Ben Kuo: Brad, thanks for the interview. Can you give our readers an overview of Novatel and what you do?
Brad Weinert: We're based in San Diego, and are publicly traded on the Nasdaq as NVTL. We've been in business since 1996, and have been exclusively in the wireless data market, specializing in 3G technology. We're a global company, with presence worldwide. Our focus is on wireless data products, which allow you to connect to the Internet, to get email and data over cellular networks. We have a wide variety of products, including PC cards, express cards that you put into laptop computer, to fixed mobile convergence devices like LAN and WAN gateway for wireless broadband access to the Internet. We also have embedded modules. Some of our major customers are Dell, Panasonic, Toshiba, and Sony, along with Vodafone, O2, Orange, and other carriers in Europe. About sixty percent of our business is in North America, with the other forty percent worldwide. We're an OEM, which means all the stuff we do has someone else's name on it. For example, our cards are being branded by Sprint, which they are selling through their channels and to their customers.
Ben Kuo: It looks like this Sprint announcement is a pretty big deal for the company?
Brad Weinert: It's huge. EVDO Rev A is the new, next generation broadband service. Sprint is the very first to offer that, and we're the very first company to deliver product for EVDO Rev A commercially. If you're a technologist, the technology is great--but the benefit to most users is it provides much better performance, both on the uplink and downlink, and supports future uses like location based services and GPS. Those will be rolled into the product over time. Sprint is a very important customer to us, one of our largest customers, and likes working with us. They're very forward thinking--they're working on a newly announced strategy with WiMax, which is just coming out.
Ben Kuo: It seems like hardware providers like yourself seem to be in the background in this industry, with the carriers really dominating the market. Why is that?
Brad Weinert: It's an interesting business. It's a dual relationship--Sprint providing the service, and us providing hardware is pretty straightforward, and we actually do joint marketing and sales calls. We market the product with Sprint to pull through product, but Sprint really does drive it. Data is becoming more and more important to carriers, as they look to improve their RPU - revenue per unit. Data is a significant portion of that, and has an increasing role in that business. It gets more interesting, when you get into modules--our technology that can be embedded into laptops--and it becomes a 3-way relationship, with the carrier, Novatel, and a vendor like Dell. Dell becomes a channel when they're selling the product in laptops, and they get an activation bounty from a carrier like Verizon. It's really kind of a food chain that has evolved over time, and we all depend on one another. The truth is that carrier is the most important link in the chain, and the one that makes the largest investment, as well.
Ben Kuo: I understand that EVDO Rev A isn't quite out there yet, when will it hit full deployment?
Brad Weinert: Yes, it's in testing right here in San Diego, and the first cities will be available in the next quarter. The major rollout will be in 2007. It's been publicly stated that there will be 100 markets up and operational by 2007. We're really excited by the merger of Nextel and Sprint, because it gives us an even bigger footprint. We've already seen that in our numbers--Sprint sales have been increasing quarter over quarter. The new technology is really a competitive advantage. The other thing about Rev-A, above the old Rev-0 technology, is that it is capable of quality of service. This comes into play with Voice over IP, video conferencing, and video on demand. Things like that need guaranteed bandwidth. The drivers in this world of mobile computing is the ability to offer ubiquitous service, and also guarantee quality of service for things like Voice over IP on a commercial level. You can make calls now with freeware, but to get commercial grade quality services you need that quality. The other thing is that we now have things like location based services and GPS built into the product.
Ben Kuo: That's available in the product now?
Brad Weinert: Both autonomous GPS and assisted GPS. That's satellite plus network assist, which gives you in-building coverage. While it's not GPS that you could use to launch a missile, it does let you where you are in a building and provide a user a good idea of where they are, and perhaps what's available for dinner nearby.
Ben Kuo: It's interesting you mention location based services. What's your angle on the uptake of those kinds of services and adoption?
Brad Weinert: It's just starting. It's one of those tantalizing deals that have been out there, but no one has figured out how to make money on it. It's looking like it's mostly added value features. We're differentiating the product and working with partners to provide value added location based services features. There are some longstanding verticals, like inventory and asset control and navigation already established, and this is really meant to enhance the general user's experience.
Ben Kuo: EVDO has a number of competitors, what's your view on where it stands?
Brad Weinert: The real reality is that there are two other technologies that are close - HSPDA, which we are also in, and which we sell through Cingular and to the rest of the world. The rest of the world is not CDMA. WiMax also comes into play. I personally don't think you'll see a winner in the near future, unless you had all those carriers agree on a standard. Each has an advantage over others. If I was betting, I'd say that HSPDA would be used globally, CDMA in North America, and WiMax is the unknown. WiMax has very clear uses in fixed mobile/nomadic environments--the hotspots on steroids. Whether it ever translates into true mobile, we will have to see. In the next two years, I think you'll see all of the technology widely deployed as the whole market takes off. We're technology agnostics, and will do whatever makes business sense. We're in all three of those now.
Ben Kuo: I have run into people who say that standard WiFi will be prevalent enough to replace the need for wireless modems and data, but it seems like this isn't the case--it seems like you business is doing very well in the data modem side.
Brad Weinert: The problem with that, is that although WiFi is good in fixed mobile coverage for a delivery endpoint in a local area, it has never been driven to commercial success by a carrier like Verizon or Sprint. The only one who really tried this was T-Mobile in Europe, where they were pretty successful with a wide area and local area under a generalized rate plan. It has never been truly aggregated under a carrier plan -- ie unlimited WiFi with your cell phone. It's certainly all over my house, but it's not truly mobile. The real barrier to this is the cost. The technology is still expensive, and not where it needs to be yet.
Ben Kuo: Thanks!