Novatel Wireless Reports Record Fourth Quarter Results; Revenues of $33.4 Million and Net Income of $0.17 per Share

SAN DIEGO, Feb 10, 2005 (BUSINESS WIRE) -- Novatel Wireless, Inc. (Nasdaq:NVTL), a leading provider of wireless broadband access solutions, today reported financial results for the fourth quarter and year ended December 31, 2004.

Revenues for the fourth quarter were $33.4 million, which is a 215% increase over $10.6 million reported in the same period last year. Based on record gross margins of 34.7%, net income applicable to common stockholders grew to approximately $5.2 million or $0.17 per diluted share -- the highest in the Company's history, which compares to a net loss applicable to common stockholders of $2.1 million or $0.23 per diluted share in the prior year period.

Revenues for the year ended December 31, 2004 were $103.7 million, a 207% increase from $33.8 million reported for the prior year. Net income applicable to common stockholders for 2004 was $13.7 million or $0.48 per diluted share which compares to a net loss of $16.7 million or $2.14 per diluted share for 2003.

"We believe that Novatel Wireless is clearly establishing itself as the world leader in 3G wireless data cards, with the most sales, the broadest product offering, the most advanced technology and the widest customer base, selling to the vast majority of the leading wireless carriers in the world," commented Peter Leparulo, Novatel Wireless' Chief Executive Officer. "Fourth quarter results, which were the best in Company history, reflect record sales of UMTS products in Europe, initial sales into the world's largest wireless operator and our entry into the EV-DO market. During the quarter, we shipped to 10 carriers in nine markets and are encouraged by recent sell-through data, as many carriers are just now rolling out widespread access to their 3G product offerings. With two important new product introductions in late December, we are well positioned to enhance our leading market share in 2005."

"At the same time, we are embarking on the most ambitious research effort in the history of the Company," added Mr. Leparulo. "We plan on introducing over eight new products in 2005, as we move into next generation technologies like HSDPA, enhance our position in EV-DO, and introduce new 3G form factors and embedded solutions. As importantly, we believe we will more than double our addressable market, with innovative advanced products like our newly introduced Ovation(TM) line. Targeted at the European market, Ovation will allow wireless carriers to offer a truly differentiated bundle of high performance, less expensive broadband Internet, local and international calling. Given the current lag in broadband deployment in Europe and the high expense of wireline local and international calling, we believe Ovation will be a compelling product in the hands of some of the continent's leading companies and brands."

    Recent highlights include

    --  In November, Novatel Wireless announced the introduction of
        the Ovation(TM) Family of 3G Multimedia Application Consoles
        for Enterprise, SOHO, and Residential Users. The Ovation
        Family is a portfolio of stand-alone desktop consoles that
        unifies WWAN, WLAN and/or VoIP to provide cost-effective high
        speed wireless broadband access, optimal call routing and the
        delivery of multimedia applications.

    --  During the fourth quarter, the Company expanded its presence
        in Asia with the announcements that its Merlin U530(TM) was
        being offered by CSL, a leading wireless carrier in Hong Kong,
        and SingTel, one of Asia's largest wireless operators.

    --  In the fourth quarter, Novatel Wireless also announced the
        availability of its quad-band Merlin U630(TM) Wireless PC Card
        Modems. The Company began shipping these products in the
        fourth quarter to Vodafone operating companies, including
        Vodacom, South Africa's leading mobile operator.

    --  In January, Verizon Wireless and Novatel Wireless announced
        the availability of the Novatel Wireless V620, a next
        generation broadband wireless PC Card for Verizon Wireless' 3G
        EV-DO Network.

    --  Last week, Novatel Wireless announced the introduction of the
        Expedite EV620(TM) EV-DO PCI Express Mini Card designed for
        turnkey integration of broadband network connectivity.

    --  In January, the Company also strengthened its Board of
        Directors with the addition of independent director Dr. John
        Davis, a telecommunications pioneer.

"Gross margins increased to a record 34.7%, reflecting in part a favorable product mix during the quarter," explained Dan Halvorson, Chief Financial Officer of Novatel Wireless. "Moving forward, we expect to continue building our R&D and sales and marketing effort, while also entering into initial volume deployment of our EV-DO and quad-band UMTS product lines in Q1. At December 31, 2004 our total cash and investment balance was $81.2 million or $2.81 per share, reflecting impressive positive cash flow from operations of $6.5 million for the fourth quarter of 2004."

Novatel Wireless will host a conference call for analysts and investors today to discuss its quarterly results at 5:00 p.m. ET on February 10, 2005. For parties in the United States and Canada, call 1-800-240-2134 to access the earnings call. A live Web cast of the conference call will also be accessible from the "Investor Relations" section of the Novatel Wireless Web site (www.novatelwireless.com). Following the live Web cast, an archived version will be available on the Novatel Wireless Web site.

About Novatel Wireless, Inc.

Novatel Wireless, Inc. is a leading provider of wireless broadband access solutions. Novatel Wireless' Merlin(TM) PC Cards, Expedite(TM) Embedded Modems, Freedom Box(TM) Ruggedized Modems, MobiLink(TM) Communications Software Suite, Ovation(TM) 3G Multimedia Application Consoles and Conversa(TM) Software Suite enable high-speed wireless access to personal, corporate and public information. The company delivers innovative 3G solutions to operators, distributors and vertical markets worldwide. Headquartered in San Diego, California, Novatel Wireless is listed on NASDAQ: NVTL. For more information on Novatel Wireless visit www.novatelwireless.com. (nvtle)

(C) 2005 Novatel Wireless. All rights reserved. The Novatel Wireless logo, Merlin, Merlin U530, Merlin U520, Expedite, Freedom Box, Ovation and Conversa are trademarks of Novatel Wireless, Inc. All other brands, products and company names mentioned herein are trademarks of their respective holders.

