To be frank, Sierra Wireless Stock has exploded over the last four months. It has seen its value nearly double, released its highest earnings report ever, and has been valued at its highest point since the early 2000s. Novatel, meanwhile, Sierra Wireless’s main competitor in the Western Hemisphere, has stayed stagnant. There is a reason that the two largest companies in the same industry have dramatically different valuations, but it is not likely to stay that way for long.

Sierra Wireless and Novatel specialize in mobile computing and machine-to-machine (M2M) communications products that work over cellular networks. Primarily, the companies sell 2G, 3G, and 4G mobile broadband wireless modems, routers, and gateways as well as software, tools, and services. The brands have traditionally focused efforts into expanding its role in a variety of industries, including automotive, energy, healthcare, networking, security, and infrastructure, just to name a few.

Since the mobile broadband boom of the early 2000s both companies have vied for control of an exponentially expanding market. Originally, the focus of Novatel and Sierra Wireless was retail consumers, i.e. the businessman on-the-go. The companies competed for contracts with Tier-1 Carriers like Verizon and Sprint, and both had multiple devices active across several US Carrier networks.

Towards the end of 2003, however, the two company’s business plans diverged on a fundamental level.  Sierra Wireless, in August 2003, completed an acquisition of privately held, high-speed CDMA wireless modules supplier, AirPrime. This would mark the onset of a 10-year strategy, conceived by Sierra Wireless, to move away from their traditional retail-centric product development business model. Novatel, meanwhile, stuck to its guns, so-to-speak. Since 2003, Novatel has filed for more than twice as many retail product patents, won contract after contract with CDMA and GSM carriers, and has released a new MIFI Hotspot or USB modem almost every 6 months.

In 2007, Sierra wireless announced its purchase of California-based AirLink Communications, a privately held developer of high-value fixed, portable, and mobile wireless data solutions. The following year, Sierra announced another acquisition. This time, it was the assets of Junxion. Junxion, based in Seattle, was a producer of Linux-based mobile wireless access points and network routers for enterprises and government customers. Three months later, the company made a bid to acquire Wavecom, a French M2m wireless technology developer. This sale was complete for approximately $275 million.

This 5-year period, from 2003 to 2008, saw declines across the board for Sierra Wireless. The question being asked by consumers, and shareholders alike, was why is this company not investing more in the retail space, which at the moment is booming? The company still had massive assets tied up in its Retail and Carrier dependent, AirCard division. Yet, no one at Sierra Wireless was pushing the boundaries of what the mobile hotspot could do like Novatel Wireless was. Novatel, at this point, had seen its company’s valuation steadily rise over 5 years, and were in position to wrestle complete control of the market from Sierra Wireless. And, it would seem by the end of 2012, Novatel had done all but that.

On January 28th, 2013 it was announced that Sierra Wireless had entered an agreement to sell all of its assets and operations related to its Retail AirCard business to NETGEAR for the modest sum of $238 million in cash.

While some were flummoxed by the move, (Why would a company sell its core business?), Sierra thrived as a result. They used the cash from the deal to strengthen the acquisitions they had made over the previous ten years. The twist in the story is that leadership at Sierra Wireless had realized long ago that the future of mobile broadband was not retail, but M2M. In 2003, companies were already looking for more a more stable means of wireless communication for integrated devices. The wireless module was the solution. With the acquisition of AirPrime, over 10 years ago, Sierra Wireless had already set the foundation for dominating the module market as they purchased one of the few western manufacturers. Subsequent acquisitions only served to strengthen that position.

Now, as the module has become all the rage, and WIFI has becomes more widely available, the USB Modem and Hotspot retail market has begun to fade. Novatel, which for nearly a decade, capitalized on the retail-carrier distribution model, is left to pick up the pieces of a collapsing market. Last year saw the largest decrease in sales within the mobile broadband retail space (17%), and API Research just stated they expect another 24% loss in the 2015. Meanwhile, the M2M market is booming. The number of connected devices is expected to breach 150 Million next year, with exponential growth expected after that.

Furthermore, the recent AWS spectrum auction by the FCC, that was expected to fetch $10 Billion in revenue, recently eclipsed the $40 Billion mark. In many ways, this astronomical price is based on speculation. Cellular Carriers are the new Railroad Tycoons – speculating on space that they hope to one day develop. This spectrum specifically, is expected to increase the amount of space the carrier has to carry its signal. More to the point, the space is needed specifically for M2M connections, as there are so only so many broadband and cellphone users. M2M offers an opportunity for Carriers to increase their user base as instead of only one line per user, one household may have up to 10 separate devices connected via cellular data. The recent surge in the stock of Sierra Wireless is a direct result of such speculation. This is due to the fact that Sierra Wireless is the only company with infrastructure already in place to provide the number of embedded modules and solutions needed to keep pace with the expected demand. Furthermore, the 10+ years of experience they have in a space that has barely been around for 3 years, only serves to increase consumer confidence.

But don’t sleep on Novatel.

The benefit of shifting focus towards M2M and away from retail is obvious. Shareholders of Novatel recently moved to oust their CEO and replace him with a more forward thinking leader. Recent deals with M2M solutions providers illustrate Novatel’s commitment to challenging Sierra Wireless’s control of the M2M and IoT (Internet of Things) market. While they may fail and making serious run at their western competitor, the reality is that the market is huge and there is a ton of space for competition.

According to ABI Research M2M application security will see strong growth over the next five years, with global revenues hitting $198 million by 2018. According to the independent wireless analyst firm Berg Insight, the number of cellular network connections worldwide used for M2M communication was 47.7 million in 2008. The company forecasts that the number of M2M connections will grow to 187 million by 2014. A research study from the E-Plus Group shows that in 2010 2.3 million M2M smart cards will be in the German market. According to the study, this figure will rise in 2013 to over 5 million smart cards. The main growth driver is segment “tracking and tracing” with an expected average growth rate of 30 percent. The fastest growing M2M segment in Germany, with an average annual growth of 47 percent, will be the consumer electronics segment. In Quebec, Rogers will connect Hydro Quebec’s central system with up to 600 Smart Meter collectors, which aggregate data relayed from the province’s 3.8-million Smart Meters. In the UK, Telefonica won on a €1.78 billion ($2.4 billion) smart-meter contract to provide connectivity services over a period of 15 years in the central and southern regions of the country. The contract is the industry’s biggest deal yet. The industrial M2M market is undergoing a fast transformation as enterprises are increasingly realizing the value of connecting geographically dispersed people, devices, sensors and machines to corporate networks. Today, industries such as oil and gas, precision agriculturemilitary, government, smartcities, manufacturing, and public utilities, among others, utilize M2M technologies for a myriad of applications. Companies such as FreeWave Technologies, Inc., and others have enabled complex and efficient data networking technologies to provide capabilities such as high-speed data transmissionmobile mesh networking, and 3G/4G cellular backhaul. These features allow large-scale operations to develop secure communication networks in difficult areas such as remote, hard-to-reach locations.

The M2M revolution is a worldwide phenomenon, and Sierra Wireless is in a position to capitalize early. However, the pie is so large, and so wide reaching, any company, with any traction at all, stands to benefit in the coming decade.