Over the last couple years, consolidation and M&A have dominated headlines. Ocean liners are consolidating to stay competitive, logistics companies are merging as weak demand is straining smaller operators. Sadly, the market has remained skeptic about M&A and profits have largely remained anemic. That’s what makes Verizon’s recent purchases so interesting.
If you missed the $4.4bn acquisition of AOL last year, or the $4.8bn purchase of Yahoo last week, then you probably missed the $2.4bn planned purchase of the cloud based fleet management firm Fleetmatics Corp—along with the purchases of nPhase, Hughes Telematics, and Telogis. What makes the recent moves interesting is that they are not consolidation moves so much as strategic steps toward repositioning. Facing a saturated mobile market and difficult margins to maintain, Verizon—a global communications company—is focused on staying at the forefront of how we communicate. Enter IoT.
For the average consumer, IoT (or the internet of things) provides control of lights, garage doors, and cursory home security systems. For a communication provider this represents a rise in machine to machine (M2M) communications. The GSMA, an international organization tasked with uniting and advancing the mobile communication industry, reports that while, “mobile is at the heart of the new digital future…smartphone adoption is already reaching critical mass in developed markets.” More importantly, “the mobile ecosystem is a major driver of economic progress welfare globally.” Therein lays the problem for companies like Verizon. If mobile is the key to the future and is oversaturated, how can the brand grow? Worldwide data traffic and cellular M2M connections is on pace to increase from 243 mn in 2014 to almost 1 bn by 2020. This growth is expected to originate from several key verticals including utilities, healthcare, commerce (what GSMA calls M-Commerce), and automotive.
Verizon’s planned purchase of Fleetmatics strengthens their position as a partner of traditional automakers, driverless automakers, third-party logistics companies, and various fleet operators. It seems Verizon has learned from companies like Kodak and Blackberry who failed to see the shift in technology and adjust their business scope.
If you’ve watched or read the news the last couple years—not that the news should be trusted (read “Old McDonald”)—it is apparent that the way we do business and the business environment has changed. Verizon has illustrated how using industry specific knowledge and company trends can be used to pivot a business’ strategy. The thought I supply is this: What is your company’s role in the new economy?
Authored by: Christon Valdivieso
Edited by: Afton Knight