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Novatel Wireless Inc. (NVTL - Analyst Report) has recently declared mixed second-quarter 2012 financial results where its top line beats the Zacks Consensus Estimate while the bottom line misses.

We believe the company’s overall financial condition will improve in the rest of 2012, driven by huge market traction of Novatel’s 4G products, especially the 4G MiFi intelligent hotspots and Expedite embedded solution.

The company is upgrading its existing customers to its innovative 4G LTE product suite. Diversification into machine-to-machine intelligent asset management solutions and newly developed insurance telematics and fleet management products will further boost Novatel’s future growth.

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.

On the flip side, intensifying competition for embedded modules is a major concern for Novatel. In addition to its traditional rival, Sierra Wireless, the company is facing significant challenges from newly launched products by large manufacturers, including Qualcomm Inc. (QCOM - Analyst Report) and L.M. Ericsson.

Qualcomm has launched its Gobi chipset that combines broadband modem technology for high-speed 3G networks with GPS functionality. Moreover, limited customer base may also act as a headwind for the company going forward. We, thus maintain our long-term Neutral recommendation on Novatel Wireless.

Currently, Novatel Wireless has a short-term Zacks #3 Rank (Hold) on the stock.

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