Itron buys Smart City specialist Silver Spring
September 21, 2017
Utility metering firm Itron is acquiring smart city IoT specialist Silver Spring Networks. Spokane, Washington based Itron is buying San Jose based Silver Spring for around $830 million. The move marks a significant deepening of Itron, market valued at $3 billion, into the IoT and smart city markets. The acquisition follows just days after Silver Spring announced that Acuity Brands would become a technology and channel partner, as well as announcing new integrated street lighting systems that are the result of their cooperation.
Headquartered in San Jose, California, Silver Spring provides IoT connectivity technology to utilities and cities. It has trade-marked "Internet of Important Things" to brand its IoT technology. In 2016, Silver Spring generated revenues of $311 million with a gross margin of 44 percent and ended the year with $1.2 billion of backlog. Positioned mainly in the smart utility and smart city sectors, Silver Spring generated more than 20 percent of its revenues through its primarily recurring managed services and SaaS solutions.
Managed services and SaaS offerings are an area of strategic focus for Itron. Silver Spring's strengths in these areas are a major reason for Itron's acquisition of the firm.
To date, Silver Spring has delivered more than 26.7 million network-enabled devices across five continents.
Itron anticipates approximately $50 million in annualised cost savings. These it expects to be realised within three years of completing the transaction. The company says it will achieve these by optimising combined operations and expenses.
The acquisition is expected to have a positive impact on Itron's long-term growth rate, be accretive to gross margin in the first year after completing the transaction and be accretive to non-GAAP EPS and adjusted EBITDA in the second year, excluding one-time, transaction-related costs and including stock-based compensation costs that Silver Spring currently excludes from its reported non-GAAP results.
“The addition of Silver Spring brings more capabilities to our offerings and advances our strategy of delivering highly secure, value-generating solutions for the critical infrastructure within utilities, smart cities and the broader industrial IoT sector,” said Philip Mezey, Itron's president and chief executive officer. “By converging our complementary, standards-based technologies, we will enhance customer efficiencies with solutions that optimise devices, network technologies, outcomes and analytics. This enables us to increase investment in new solutions and accelerate innovation for our combined customer base, covering more than 200 million people.
“This transaction also increases our presence in the sizeable industrial IoT segment, driving higher growth with recurring revenues and enabling Itron to increase profitability beyond our mid-teens EBITDA margin target,” continued Mezey. “Combining Silver Spring's entrepreneurial culture and proven capabilities with Itron's operational strengths, depth of solutions and customer intimacy will result in a company that is well-positioned in the fast growing critical infrastructure space. We look forward to welcoming Silver Spring's talented team of engineers and professionals to Itron and are confident that together, we are best equipped to provide industry-leading solutions that will deliver greater value to our customers.”
Mike Bell, president and chief executive officer of Silver Spring Networks, said, "Joining forces with Itron will enable us to help more utilities and cities adopt the industrial Internet, improve their performance and reliability, and better position themselves for a connected future. This strong combination will address end-to-end solutions for our customers and will create immediate value for our stockholders; it will also provide new opportunities for our employees as part of a larger, global technology leader for the Internet of Important Things."
The news of the acquisition follows on news that Silver Springs Networks had agreed channel and technology agreements around smart street lighting with Acuity Brands through the latter's Acutiy Brands Lighting Inc subsidiary.
Acuity Brands' field sales organisation will deliver Silver Spring's technology for smart street lights and smart city services as part of its turn-key offering for large-scale customers including utilities and cities. This includes Silver Spring's Gen5 networking platform, Streetlight.Vision control management software (CMS), and the ability to provide end-customers smart lighting and smart city solutions delivered through Silver Spring's Network-as-a-Service (NaaS) platform.
Silver Spring's NaaS platform allows cities and utilities to avoid upfront capital equipment and deployment costs as well as reduce operational and management expenditures.
The two companies also announced upcoming US availability of their integrated street light solution, DTL DSN intelligent photocontrol from Acuity Brands. The solution integrates Silver Spring's standards-based, IPv6 networking platform with an enhanced version of the DLL Elite long-life, LED-compatible photocontrol from Acuity Brands. The DTL DSN intelligent photocontrol offers customers enhanced control features including remote brightening and dimming.