Note Regarding Forward Looking Statements

Some of the information presented in this release is forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Although Novatel Wireless believes that the expectations reflected in such forward-looking statements are reasonable, it cannot guarantee future results, performance or achievements. Certain factors that could cause actual results to differ materially from Novatel Wireless' expectations are set forth as risk factors in the Company's SEC reports and filings. Included among these factors are the future demand for wireless access to data, the future growth of wireless wide area networking, changes in wireless transmission standards and technologies, continued acceptance of and market demand for Novatel Wireless' products, dependence on intellectual property rights, dependence on a small number of customers, and the Company's general business and strategy, including plans and expectations relating to technology, product development, strategic relationships, customers, manufacturing, service activities, international expansion, sales initiatives and gross margin and cost containment initiatives. These factors, as well as other factors detailed from time to time in the Company's SEC reports and filings, could cause actual results to differ materially. Forward-looking statements are not guarantees of performance. Novatel Wireless assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

                        NOVATEL WIRELESS, INC.
                      CONSOLIDATED BALANCE SHEETS
                              (unaudited)

                                             As of December 31,
                                            2004            2003
                                        -------------   -------------

ASSETS

Current assets:

Cash and cash equivalents              $  16,486,000   $   3,942,000
Marketable securities                     36,591,000               -
Restricted cash                                    -         635,000
Accounts receivable, net                  14,061,000       8,986,000
Accounts receivable - related parties              -         399,000
Inventories                                9,653,000       2,349,000
Other current assets                       2,182,000       1,378,000
                                        -------------   -------------
Total current assets                      78,973,000      17,689,000

Property, plant and equipment, net         4,476,000       1,915,000

Marketable securities                     28,144,000               -

Intangible assets, net                     4,620,000       4,629,000

Other assets                                 110,000         188,000
                                        -------------   -------------
                                       $ 116,323,000   $  24,421,000
                                        =============   =============


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                       $   5,952,000   $   6,730,000
Accrued expenses                           7,962,000       1,179,000
Restructuring accrual                        573,000       1,222,000
Deferred revenues                            531,000       6,218,000
Current portion of capital lease
 obligations                               1,127,000          82,000
                                        -------------   -------------
Total current liabilities                 16,145,000      15,431,000


Stockholders' equity:

Common stock                                  29,000          13,000
Additional paid-in capital               333,945,000     256,253,000
Accumulated other comprehensive
 income                                     (336,000)              -
Deferred stock-based compensation                  -        (142,000)
Accumulated Deficit                     (233,460,000)   (247,134,000)
                                        -------------   -------------
Total stockholders' equity               100,178,000       8,990,000
                                        -------------   -------------

                                       $ 116,323,000   $  24,421,000
                                        =============   =============


                        NOVATEL WIRELESS, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (unaudited)


                   Three months ended         Twelve months ended
                ------------------------- ---------------------------
                        December 31,               December 31,
                        ------------               ------------
                    2004         2003          2004          2003
                 -----------  -----------  ------------  ------------

Revenue         $33,448,000  $10,604,000  $103,727,000  $ 33,815,000

Cost of revenue  21,857,000    7,786,000    69,780,000    27,942,000

                ------------ ------------ ------------- -------------
  Gross margin   11,591,000    2,818,000    33,947,000     5,873,000
                 -----------  -----------  ------------  ------------

Operating costs
 and expenses:

Research and
 development      3,334,000    1,447,000    10,625,000     6,118,000
Sales and
 marketing        1,577,000      669,000     4,739,000     2,693,000
General and
 administrative   1,551,000      850,000     5,138,000     4,068,000
Restructuring
 charges                  -      414,000             -       828,000
                 -----------  -----------  ------------  ------------
Total operating
 expenses         6,462,000    3,380,000    20,502,000    13,707,000

Operating
 income (loss)    5,129,000     (562,000)   13,445,000    (7,834,000)

Other income
 (expense):

Interest income     479,000        8,000       927,000        44,000
Interest expense    (26,000)  (1,392,000)      (56,000)   (3,939,000)
Other, net          (64,000)      92,000      (148,000)       91,000
                 -----------  -----------  ------------  ------------

Income (loss)
 before income
 taxes          $ 5,518,000  $(1,854,000) $ 14,168,000  $(11,638,000)

Provision for
 income taxes      (349,000)           -      (349,000)            -
                 -----------  -----------  ------------  ------------

Net income
 (loss) after
 taxes            5,169,000   (1,854,000)   13,819,000   (11,638,000)

Accretion of
 dividends and
 beneficial
 conversion
 features
 pertaining to
 preferred stock          -     (214,000)     (145,000)   (5,079,000)

Net income
 (loss)
 applicable
 to common
 stockholders   $ 5,169,000  $(2,068,000) $ 13,674,000  $(16,717,000)
                 ===========  ===========  ============  ============

Per share data:

Net income
 (loss) per
 common share:
Basic           $      0.18  $     (0.23) $       0.57  $      (2.14)
Diluted         $      0.17  $     (0.23) $       0.48  $      (2.14)


Weighted average
 shares used
 in computation
 of per share
 calculation:
Basic            28,710,444    9,129,053    23,969,044     7,817,539
Diluted          30,876,249    9,129,053    28,863,361     7,817,539

SOURCE: Novatel Wireless, Inc.

Novatel Wireless
Dan Halvorson, 858-320-8821
www.novatelwireless.com
or
The Blueshirt Group, Investor Relations
Chris Danne/Rakesh Mehta, 415-217-7722
[email protected]
[email protected]

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