Novatel sells famous MiFi business to TCL
In the early years of this decade, Novatel was booming on the back of mobile broadband demand. Along with rival Sierra it branched out of its traditional module business to sell huge numbers of dongles, before they fell victim to tethered smartphones and improved laptop WiFi. Novatel then pioneered the personal hotspot – another technology which has now either been incorporated into the smartphone or commoditized by Chinese vendors like Huawei.
So Novatel is selling its former crown jewel, offloading the mobile broadband business to Hong Kong’s TCL Industries Holdings for $50m and, like Sierra before it, focusing mainly on the Internet of Things (IoT). The deal with TCL – which formerly acquired Alcatel’s handset business and brand – includes the famous MiFi-branded personal hotspots as well as USB dongle product lines.
Novatel has been boosting its software and services business in order to improve margins and value, and in October it fired CEO Alex Mashinsky and appointed Sue Swenson as CEO. Last month the company said it would cut 45 jobs and focus on higher margin products that generate recurring revenue.
“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 statement. “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 which include fleet management and asset tracking applications, plus business connectivity offerings acquired with Feeney Wireless in April 2015. Novatel said it will form a new holding company with a new operating structure to streamline its structure. This new company is expected to generate about $90m in annualized revenues, with non-GAAP gross margin of more than 60% and adjusted EBITDA margin of approximately 10%.