WISeKey Initiation of Coverage by Research Dynamics
August 26 2016 - 9:43AM
Business Wire
This report is published by Research Dynamics, an independent
research boutique
Monetizing on substantial opportunities
Vertically Integrated Platform, potential operational
synergies and domicile in a neutral location
WISeKey offers clients a vertically integrated digital identity
platform interconnecting its cybersecurity offering and IoT
ecosystem.
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.
Valuation
We think 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, we expect 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%, we arrive at a valuation of CHF14.9
per share. We adopt a bullish stance on WISeKey as the stock offers
significant upside potential from current levels.
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Research DynamicsAlexandre Müller, amu@researchdynamics.chDoris
Rudischhauser, dru@researchdynamics.chTel: +41 43 268 3232