Ken Nagy, CFA
For Sierra Monitor Cisco EnergyWise Could be a Game Changer
Sierra Monitor Corporation (SRMC) designs and develops hazardous gas monitoring devices for the protection of personnel and facilities in industrial work places. Through its subsidiary FieldServer Technologies the firm has branched into protocol translation technology, which enables machine to machine (M2M) communication in energy and building automation applications. This high growth business should complement the gas detection business, while not sacrificing market or margins. FieldServer should see a tailwind as a result of the push toward zero net energy building designs. We see value in the shares of SRMC based on their strong recent performance and aggressive moves to build OEM channels with major US companies in the energy and building automation space.
Solid Results Across all Segments
On April 26, 2011 SRMC announced financial results for the first quarter of fiscal year 2011 ended March 31, 2011. The firm again delivered solid sales and net income. Revenue for the period was $4.2 million virtually flat sequentially and up 83.8% year-over year. Gross margins benefited from product mix and were slightly higher (60.2%) than the historical corporate average. The corporate average has been in the 58-60% range and we expect that range for future quarters as well.
Income from operations was $527,413, compared to a loss of $122,199 in the first quarter of 2010. First quarter net income increased to $316,623 or $0.03 per share (basic and diluted), compared to net loss of $73,106 or $0.01 per share (basic and diluted) in the same prior year period. On a non-GAAP basis net income was $426,276 or $0.04 per basic and diluted share. Non-GAAP items included a depreciation and amortization charge, a provision for bad debt expense, a provision for inventory losses, and a stock based compensation expense. Zacks generally adds back in stock based compensation expenses.
Cisco EnergyWise
According to Cisco, in response to energy costs, environmental concerns, and government directives, there is an increased need for sustainable and “green” business IT operations. More than 70 percent of electricity consumed in the United States is used in office buildings. However, inefficient use is leading to energy wastage. For example, Department of Energy (DoE) estimates suggest that PCs left on are in use only 9 to 15 percent of the time. Consequently, there is renewed focus in making sure of not only the procurement of energy-efficient equipment, but also judicious usage and proactive monitoring. Enter Cisco EnergyWise Architecture. This is technology architecture added to existing switching and routing portfolios that is able to,
- Measure power consumption consumed by each device in the network.
- Analyze this data in order to make decisions on cost saving policy actions.
- Enact policies to optimize the power consumption of the building.
Sierra Monitor’s FieldServer division has developed a translator to allow energy management connections between Cisco’s EnergyWise protocol and external devices including power meters, lighting controls and other building automation devices. The translator, which is currently under test, opens opportunities for Cisco to increase the benefit of their EnergyWise offering and thereby expanding the market for FieldServer products.
*Source for Cisco EnergyWise System is from company brochure
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