SiriusXM’s Telematics Branch Means Seriously Connected Cars

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The $530 million cash deal has closed between SIRIUS XM Radio Inc. (NASDAQ: SIRI) and Agero, Inc. SiriusXM announced Monday it had completed the acquisition of Agero’s Connected Vehicle Services division, and that the division at Sirius will now be called Sirius XM Connected Vehicle Services Inc. The acquisition is a boost for the telematics division at SiriusXM. Telematics in cars connects the driver, through the vehicle to technology. It is a growing industry, encompassing GPS navigation, traffic information, and for some cars, checking email or connecting to the internet.

The sale of Agero’s Connected Vehicle Services to Sirius was announced in August. Dave Ferrick, CEO of Agero, said in the press release it was because telematics has “become increasingly focused on integration and infotainment,” and “that SiriusXM is perfectly positioned to take these capabilities forward in this changing market.”

Ferrick went on to explain that spinning off this branch of its business allows Agero to “focus our resources in our roadside vehicle assistance, claims management, and information services which will allow us to best serve our clients and their customers in a fast-changing marketplace.”

Agero was able to cut ties with an increasingly diverging branch of its business, and SiriusXM gained access to a new market. In its press release, SiriusXM listed “Acura, BMW, Honda, Hyundai, Infiniti, Lexus, Nissan, and Toyota” as part of the market it would be providing services to through as a result of buying Agero’s telematics unit.

In Monday’s statement, Jim Meyer, CEO at SiriusXM, said the company was now “positioned to accelerate SiriusXM’s development of our connected vehicle services platform, supporting the rapidly expanding field of connected vehicle services and strengthening our ability to provide services over satellite and mobile networks.”

Bloomberg reported on the sale in August, after the terms were announced, and provided an excerpt from a research note by a Piper Jaffray equity analyst, James Marsh. “We expect telematics to develop into a meaningful business for Sirius XM over time, and also provide some comfort to investors that Sirius XM has something to gain from the connected car, rather than simply facing more audio competition,” the note read.

SiriusXM isn’t alone in diversifying business with telematics. Smartphones can also play a role in connecting car and driver through telematics. In June, Honda Motor Company, Ltd. (NYSE: HMC) announced it was developing a telematics app, “HondaLink”, to give drivers information about their car’s state of affairs. Acura, the luxury vehicle branch of Honda, had previously announced “AcuraLink” which will be available on 2014 models.

The growing presence of apps and smartphone-car interconnectivity is a boost for Apple, Inc. (NASDAQ: AAPL) as well. A report by ABI research predicts that smartphone integration systems for cars will swell to 35.1 million units by 2018. Approximately half, 49.8 percent, will be outfitted with Apple’s “iOS in the Car” technology. By growing its telematics business, SiriusXM — like Apple — is looking to profit off an increasingly popular feature for cars.

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