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We upgraded our recommendation on Novatel Wireless Inc. to Outperform based on our believe that the company’s overall financials will improve in 2012 supported by huge market traction of  Novatel’s 4G products, especially the 4G MiFi intelligent hotspots and 4G Expedite embedded solution. The company is systematically upgrading its existing customers to its innovative 4G product suite.

Novatel’s diversification into machine-to-machine (M2M) intelligent asset management solutions and newly developed insurance telematics and fleet management products will further boost Novatel’s future growth. The company reported mixed financial results for the fourth quarter of 2011. Nevertheless, the company has an un-leveraged and healthy balance sheet, which will sustain its future innovations. Furthermore, the stock price has plummeted over 47% last year and is currently trading at an attractive multiple. 

Novatel introduced its first 4G LTE MiFi mobile intelligent hotspots and first embedded LTE solutions with Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Group plc. (VOD - Analyst Report). Currently, 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.

Novatel completed the acquisition of Enfora, a machine-to-machine (M2M) intelligent asset management solutions provider. Enfora has a long list of clientele including several enterprises, applications service providers, OEMs and distributors. This acquisition will place Novatel firmly in the fast growing M2M markets. Various industry sources estimated that mobile M2M market may reach $20 billion by 2014. Moreover, according to ABI Research, the numbers of global insurance telematics users are expected to grow at a CAGR of 90% to 89 million in 2017. This is a vast untapped market and generates huge revenue potential to Novatel.

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