Corporate Profile and Strategy
Novatel Wireless (NVTL) is a San Diego, CA-based provider of wireless broadband access solutions for the global mobile communications market. The company's products include Third Generation (3G) Wireless PC card modems, embedded modems, ruggedized modems and communications software. Novatel's primary customers include wireless operators and technology solutions providers, such as Sprint Nextel, Dell, Sony, Toshiba, Panasonic, Orange, Singtel, Telefonica, Telecom Italia Mobile, T-Mobile, Verizon Wireless and Vodafone.
Growth through Technology Diversification: Novatel has started reaping the benefits of its higher R&D expenditures that it incurred as a catalyst to diversify its business model. As a result, Novatel has become the leading provider of high-margin embedded modules to the original equipment manufacturers (OEM), in addition to maintaining its market share for wireless PC access cards. Furthermore, the company witnessed strong demand for its fixed-mobile convergence products as telecom service providers transform their infrastructure towards IP-based converged wireline/wireless networks. EV-DO Revision A and HSDPA (High-Speed Downlink Packet Access) offerings, along with portable USB (Universal Serial Bus) modems, are also receiving intriguing market acceptance, resulting in strong earnings momentum as carriers deploy 3G wireless networks on a global basis.
New Product Launches: To Novatel's credit, the company is one of the few suppliers that provide PC cards for notebook computers based on each of the main 3G technologies EV-DO, WCDMA and HSDPA. The company estimates that it has agreements and/or design wins with original equipment manufacturers representing well over 30% of the world's laptop computer market share. Recently, Novatel introduced a new wireless modem to be used with next-generation HSUPA (high-speed uplink packet access) and EV-DO Revision B networks. This new product will provide greater mobility, faster connectivity, and location-based services along with user-friendly installation techniques. Novatel launched its Ovation USB modems for HSUPA network with Tier-I telecom operators in the European markets. At the end of the third quarter, the company launched its revolutionary U727 ultra sleek USB modems for EV-Do Rev A networks. Novatel started shipments of ExpressCards to be used for EV-DO Revision A at SprintNextel as this technology may support more than 200 million users on wireless networks by the end of 2007.
Geographical and Client-Base Expansion: Novatel continues to diversify its business prospects with over 22 customers in 36 different countries now using its ExpressCard, USB modems, and embedded OEM solutions. During the third quarter of 2007, the company's customer base included Dell, Sony, Verizon Sprint, Orange, and Vodafone. This reduces Novatel's overall dependency on SprintNextel and Toshiba, although these two companies remain significant revenue generating customers. In addition, the company has business relationships with Panasonic, T-mobile, and Telefonica. Sales ramped up in the European and Asia-Pacific regions, fostering international revenue to represent 26% of total sales in the third quarter of 2007 (up from 23% last quarter), reducing the company's bookings concentration in the U.S. market.
New Business Strategy: Novatel also started its second phase of diversification by introducing end-to-end value-added applications and services to telecom carriers using Novatel's broadband mobile computing platforms. Wireless servers work within current carrier architectures and ensure secure communications, authentication, provisioning and billing across the entire wireless network. The client technology is to be supported on all Novatel wireless wide area network modules. The company is developing new software that will allow the user to be notified when incoming e-mail and calendar appointments are presented, even if the computer is in sleep mode. These value-added services have gained encouraging market traction, since they enhance wireless notebook capabilities, computer asset tracking, and allow operators to provide value added IP-based voice and multimedia applications to their end users.