Both Itron (NASDAQ:ITRI) and Silver Spring Networks (NYSE:SSNI) have struggled to show consistent revenue growth and profitability. There are too many companies worldwide competing in a slow growing business in the highly regulated industries such as electric, water and gas. As smart meter companies have struggled to grow, they have tried to diversify into broader Internet-of-Things applications like managing street light in Smart City initiatives. But these initiatives are yet to prove that they will spur significant growth. Consolidation may be an option to drive down cost, increase scale and grow revenue.

Water, electricity and gas are essential to life. One would think given the increased environmental awareness and increasing demand due to population growth would lead to rapid adoption of smart meters that help monitor and inform use of resources and help drive conservation and new consumption models. Yet, smart meter adoption in the U.S. has either stalled or is growing very slowly and adoption in countries with vast populations, such as India, has been extremely slow. According to Silver Spring Networks, a little over half of the 150 million end-points in the U.S are managed by Advanced Metering Infrastructure (AMI).

Theft of electricity and the subsequent loss in revenue is a problem in India and smart meters could help reduce theft. Yet, India has been very slow to adopt smart meters. The Indian Government plans to install 50 million smart meters by 2020. Considering that India has potential for approximately 250 million smart meter end-points, that's a 20% market penetration over five years. Silver Spring Networks announced that CESC of India will use its smart meters and AMI infrastructure for 237,000 homes. There is also local competition in India from companies such as Larsen & Toubro.

China, which has the largest installation of smart meters in the world with 150 million units installed by 2015, has sourced smart meters from local manufacturers. That has left companies like Sensus, Itron and Silver Spring Networks with little or no business from China. In China, companies like Yantai Dongfang Wisdom Electric Co., Ltd., Wasion Group and Shenzhen Kaifa Technology have dominated the market.

Europe is targeting a deployment of close to 200 million smart meters for electricity by 2020. According to Berg Insight, Europe may achieve deployment of 150 million smart meters in 2017

Excessive number of global and local competition, coupled with regulatory and political hurdles have made consistent growth extremely difficult. On the surface, demographic, environmental, technological trends coupled with global size of the utilities market make smart meters and smart grid markets and the companies that operate in it look very attractive. But, in practice, lot of competitors entered the market highlighting the fact that the industry did not have a wide moat to keep out competition. This industry may be ripe for consolidation.[Prasanna Rajagopal]