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Analyst Blog

We reiterate our long-term Neutral recommendation on Novatel Wireless Inc. (NVTL - Analyst Report). The company’s second-quarter 2011 financial results beat the Zacks Consensus Estimates. This was primarily due to significant increase in revenue supported by a huge market traction of Novatel’s newly launched 4G-enabled products, especially the 4G MiFi intelligent hotspots and 4G Expedite embedded solution. At present, the company is systematically upgrading its existing customers to its innovative 4G product suite.

In May 2011, Novatel introduced its first embedded LTE solution for Verizon Wireless. Verizon Wireless is a joint venture between Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Group plc. (VOD - Analyst Report). The Expedite embedded-module suite incorporates super-fast 4G data connectivity with tablets and laptops. Earlier, Novatel introduced its first 4G MiFi mobile intelligent hotspots with Verizon. MiFi 4510L provides backward compatibility with Verizon’s 3G networks. At present, Novatel is the only company, which can offer a full suite of LTE products across all forms of wireless data access medium, viz., MiFi Intelligent mobile hotspots, Ovation USB modems, and Expedite embedded modules.

Comcast Corp. (CMCSA - Analyst Report) is using MiFi 4082 Intelligent Mobile Hotspot of Novatel for its nationwide rollout of TVEverywhere service called “Xfinity Internet 2go”. The MiFi 4082 supports 4G WiMAX data transfer and enhances Comcast's entertainment offerings with connectivity for up to five Wi-Fi enabled devices.

However, Novatel is still suffering from net losses and management is yet to provide any timeframe when the company will again attain profitability. Further, Novatel is facing increasing competitive pressures from low-cost Asian manufacturers. Nevertheless, the stock price has plummeted more than 70% last year. We believe this low-level of current valuation may provide a cushion for further downslide of the stock price.

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