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Novatel Wireless Underperforms

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Novatel Wireless Inc. posted weak financial results for the fourth quarter of 2012, which fell below the Zacks Consensus Estimates. On a GAAP basis, net loss in the reported quarter was $14.9 million or 45 cents per share, wider than the year-ago net loss of $3.4 million or 11 cents per share. Adjusted loss per share of 44 cents in the fourth quarter of 2012 was much wider than the Zacks Consensus Estimate of a loss of 31 cents per share.

Total revenue in the reported quarter stood at $70.7 million, down 35.6% year over year and also below the Zacks Consensus Estimate of $72 million. The year-over-year decline in revenue was mainly attributable to subdued performance in the Mobile Computing Product segment. Segment wise, Mobile Computing Products generated revenue of $63.9 million down 36% year over year. M2M Products and Solutions revenue was $6.8 million down 31.8% year over year.

Quarterly gross margin was 19.2% compared with 23.4% in the year-ago quarter. Operating expenses in the reported quarter were $28.2 million, remaining almost same year over year. Quarterly operating loss was $14.6 million compared with $2.5 million in the year-ago quarter.

During the fourth quarter, Novatel used $7.1 million for operations compared with a cash generation of $25.2 million in the year-ago quarter. Free cash flow was negative $7.6 million in the reported quarter compared with $24.1 million in the prior-year quarter. At the end of 2012, Novatel had approximately $55.3 million in cash and marketable securities on its balance sheet compared with $75.4 million at the end of fiscal 2011. The balance sheet of Novatel remains debt free.

Financial outlook

Management provided revenue guidance for the first quarter of 2013 in the range of $83–$93 million. Non-GAAP gross margin is expected to be between 22% and 24%. Non-GAAP earnings per share are anticipated in the band of a loss of 19 cents per share to 7 cents per share.

Other Stocks to Consider

Novatel Wireless currently has a Zacks Rank #3 (Hold). Other stocks to consider in the wireless connectivity solutions industry include Sierra Wireless Inc. (SWIR - Free Report) , Synaptics Inc. (SYNA - Free Report) and Planar Systems Inc. . While Synaptics and Planar currently have a Zacks Rank #1 (Strong Buy), Sierra has a Zacks Rank #4 (Sell).

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