Novatel Wireless Inc.
) posted dismal financial results for the second quarter of 2013.
On a GAAP basis, net loss in the reported quarter was $7.9
million or a loss of 23 cents per share compared with the
year-ago net loss of $4.5 million or a loss of 14 cents. The
figure was wider than the Zacks Consensus Estimate of a loss of
16 cents per share.
Total revenue in the reported quarter stood at $91.1 million,
down 11% year over year and also below the Zacks Consensus
Estimate of $93 million. The year-over-year decline in revenues
was mainly attributed to subdued performance in the Mobile
Computing Product segment. Segment wise, Mobile Computing
Products generated revenues of $80.8 million, down 12.7% year
over year. M2M Products and Solutions revenues were $10.3
million, up 4% year over year.
Quarterly gross margin was 20.9% compared with 22.8% in the
year-ago quarter. Operating expenses in the reported quarter were
$26.8 million compared with $27.7 million in the year-ago
quarter. Quarterly operating loss was $7.7 million compared with
$4.4 million in the year-ago quarter.
During the second quarter of 2013, Novatel generated $4.6 million
of cash from operations compared with cash consumption of $5.2
million in the year-ago quarter. Free cash flow was $3.7 million
compared with a negative $7.6 million in the prior-year quarter.
At the end of the second quarter of 2013, Novatel had
approximately $46.1 million in cash and marketable securities on
its balance sheet compared with $54.1 million at the end of 2012.
The balance sheet of Novatel remains debt free.
Management provided revenue guidance for the third quarter of
2013 of $90-$100 million. Non-GAAP gross margin is expected to be
between 21% and 22%. Non-GAAP earnings per share are anticipated
in the band of a loss of 14 cents per share to 2 cents per share.
Novatel has launched its innovative touchscreen MiFi 2 product
). The company also launched MiFi 2 in collaboration with
Canada's largest LTE service provider, Bell Canada. Novatel also
plans to launch the next generation Wi-Fi hotspot with
) in the second half of 2013.
Recently, Verizon Wireless, a subsidiary of Verizon
Communications Inc. (VZ), launched Novatel's MiFi 4620 with an
expanded battery backup. Novatel further introduced a second
variant of MiFi called MiFi 5510L, with Verizon Wireless in the
first quarter of 2013, which is more cost effective.
However, we anticipate a gradual increase in competition for
Novatel's MiFi product line. Several versions of smartphones have
an inbuilt WiFi capability. Low-cost Asian manufacturers,
including ZTE and Huawei Technologies, have already launched
their own versions of intelligent mobile hot spots. This is
exerting competitive pressure on Novatel. Intensifying
competition for embedded modules is also a major concern for the
Currently, Novatel carries a Zacks Rank #3 (Hold).
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