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Deal Analysis: Nortek Buys 25% of MiOS/Vera

Mike Wolf MiOS Nortek

One of the worst kept secrets over the past year or two among smart home insiders has been that MiOS, the company behind the Vera brand of smart home gear and maker of the white label MiOS software platform for smart home manufacturers, has been looking for new funding or to get acquired. So when I saw the news this week that Nortek had invested in MiOS and picked up 25% ownership in the company, I wasn't so much surprised as intrigued by a partnership between one of the biggest manufacturers of Z-Wave smart home gear and one of the longest-standing IoT and smart home platform companies. 

Before we look at implications and what, if anything, this signifies about the broader smart home space, let's take a look at the deal specifics:

Nortek indicates they want to use MiOS technology to help create " develop lifestyle-driven solutions for the connected home across many of our businesses." Basically this means the MiOS IoT platform will power new products from a couple divisions, including Nortek Security and Control, the division within Nortek that makes a lot of the Z-Wave gear for security and smart home service providers. Nortek Security also is where the popular 2Gig line of products lives, so it's conceivable MiOS could be integrated into 2Gig panels at some point.

MiOS will continue as an independent company. In an interview with Twice, Lew Brown, the CEO of MiOS, had this to say: Our core strategy is unchanged. We will continue to support our current OEM partners as well as new ones. We also will continue to grow our Vera brand and recently launched our new multi-radio VeraPlus.” The announcement indicated that MiOS will continue to supply URC, a Nortek competitor.

Thoughts:

This deal makes a lot of sense from a synergistic standpoint, as MiOS/Vera uses Z-Wave as its core connectivity technology, while Nortek touts itself as the world's biggest maker of Z-Wave products.  MiOS/Vera has already had a working relationship with Nortek, with one example being Vera integration with Elan, one of Nortek's premium integrator-centric brands. 

One potential avenue for Nortek to go down with this deal is to expand its own DIY offerings, which it had started to dabble with early last year when it announced a Wink/GoControl home security kit. The kit seems to be the extent of the Wink/Nortek partnership, but I have to wonder going forward if it makes more sense for future Nortek DIY packages to use Vera as partner brand.

More broadly, I think just as we've seen with nearly every consumer hardware market (and in reality, Nortek makes lots of consumer gear, even if the vast majority is sold through service providers), software and cloud platform expertise is an increasingly important requirement to compete long term. Hardware devices and the experiences they deliver are as much reliant on the software they are integrated with as the hardware, and in MiOS/Vera Nortek is essentially getting a software/cloud platform for IoT and smart home they can start to integrate more deeply with across their various brands.

For MiOS, this will likely accelerate the company's growth in the service provider market for its IoT platform. The MiOS business has been the faster growing of the two businesses (Vera being the other business, which is a consumer-facing smart home brand), with deals like Orange as well as a variety of other focused service providers in the energy and aging-in-place verticals. Nortek is a big supplier into the security and managed smart home space, and has divisions that service elder care and other growth segments within connected home. 

As for what this deal signals about the smart home space, I think its probably an indicator of the types of deals we'll see more of in the future. Vertical integration plays like this happen as markets mature, and they tend to accelerate as service providers and other large customers start to consider stability and comprehensiveness as much as much as pricing when it comes to RFPs.

And to be clear, it's not that I think service provider IoT deployments are drying up, in fact it's just the opposite. More managed service offerings for a variety of use-cases and verticals are in the planning than ever. It's just that service providers have been burned by working with platform providers that either don't make it or pivot as they try to either save themselves or chase bigger opportunities. By working with a company like Nortek, MiOS has basically saddled up with one of the biggest hardware providers in the space and together that's a pretty compelling combination. 

UPDATE: I reached out to Nortek and MiOS to ask a few questions. Rob Halligan, Group VP of Marketing, Nortek Security, answered a few on behalf of Nortek Security, and Lew Brown, CEO of MiOS, responded to my question about MiOS. Below is Rob's answers and then Lew's answer to the one question I asked him:

Q: Will MiOS/Vera be packaged for any Nortek DIY offerings (maybe Duane question?)

Halligan/Nortek:

  •  Our strategy is professionally installed systems.
  • We are demo-ing 2GIG as our anchor platform and strategy
  • We are demoing both 2GIG and 3rd party control hubs as examples of control and automation within a smart house to demonstrate both 2GIG compatibility and control for our range of smart products as well as the same for other hubs, Vera used as a 3rd party example.
  • Part of our relationship with mios is a software and hardware relationship around future products. We are showing a sneak peek of potential products at the show that may include Mios technology should they eventually be released to the market


Q: Will MiOS be the cloud and software platform for control and automation within GoControl and other service provider offerings, or is it just one of many on the menu (and is that partially determined by your customer requirements, current tech, etc)

Halligan/Nortek:

  • Our strategy is to be open to a range of backend providers who want to support our systems, in order to provide our customers with choices; as example, this is the case of the support for 2GIG today.
  • Part of our relationship with mios is a software and hardware relationship around future products. We are showing a sneak peek of potential products at the show that may include Mios technology should they eventually be released to the market

Q: Will Vera product suite change with this deal, such as some Nortek product integrations or product bundles?

Lew: The Vera core strategy will not change. We have already been integrating GoControl and Nutone branded products and will continue to as their roadmap expands. We do not have any specific product bundles planned at this time but surely would look forward to any bundle that has a compelling consumer appeal.

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