EV-DO

Novatel catches tech flu

April 15, 2008: 11:16 AM ET

By Scott Martin

Novatel's big miss (NVTL) offers a glimpse of how slumping tech spending can pinch a weak player.

The wireless modem maker warned Monday that first-quarter sales came in below its target. Revenue was $91 million, or 9% below its previous forecast. Novatel will release its disclose its full earnings for the quarter on May 1.

Novatel blamed a product glitch for delays in its supplies of USB devices to a European customer, in a press release Monday after the market closed. But it became clear on a conference call with analyst that other factors weighed heavily on the San Diego tech shop. Among the problems in the quarter ended March 31 was the continued collapse of Sprint (S), a big buyer of so-called 3G modems. The company also saw sluggish demand from another key customer Dell (DELL), which has seen its own share of struggles in the PC market.

Novatel's product stumble, combined with weakening customers, left the door open for a third condition familiar to players in a cutthroat market beset by slowing orders -- losing business to a rival. In this case, wireless modem giant Sierra Wireless (SWIR) swept up business that Novatel expected to book. Novatel shares fell 21% Tuesday in the wake of the warning.

The triple treat was too much for Novatel's board. The company also announced that Peter Leparulo, the company's chairman and former chief, would take over immediately as CEO from Brad Weinert, who will continue as president.

"Everyone around this table agrees that better execution is required for this unforgiving market, where carriers are looking to maintain leaner inventories," Leparulo told analysts on a conference call Monday.

Brace for a rough ride, he seems to be saying, which is something tech investors and analysts fear they will be hearing a lot this earnings season.

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