Novatel to sell mobile broadband business for $50M, sharpen focus on the IoT

Novatel said it will sell its mobile broadband business to Hong Kong’s TCL Industries Holdings for $50 million as it hones its focus on the IoT.

Novatel emerged as a hardware vendor in the early days of the mobile web in the U.S., providing modems for the Palm Pilot among other things. But the company has increasingly moved away from hardware in favor of providing software and services for the IoT.

In October Novatel shook up its front office, abruptly firing CEO Alex Mashinsky and naming Sue Swenson as new CEO. Last month the company said it would cut 45 jobs and focus on higher-margin products that generate recurring revenue.

The TCL deal includes Novatel’s MiFi-branded hotspots as well as USB modem product lines.

"The sale of Novatel Wireless's mobile broadband business to TCL is the most transformative event in Novatel Wireless's history, and punctuates our period of metamorphosis," Swenson said in a press release. "Upon the closing of the transaction with TCL, Novatel Wireless will no longer sell any products it sold at the beginning of 2015.  We will have transitioned the company from a hardware-only business with approximately 80% of revenues tied to one customer into a predominantly SaaS, services and solutions business with thousands of customers generating recurring revenues.”

Those offerings include Novatel’s Ctrack telematics products including fleet management and asset tracking and monitoring, Swenson continued. The also include business connectivity offerings from Feeney Wireless, which Novatel acquired in April 2015.

Novatel said it will form a new holding company with a new operating structure in an effort to streamline the business, CFO Michael Newman said.

"Commencing in the first quarter after the closing of the transaction with TCL, we estimate that Newco will be generating approximately $90 million in annualized revenues, with non-GAAP gross margin of more than 60% and adjusted EBITDA margin of approximately 10%," Newman added in prepared remarks.

Shares of Novatel rose 31 percent in after-hours trading following the announcement of the deal Thursday, The Wall Street Journal reported.

For more:
- read this Novatel announcement

- see the Wall Street Journal report

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