Itron Inc. (ITRI) – Part 2 – Business Issues

The table summarizes Itron’s acquisitions over the years:

Date	Name	Acquisition Amount	Product/Technology
3/2002	LineSoft Corporation	$43.5M – half cash, half stock (848,870 shares issued)	Transmission and Distribution software solutions – optimizes the construction/rebuild of transmission and distribution lines.
10/2002	Regional Economic Research (RER)	$14.3M cash. Additional $3.7M earn out cash paid over 2 years as revenue targets were exceeded	Energy consulting, analysis and software services and associated software.
10/2002	eMobile Data Corporation	$9.4M cash	web-based workforce management solutions.
3/2003	Silicon Energy	$71M cash	Enterprise Energy Management Software targeted for both utilities and large energy users. Provided company foothold into the large energy user area. Had ~$15M revenue.
7/2004	Schlumberger’s Electric Meter (SEM) Business	$256M Cash	market share in residential electronic meter space. Had $229M revenue.
4/2006	Quantum Consulting	$4.5M Cash	Consulting services in energy efficiency, planning design, and market research.
6/2006	ELO Systemas	$3.85M Cash	AMR Technology and related manufacturing and service in Brazil.
11/2006	Flow Metrix, Inc.	$13.6M Cash	Leak detection for underground pipelines to complement fixed network water products.
4/2007	Actaris Metering Systems	$1.7B Cash	Gained breadth in the gas & water metering area along with geographical reach in Europe.

Itron is a globally diversified company and underscored it further with the Actaris acquisition this year. Comparing revenue numbers prior to acquisition Actaris was bigger than Itron. Blending the unique identity of the two companies will require time and could, in the meantime portray haphazard coordination at the helm. Eventually, the products and geographical diversification Actaris provides should enable Itron to navigate markets that were previously a challenge to charter. This is Itron’s gamble at putting resources for gaining resources.

Itron was able to accommodate almost all of the various purchases by combining cash generated from the business with an accumulated debt of $1.6B. For the LineSoft acquisition the company paid half in stock and for funding the Actaris acquisition 4.1 million additional shares were issued.

The market sector that Itron is trying to tap into is sprawled out. To uniquely address the various categories requires a breadth of products which can be arduous to develop or assemble. The rapid pace of acquisitions has helped Itron gain popularity in the market. However, they encounter the risk of spreading themselves too thin in some of these areas. Continuing the aggressive acquisition strategy along with organic growth by developing a culture of strong R&D internally is the right strategy to go forward. In the last few years, Itron has proved they can do the former successfully but for the latter part, the jury is still out.


Itron (ITRI) Analysis:

1. Itron (ITRI) - Part 1 - Introduction.
2. Itron (ITRI) - Part 2 - Business Issues.
3. Itron (ITRI) - Part 3 - Outlook.