsoft’s Azure Cosmos DB will now be equipped to match real-life IoT data traffic that will be communicating across large geographic regions.  Ie IoT devices can now be written to any data center running on Cosmo DB instead of being restricted to pre-defined data center. This is an important feature to reflect the emerging trend of moving analytics to the edge.  Secondly, Microsoft is also planning to offer a cloud-based service around spatial intelligence.  This is a crucial requirement especially for such emerging trends as drones within IoT applications.  Finally, Microsoft announced in June that it will offer a new service, “Windows IoT Core Service”.  It will provide 10-years of support and services around device updates and device health diagnostics.  

Rockwell Automationinvesting US$1bn in PTC in exchange for 8.4% of reflects another type of market strategy.  This news reflects PTC’s strength and credibility in the market and also reaffirms our view that the application enablement platform layer is less understood than the connectivity or device management layers.  Our analysis of the IoT platform market, in an upcoming 6-monthly report, will reflect the need to democratise the features within the application enablement layer.  As enterprise users become more familiar with their IoT deployments and more adapt at turning data into insights, they will next seek out tools to enable business process optimisation in the near future.
ARM buying Stream Communications is a departure for its “hardware” business reputation.  It has been seeking a diversification route to services and they have finally taken the plunge with Stream, who provides M2M/IoT connectivity services as an MVNO. Considering how the bulk of MVNOs operate in a more agile fashion than the traditional MNOs or even technology giants such as ARM, we are intrigued to see how ARM intends to optimise the value Stream brings.  We are cautious in outlook.  On one hand, ARM has significant market reach through its intelligence, device management platform, security and hardware intellectual property and customers.  On the other hand, we have seen more examples of struggling companies than successful ones.
My colleague, Christina Patsuira, observed in an earlier blog that the funding raised by IoT in 2017 dropped 13% year on year to $2.51 bn in 2017.  She attributed the decline to 2 main reasons.  First, there is a shift away from pure IoT to other emerging technologies such as Augmented Reality/Virtual Reality, CyberSecurity, Artificial Intelligence and blockchain.  The second reason is because of a breathing space for previous investment to achieve scheduled milestones.  that the funding raised in IoT amounted to $2.51 bn in 2017.  These 2 reasons remain valid. 

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