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Summary:

Novatel’s second quarter results Thursday included a 50 percent rise in overall revenue and showed off the tight relationship between better mobile broadband, Wi-Fi and consumers toting multiple broadband-enabled devices. But how will carriers and customers react to downloading more content at faster speeds?

MiFi-4510L-4

Novatel’s second quarter results Thursday included a 50 percent rise in year-over-year revenue and showed off the tight relationship between better mobile broadband, Wi-Fi and consumers toting multiple broadband-enabled devices. The company, which makes the MiFi mobile routers that use a cell signal and convert it to Wi-Fi, said in its earnings release that LTE was a strong contributor to sales of the hot spots. From the Novatel release:

Our LTE MiFi hotspot has quickly become the category leader. Our LTE Expedite embedded modules have achieved a number of tier-one OEM design wins for future product launches in the U.S. and around the world.

The company also anticipated sales of $105 million to $120 million for the coming quarter, which could help Novatel swing to profitability. This is far better than the lackluster earnings and worries Novatel was facing 18 months ago when it bet its success on hot spots. It also may be a sign that 4G broadband speeds are the key to mobile hot spot success. Last year, an analyst report from Infonetics offered the surprising conclusion that sales of personal hotspots had fallen in 2009, when only 3G versions of the credit-card sized devices were available.

So I’m willing to bet Novatel’s success is a combination of faster LTE speeds that rival old-school wireline connections at 5 Mbps to 12 Mbps down, and more Wi-Fi enabled devices that benefit from a broadband connection such as tablets. Throw in a lack of compelling multiple-device plans from carriers and more familiarity with the product, and LTE hot spots are a likely winner; a premise we concluded in our review of the MiFi 4510L.

Of course, for customers taking advantage of the devices, especially with multiple devices, they may experience some serious sticker shock if they go over their data plans. On the flip side, carriers may not be pleased by a preponderance of mobile hot spots, not only because they can take away revenue from folks buying additional plans, but also because Cisco estimates many of the devices that connect via a MiFi device consume much more data than smartphones. And we already know how carriers are viewing smartphone data consumption.

  1. Let’s cut the BS here Stacey – the real issue in the US is broadband caps. Until carriers eliminate the limits on how much people can use, mobile hotspots will NEVER take off.

    Want proof? Let’s rewind to September last year, Virgin Mobile’s Mifi was flying off the shelves quicker than they could supply hardware, and was showing out-of-stock on the company’s web store for weeks on end. Why? People were buying it because it came with an unlimited 3G plan that was priced very competitively. Unfortunately for VM, they shot themselves in the foot by later eliminating the attractive service, despite strong consumer demand.

    In contrast, Verizon’s $80/10GB LTE plan is a rip-off, and their marketing of the service a grand deception. There is nothing to suggest Verizon could not offer a more usable 30GB bucket for the same price or less, other than the fact that they are driven by corporate greed and out-of-touch with what people want.

    Kudos to Sprint/Clearwire for being the only real choice in 4G, with an unlimited plan priced under $40 and no up-front hardware cost for its business customers. That is one way to spur growth, and they are on to something. You can choose to overlook attention-to-detail, but it can be the difference between a long-term contract versus no sale!

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    1. Alex Karpowitsch Monday, August 8, 2011

      Bingo. But there is hope – we finally have the carriers where we want them. Apple brought the phone that muscled carriers out of stupid revenue sources (ringtones, other nonsense) and is forcing them to pour money into network upgrades.

      Things will get better, but it will take quite some time.

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