Novatel Wireless Inc (NASDAQ:NVTL) Disappoints Amid Competition From Asia


While other companies are taking advantage of demand for their products from the Asian markets, Novatel Wireless Inc (NASDAQ:NVTL) is facing stiff competition from manufacturers located in Asia.

The financial results:

The competition is so tough that Novatel Wireless Inc (NASDAQ:NVTL)’s financial results have been impacted. The company expects the effects of competition to carry forward in the next quarter also. Low-cost manufacturers in Asia as well as its limited customer base took a toll on the company’s top as well as bottom line. Revenues dropped by 7% y-on-y basis to $65.3 million and were far short of analysts’ expectations of $75 million. The margins also dropped to 18.4% against 19.2% reported for the same quarter last year. Operating expenses increased to $33.5 million against $28.2 million for fourth quarter last year. Though mobile computing products saw a decline of 10.8%, revenues from M2M were up by 22% generating $8.3 million in revenues.

The subdued outlook:

Novatel Wireless Inc (NASDAQ:NVTL) has another issue to contend with. Revenues from Mobile computing products account for 89% of the total revenues against 11% from M2M product segments. Such a heavy dependence on one segment is problematic particularly as the company expects its market share to shrink further. It is also left with only $24.5 million in cash and cash equivalents and though it expects this amount to be sufficient, doubts remain. On the positive side, the company expects M2M business to grow at a rate of 30% and above in 2014. It has the potential of generating revenues of $60 million. It will have to rely on cost cutting measures to support the profit margins. However, Novatel expects that the mobile computing business to stabilize in 2014 and also show signs of recovery.

Novatel Wireless Inc (NASDAQ:NVTL) expects revenues of $50 million to $54 million in the first quarter of 2014. Analysts had expected a higher figure; they were looking at revenues of $75 million.


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