Novatel Wireless Inc.
) reported adjusted loss per share of one cent in the fourth
quarter of 2011, narrower than the Zacks Consensus Estimate of a
loss of 8 cents and the prior-year quarter loss of 6 cents per
On a GAAP basis, net loss in the reported quarter was $3.4
million or 11 cents per share compared with a net loss of $0.9
million or 3 cents per share in the prior-year quarter.
Total revenue in the reported quarter stood at $109.8 million,
down 8% year over year and also below the Zacks Consensus Estimate
of $114 million. The year-over-year decline in total revenue was
mainly attributable to slowdown in revenue across all its major
Revenue by Product Category
Revenue from Mobile Broadband Devices was $93.9 million, down
11% year over year. Embedded Solutions revenue was $7.8 million,
down 29.7% year over year. Asset Management Solutions &
Services revenue was also down 12.9% year over year to 8.1
Gross margin was 24.5% in the quarter compared with 19.9% in the
year-ago quarter. Operating expenses (excluding amortization and
Goodwill impairment charges) in the reported quarter were $25.8
million compared with $27.4 million in the prior-year quarter.
During the reported quarter, Novatel generated negative cash
flow of $25.2 million from operations compared with a cash
consumption of $7.7 million in the year-ago quarter. Free cash flow
at the end of fourth quarter 2011 was negative $24.1 million
compared with $2.5 million in the previous quarter. At the end of
the fourth quarter of 2011, Novatel had approximately $75.4 million
in cash & marketable securities on its balance sheet compared
with $77.2 million at the end of fiscal 2010. The balance sheet of
Novatel remains debt free.
Management provided revenue guidance for the first quarter of
2012 in the range of $85 million-$110 million. Non-GAAP gross
margin is expected to be between 24% and 25%. Non-GAAP EPS is
anticipated in the band of a loss of 18 cents per share to profit
of 6 cents per share.
Despite beating the Zacks Consensus Estimate, Novatel continues
to incur losses. We believe that delay in product launch, stiff
competition from Low-cost Asian manufacturers such as ZTE and
Huawei Technologies coupled with weak customer base are responsible
for such dismal performance. So, in order to recover lost ground,
the company is offering innovative products like 4G LTE-capable
MiFi Intelligent Mobile Hotspot technology and the world's thinnest
4G LTE-enabled USB modem called Ovatio MC679 to large carriers like
Verizon Communication Inc.
). Such new product development coupled with a strong product
pipeline will create more opportunities for the company going
We, maintain our long-term Neutral recommendation on Novatel.
Currently, Novatel has a Zacks #3 Rank, implying a short-term Hold
rating on the stock.
Based in San Diego, CA, the company wireless connectivity
services to different devices like PC and smartphones. The company
gained popularity mainly due to its MiFi product lines.
NOVATEL WIRELES (
): Free Stock Analysis Report
VERIZON COMM (
): Free Stock Analysis Report
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