Yesterday, after market close, Novatel Wireless Inc. (NVTL) declared disappointing fourth quarter 2009 financial results. The company’s first quarter 2010 outlook is more lackluster due to lower average selling price (ASP) and weak seasonality. In the after-market trade in NASDAQ, the stock price of Novatel tumbled 76 cents (10.34%) to $6.59.
 
Fourth quarter total revenue of $88.64 million was up 36% year-over-year but declined 6% sequentially. Quarterly revenue was also well below the Zacks Consensus Estimate of $92 million. On a GAAP basis, net income in the fourth quarter was $0.95 million or an income of 3 cents per share compared to a net loss of $3 million or 10 cents in the prior-year quarter. However, the quarterly EPS of 3 cents is significantly below the Zacks Consensus Estimate of 8 cents.
 
Quarterly gross margin was 26.2% compared to 11.8% in the year-ago quarter and 31.6% in the previous quarter. Operating expenses, in the same quarter, were $22.4 million compared to $14 million in the prior-year quarter and $22.6 million in the previous quarter.
 
During the fourth quarter 2009, Novatel generated $5.5 million of cash from operations compared to $3 million in the year-ago quarter and a record high $28.3 million in the previous quarter. Quarterly free cash flow (cash flow from operations less capital expenditures) was $3.4 million compared to $1.2 million in the prior-year quarter and $26.9 million in the previous quarter.
 
At the end of fiscal 2009, Novatel had approximately $176 million of cash and marketable securities on its balance sheet compared to $143.2 million at the end of the previous year. The company is debt-free.
 
Outlook
 
Management has given guidance that the company’s first quarter 2010 revenue will be $70 million. Gross margin will be 24%. Loss per share on GAAP basis will be 13 cents.
 
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