Gemalto combining SIM, M2M with Cinterion buy

Gemalto is looking to insert SIM cards into mobile devices. Today the identity module–maker announced it is purchasing Cinterion Wireless, the world’s largest manufacturer of GSM machine-to-machine wireless communications modules.

The combo puts under a single umbrella the two technologies necessary to make an M2M solution work: the radio module that physically connects a device to the network and the authentication and security software that allows it transmit.

Gemalto said it is paying $199 million in cash and expects to close the transaction in six weeks. Formerly Siemens Wireless Modules, Cinterion went into private hands in 2008, as Siemens spun off non-core businesses. Since then Cinterion has grown to become a dominant player in the M2M space, with 20% of global market share. It has a staff of 335 employees, primarily in Germany, and annual revenues of about $175 million.

“We are taking the leadership position in a fast growing market, the market of smart machines that paves the way to the 'Internet of things,'” said Olivier Piou, CEO of Gemalto, in a statement. "Together with Cinterion we can address the strong interest of our largest customers, the mobile network operators, in M2M and team up with them to offer the M2M market the right combination of advanced software, premium devices and remote management services that has historically been successful in our SIM card business.”

M2M is a high-volume, low-revenue-per-subscriber business in the mobile industry, fueled by smart grid, vehicle tracking and home security devices that individually bring in little but also have little impact on the network. Carriers have been attracted by the potential of that incremental revenue adding up as M2M applications scale to the millions. In addition, the burgeoning market for consumer M2M devices such as Internet tablets and e-book readers, as well as more robust vertical applications like video surveillance, promises to move individual M2M connections up the value chain and from the GSM to 3G and 4G networks. Already Verizon Wireless (NYSE:VZ, NYSE:VOD) has certified far more M2M devices for its long-term evolution network than it has handsets or other consumer retail devices.

Gemalto said it plans to leverage Cinterion’s module technology to create combined radio-security solutions for operators and M2M device–makers, though it did not offer specifics on what shape that combination might take. One possibility is that Gemalto might go the route of SIM-less modules, where identity and authentication are directly loaded into the module rather than kept separately on a smart card.