Novatel MiFi to Face Challenge - Analyst Blog

MiFi, the legendary mobile intelligent hotspots of Novatel Wireless Inc. (NVTL) is under trouble. Recently, a Bloomberg report forecasted that Verizon Wireless (VZ) will soon start selling Apple Inc’s (AAPL) iPad with internal connectivity for its high-speed 3G networks.

As of now, Verizon is selling WiFi only iPads that require MiFi mobile intelligent hotspots. The report is quite surprising as Verizon started selling MiFi installed iPads only over last three months and recently the company declared that it will soon introduce 4G MiFi devices.

Apple’s iPad was first introduced exclusively with AT&T (T) for its 3G network. In order to counter AT&T, Verizon is using MiFi hotspots that will enable its 3G network access. Bloomberg reported that Verizon will now provide an embedded chip within iPad through which the users will be able to connect its 3G networks, which does not require MiFi.

We believe this is a serious concern for Novatel. MiFi currently constitute more than 42% of Novatel’s total revenue. Loss of a big customer like Verizon will definitely affect the company. Nevertheless, Verizon did not gave any specific date from when it will start selling its embedded iPads or whether the same technical innovation will be used for its newly introduced super-fast 4G LTE networks.

The market for broadband wireless access solution is emerging rapidly in terms of technological innovation and demand. Novatel’s product sales largely depend on the market dynamics for wireless access of enterprise networks and the Internet, which may be adversely impacted by alternative solutions.

We anticipate gradually increasing competition for Novatel’s MiFi product line. Several latest versions of smartphones posess in-build WiFi capability. Large firms like Qualcomm Inc. (QCOM), ZTE, and Huawei Technologies are on the verge of introducing their own version of intelligent mobile hotspots.

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