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Belden walks away from IoT deal

Network equipment maker Belden is dropping its $380 million bid for IoT module maker Digi International. Belden said its offer was based on projections that Digi’s annual earnings before interest, depreciation and taxes would hit $24 million. But Digi’s most recent earnings report suggests EBITDA will be less than half that. Late last week, Digi reported EBITDA of $2.8 million for its second fiscal quarter.

Digi reported revenue of $45.6 million for the second fiscal quarter of 2017 compared to $50.2 million in the second fiscal quarter of 2016. Net income was $1.3 million, compared to $2.1 million in the year-ago quarter.

Digi’s three biggest businesses are cellular routers and gateways, modules and boards with embedded intelligence, and networking gear, such as console and serial servers and USB connected products. All three of those businesses saw year-on-year sales declines in the most recent quarter.

“Our products business is continuing to transition from a custom provider to fewer offerings with broader applications,” said Digi CEO Ronald E. Konezny. “Although our results did not meet our expectations this quarter, we remain confident in our strategy and our growth prospects.”

Belden, however, is ready to move on. The company had already made two attempts to strike a deal with Digi, but Digi’s board was apparently unresponsive. Now the $2.3 billion dollar equipment maker may look elsewhere for an IoT partner.

Belden wanted to make Digi part of its industrial IT business, which markets routers and switches to the manufacturing, transportation and energy industries.

Digi’s board sees a different future for the company, and is focused on growing its service revenues. Within the last 19 months, Digi has made three acquisitions in the smart solutions space. The most recent was its $29 million acquisition of Smart Temps.

Image source: Digi International

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