Novatel Wireless Inc. (NVTL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
Novatel Wireless reported poor financial results for the fourth quarter of 2013 as both the top and the bottom line lagged the Zacks Consensus Estimate. Consequently, the company slashed its outlook for the next quarter. Competition from low-cost Asian manufacturers coupled with a limited customer base will continue to act as headwinds. Management expects the company's 4G MiFi intelligent hotspots and Expedite embedded solutions to gain significant market traction going ahead. A debt-free balance sheet, continuous contract wins coupled with growing demand for telematics services will act as tailwinds for the company going forward. Meanwhile, the stock price has soared by a whopping 75% in the last year. We believe Novatel Wireless is currently fairly valued and therefore, reiterate our Neutral recommendation on the stock.

Overview:

Novatel Wireless Inc. NVTL is a San Diego, California-based provider of wireless broadband access solutions for the global mobile communications market. The company operates in the wireless data modem technology industry. The products include 3G wireless PC-card and ExpressCard modems, embedded modems, USB modems, Fixed-Mobile Convergence solutions, and communications software. These products are mainly used by wireless service providers, infrastructure solution providers, original equipment manufacturers, and distributors. Novatel also offers software engineering, integration and design services to customers to facilitate the use of its products.

Segment wise, Mobile Computing Products accounted for 89% of the total revenue in fiscal 2013. The remaining 11% was generated from M2M Products and Solutions. Within the Mobile Computing segment, MiFi accounted for 84.8% of the total revenue. Embedded Modules accounted for 10% and the remaining 5.2% was generated from the PC OEM business. Geographically, North America generated 95.2% of the total revenue and international markets accounted for the rest 4.8%. Major customers include Dell, AT&T, Comcast Corp., Telefonica S.A., Verizon Wireless and Sprint.

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