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Trimble (TRMB) Acquires ISE to Boost Transportation Business


Trimble Navigation Ltd. TRMB, an original equipment manufacturer of positioning, surveying and machine control products, recently acquired a privately-held company, Innovative Software Engineering (ISE).

The financial details of the deal have been kept under wraps.

The company’s shares increased 39.8% in the last one year compared with the Zacks categorized Electronic Products Miscellaneous industry’s gain of 34.5%. This was largely backed by the company’s aggressive merger and acquisition strategy.

ISE Acquisition Complements Trimble's Portfolio

Acquisitions have helped Trimble in building a comprehensive portfolio, entering new markets and generating additional revenues.

Headquartered in Coralville, Iowa, ISE is an engineering and systems integration firm. The company provides Internet of Things and telematics solutions, enterprise mobility applications and other software solutions to businesses to help them in meeting their Electronic Logging Device (ELD) requirement.

The ELD rule is applied to most motor carriers and drivers who are required to maintain records of duty status (RODS). The rule applies to commercial buses as well as trucks and to Canada- and Mexico-domiciled drivers. The ELD rule helps in increasing the efficiency of roadside law enforcement personnel in reviewing driver records. These rules help to protect commercial drivers from harassment. According to the Federal Motor Carrier Safety Administration (FMCSA), the ELD mandate is expected to impact 3.4 million drivers across the U.S.

The acquisition, effective immediately, will extend Trimble’s capabilities in serving its customers in the transportation business. The deal will focus on advanced technologies and implementation solutions for better fleet management. It will enable Trimble to provide its customers with robust and compliant ELD solution.

Post acquisition, ISE businesses will become a part of Trimble's Transportation Segment.

Bottom Line

The acquisitions are part of Trimble’s bid to expand its international business, while sustaining focus on commercial applications. These being more macro-sensitive, allow a stable revenue stream and better profits.

Trimble has added a large number of companies in the last few years. Only last month, it acquired Muller-Elektronik, a German-based company which specializes in implement control and precision farming solutions. In 2014, 2015 and 2016, it acquired 10, five and three companies, respectively, as well as important assets of several others to complement its current business and capabilities.

These acquisitions are small in comparison to Trimble, so there have been no integration issues. Instead, the acquisitions facilitated market expansion and revenue buildup. The company also forms joint ventures to build positions in strategic areas. We expect acquisitions to remain an important growth driver going ahead.

Other Stocks to Consider

Currently, Trimble has a Zacks Rank #2 (Buy). Some other stocks worth considering in the broader technology sector include KLA-Tencor KLAC and Applied Materials AMAT, each sporting a Zacks Rank #1 (Strong Buy), while Advanced Energy Industries, Inc. AEIS, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KLA-Tencor delivered a positive earnings surprise of 11.55%, on average, in the last four quarters.

Applied Materials delivered a positive earnings surprise of 3.35%, on average, in the trailing four quarters.

Advanced Energy Industries, Inc. delivered a positive earnings surprise of 10.46%, on average, in the trailing four quarters.

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