Novatel Wireless Inc. (NVTL) recently entered into a Master Purchase Agreement with Comcast Corp. (CMCSA) through which the company will supply MiFi 2200 Intelligent Mobile Hotspots and Ovation MC760 USB modems to Comcast. At present, Comcast is rolling-out its 4G WiMAX-based High-Speed 2go network throughout the U.S. Both MiFi 2200 and MC760 are now commercially available through Comcast.
According to our view, launch of MiFi series of product in Comcast’s network is a major positive for Novatel. MiFi, the industry’s first Mobile Intelligent Hotspots, is an ultra-portable wireless device, creating an environment of high-speed Internet connectivity that can be easily shared between multiple users and Wi-Fi devices.
However, we anticipate gradually increasing competition for Novatel’s MiFi product line. Several latest versions of smartphones have in-built WiFi capability. Large firms like Qualcomm Inc. (QCOM), ZTE Corporation (ZTCOF.PK) and Huawei Technologies are on the verge of introducing their own version of intelligent mobile hot spots. In the second quarter 2010, MiFi sales declined by a whopping 26% sequentially.
In this critical situation, a client like Comcast becomes very crucial. As the largest cable MSO in the U.S., Comcast is selling this wireless service bundled with one or more of its popular Internet, phone and television products, providing mobile broadband connectivity wherever and whenever customers need.
Furthermore, business performance for Novatel depends on a limited number of customers who represent a significant portion of the company’s total revenue. During the second quarter of 2010, the top two customers accounted for more than 83% of total revenue. A business agreement with Comcast will help Novatel to reduce its customer concentration.
Novatel has already received the first carrier certification for its MiFi operating system (OS). The company has decided to launch MiFi OS with five tier 1 wireless operators in the fourth quarter 2010. This will enable software developers to use MiFi’s open CGI to access the on-board processing capabilities of this intelligent mobile hotspot.
We maintain our long-term Underperform recommendation for Novatel. Currently it is a short-term Zacks #4 Rank (Sell) stock.

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