Novatel's MiFi 2200 - A Story to Watch Closely

On May 17^th Verizon (VZ) will introduce its wireless broadband product called the MiFi 2200. I first heard about the device in a New York Times article from May 6^th written by David Pogue. CNBC then featured it later that day. The MiFi 2200 is a device made by Novatel Wireless (NVTL), and according to Novatel,

lets customers create a personal Wi-Fi cloud capable of sharing the reliability and high-speed internet connectivity of the Verizon Wireless 3G Mobile Broadband network with up to five Wi-Fi-enabled devices such as notebooks, netbooks, cameras, gaming devices or portable media / MP 3 players.

The MiFi 2200 is similar to home networking devices which broadcast a WiFi signal. Mr. Pogue demonstrated the device on CNBC. It is small, fits easily into a pocket and looks like a slim cell phone. It looks easy to operate as there is one power button, and has a four hour battery life. A password is attached to the bottom of the device. Mr. Pogue said that when he was trying out the device he was on an airplane tarmac and had the device in his pocket as he surfed the web on his lap top. He said the person next to him was amazed that he was able to pick up the internet from a device in his pocket. What is interesting about the MiFi 2200 is that it allows up to five simultaneous users to access the internet as long as the users are within 30 – 40 feet of the device.

The stock market has already picked up a whiff of the potential of the device as NVTL shot up last week from $7.75 to $10.19 after the article in the New York Times. The product is due to be released on May 17th. Looking at Novatel’s fundamentals from Yahoo Finance, its market cap is $302 million, trailing twelve month revenues are $304 million, shares outstanding are 30.4 million. It has cash on the balance sheet of around $118 million, trailing twelve month EPS of -$0.18, EBITDA of $1.2 million, and virtually no debt. The trailing price to sales ratio is around 1. However, as noted above they are not earning any money and EBITDA is barely positive. The company has about 300 employees and is located in San Diego.

Verizon was involved in the development of this product. Here is a quote from the from the Chief Marketing Officer the Novatel press release,

With projected growth rates of over 30 percent for Wi-Fi mobile phones, MiFi will be of great benefit to both business customers and consumers. It gives customers the flexibility to transform their Wi-Fi-enabled consumer electronics into Mobile Broadband devices and to choose how and when they need to be connected at a price that will match most budgets.

The device will sell for $100 after a $50 rebate and the Verizon monthly fees range from $40 to $60. I do not own shares of NVTL nor does the firm I work for, but we will be watching this story very closely to see if the considerable buzz surrounding this product will match reality of product sales in the market place. The device could be the catalyst that the company and the stock need to get going. William O’Neill, legendary stock trader, has spoken of the need for something new when considering a stock purchase. This could be the ‘new’ device for NVTL. If there are lines out the door like there were when the Apple (AAPL) iPhone was released Novatel may have some legs. At 1 x revs, this is definitely a story to watch closely.

Here is a picture of the MiFi 2200 from Novatel’s web site.

The article was written by Tom Henderson, analyst at JBH Capital.

Disclosure: I do not own NVTL nor VZ, and neither does my firm.

Comments

[User 420870:]

MIFI is becoming a household name

We need a follow up story...most Verizon stores are selling the MIFI as fast as they get them. Mifi selling in Europe under Movistar brand by Telefonica.very low data rates could be used there in apartments and small homes as a sole connectivity device..Sprint launching shortly...this has to be huge news for such a small company.

May 27 07:05 PM