Itron’s deal to acquire cellular-networking company SmartSynch is a smart move by the big meter maker, helping bring an increasingly important communication technology in-house.  Besides helping to validate cellular as a supplement to various RF mesh technologies, it also reflects market reality.  Cellular technology is now an efficient and cost-effective alternative to RF mesh in some cases, and utility operators now recognize this.

Moreover, Itron is not alone in seeing the value and future of cellular solutions.  Recently, Silver Spring Networks launched its latest version of smart grid network technology, Gen4, which allows a utility to mix in cellular if it wants.  And Cisco recently unveiled its latest network architecture that encompasses cellular, RF mesh and WiMAX.

The major communication suppliers in this space – including Itron with its OpenWay RF mesh technology – naturally want to promote their own RF solutions.  But cellular got a big lift last year when Consumers Energy (an electricity and natural gas provider in Michigan) chose SmartSynch’s cellular-based AMI system for 1.8 million electric customers.  That got people’s attention.

Now with SmartSynch under its wing, Itron can tell its utility customers, “We’ve got you covered.  If you need to build a private RF network, fine, we’ve got that.  But if you also need a cellular solution, we’ve got that, too.”

The purchase doesn’t come as a big surprise.  The two have been partners for more than a decade, and have contemplated a tie-up in the past, but could never agree on terms.  This deal, valued at $100 million, finally worked for both sides.  Over the years, privately held and venture-backed SmartSynch had raised an estimated $91 million.  But its prospects for an IPO were dim, and barring an acquisition, it was likely faced with having to go back to VCs for more funding.  The choice was fairly clear: take the Itron deal and play with the big boys, or shuffle along.

The deal also highlights the following:

• The growing importance of cellular for AMI, supplementing its traditional strength in commercial and industrial market and “hard to reach” meters
• Industry consolidation in the face of a shrinking North American AMI market
• The potential to leverage SmartSynch’s technology outside the U.S. with Itron’s global reach
• An interesting overlap between SmartSynch GridRouter and the Cisco router developed in partnership with Itron (and used at BC Hydro)

Itron CEO LeRoy Nosbaum, who came out of retirement last September to get Itron’s house in order, has put another arrow in his quiver as he moves the company forward.  And, quite clearly, this deal moves cellular up the food chain.