In order to leverage the Vertical Integrated Platform, WISeKey announced the acquisition of VaultIC, the semiconductor company of French embedded software firm INSIDE Secure. These enhancements should bolster WISeKey’s profile as a cybersecurity IoT security player, with the chip-to-root capability, providing a potentially unparalleled trusted and secure IoT ecosystem.
WISeKey could also drive revenue growth by integrating its solutions with SAP’s industry-leading solutions as announced by both companies, reinforcing the current cybersecurity of SAP HANA, and also via the signed partnerships with Microsoft on CityNext and MasterCard on authentication and payment for wearable devices. WISeKey could generate operational synergies from its expanded offerings and potentially increasing applications in a relatively nascent IoT market. Moreover, WISeKey claims to be the only player globally benefiting from a neutral cryptographic rootkey store outside the US and other potentially conflictive jurisdictions, which opens new client acquisition streams specially in what concern the IoT Market and Industrial Internet requiring large deployment of Digital Identities.
Buying growth and applications through acquisitions and partnerships
WISeKey has expanded its offerings and markets both by strategic alliances, organic growth and, recently, through acquisitions. The company intends to grow further through complementary acquisitions and/or partnerships. The company expects to complete the acquisition of VaultIC, the semiconductor assets of INSIDE Secure in September 2016. WISeKey also announced an intention to merge with Swiss company OpenLimit in July 2016. OpenLimit is listed on the German Stock Market and has a strong footprint in Germany as the provider of the German Governmental National Identity and IoT services. WISeKey also has contracts and agreements with global customers and strategic partners including MasterCard, CenturyLink, Bulgari, Hublot, Bancorp, Airtel, Microsoft, SAP and Samsung. Besides, WISeKey is diversifying across geographies in a bid to create new growth avenues.
High-growth target markets and expansion in the IoT space to drive future revenue growth
WISeKey’s solutions target high-growth markets such as mobile payments & security, identity management and IoT. According to global market research firm IDC, the global IoT market is expected to grow to USD1.7tn by 2020 from USD655.8bn in 2014. It is also predicted that the number of connected devices will grow to 29.5 billion in 2020 from 10.3 billion in 2014. WISeKey has invested resources in IoT technology (including acquisitions) in the past which should enable it to start fully monetizing them from now on. WISeKey is currently deploying large-scale IoT digital identities for watches and has a proven revenue model in this emerging space, which other competitors are still trying to monetize. This trusted technology integrates wearable technology with secure authentication and identification, in both physical and virtual environments, and empowers IoT and wearable devices to become secure transactional devices. It is estimated that the global wearable market will grow at an annual rate of 35% over the next five years.
WISeKey will continue to remain a strategic niche consolidator in the IoT cybersecurity space (rather than become an M&A target itself) since its Articles contain provisions that could prevent or delay any potential bid. Accordingly, despite the flurry of deal activity in the IT security sector and WISeKey’s niche offerings, it is expected the company to command valuations lower than comparable deals. Moreover, the lack of visibility on margins exacerbates the need for a deep discount, in our view. Based on a terminal growth rate of 3.0%, it has been arrived at a valuation of CHF14.9 per share.
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