Hello Brittlerock,
But I’m still concerned about a moat. Is there anything so unique about SSNI that some bigger networking companies can’t emulate? I don’t see anything particularly unique about their business.
From my perspective, the bulk of the revenues that SSNI (and their competitors) receive come from the automated metering side of the business. I don’t believe there is a moat for this part of the business. I think it is important to realize that we are at less than the midpoint of deployment of smart meters. Call it 40% today and you won’t be far off. Therefore, more new AMI product will be deployed in the future that has been thus far. There also may be an “upgrade cycle” as some utilities will not meet new aspirations with older meters.
If SSNI has a moat, it is in the efficacy of their technology. They deliver an open-standards mesh network to connect the endpoints in their system. This means that a customer has “future-proofed his investment” because the first generation produced will be compatible with each forward generation. This moat does not show up well in the early innings where most of the revenue is for the automated meters and not for the operation of the network that connects them. SSNi’s network will layer on any of the various IOT functions that want to be deployed in the geography that the network serves. So far, the moat has been established in the recurring revenue base that is derived from the operation of the network. The permanence of the moat is questionable. In this recent article on Itron by Saul’s guru, Bert Hochfeld, he speculates that Itron may have developed a network that will compete with SSNI.
http://seekingalpha.com/article/4019706-itron-can-investors-…
IMO, SSNI enjoys first mover advantage here and could prevail as ITRI is not yet tested. Bert says there is enough market to enable multiple winners, but I am not interested in such an outcome. We should know in less than two years whether or not SSNI is the clear leader in the space.
Best regards,
Mike