Brian Griffin

Novatel, Sierra Wireless: Game Over

A company will never signal its own demise. I am led to believe that either they do not know that they are going to be priced out of the market or that they think they can compete at much lower price points.

I do agree that this may take some time to play out fully but the market tends to discount information 6-9 months in advance. Consumers will go for what works at a lower price any day. The lack of other best of breed competitors has been a function of the fact that this has been a very small market until now.

For an example of another best of breed company that was ruined when competitors entered their markets look no further than CSR LN and their bluetooth business. As soon as a market grows to a size where a BRCM or a QCOM feels that it is worth competing in, they will join in and compete on price.

SWIR and NVTL MUST diversify if they are to remain in business. They have purchased new businesses in the past and pursued new lines of revenue. These transactions are rarely reasons for stock prices to go up because a premium is usually paid and the uncertainties are many.

As for, SWIR's M2M business is close to 10% of their sales. This is hardly enough to help the company in the near term. Remember, if they quit this "low margin business" that means they are quitting on approx 25% of their revenues. That's a large hole to fill.

I have heard their conference calls and I am simply short because I believe that they represent overvalued companies with a catalyst on the horizon. I am far from infallible and if your research has led you to conclude that these stocks are good values then by all means purchase them. That is why the disclaimer appears on the site to do your own research.

Thanks for your comments and helping me to think about my positions differently.