Inseego Corp.
Q1 2008 Earnings Call Transcript

Published: 1 May 2008

[Operator:]

Good afternoon, ladies and gentlemen. Thank you so much for standing by. Welcome to the Novatel Wireless first quarter 2008 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions) As a remainder, this conference is being recorded today on Thursday, the May 1, 2008. I will now turn the conference over to Ms. Julie Cunningham, Vice President of Investor Relations. Please go ahead.

[Julie Cunningham:]

Good afternoon everyone and thanks for joining us. The agenda for today's call is as follows. Peter Leparulo, Chairman and CEO will provide a business overview and Kenneth Leddon, Chief Financial Officer will review financial results. As a reminder, this conference call is being broadcast on Thursday, May 1, 2008 over the phone and the Internet to all interested parties. The information shared in this call is effective as of today's date and will not be updated. During this call, non-GAAP financial measures will be discussed. Reconciliations to the most directly comparable GAAP financial measures are included in our first quarter earnings release which is available on the Investor Relations page of our website at www.novatelwireless.com. The audio replay of this call will be archived there for 30 days. Today's discussion may include forward-looking statements. These forward-looking statements are not historical facts but rather are based on the company's current expectations and beliefs. The company's actual results could differ materially. Please refer to our SEC filing for a detailed discussion of potential risk. Now, I would like to introduce Peter Leparulo Chairman and Chief Executive Officer of Novatel Wireless.

[Peter Leparulo:]

Thanks Julie and thanks to all of you for joining us today. As we described on our April 14 call the first quarter results were lower than our expectations. We are in a strong market and there are many significant opportunities available for the company and we are disappointed we didn't deliver on that potential in the first quarter. With that being said we believe we have a strong financial to return the company to growth and to a performance level that you as share holders expect. To begin, revenue for the first quarter was $91 million. EPS on a GAAP basis was $0.14 per share and non-GAAP EPS was $0.17 per share. As we described earlier revenue was lower than anticipated due primarily to three factors; first, one of our very good partners in Europe delayed the launch of our MC 930D product into their network. We had already begun shipping these orders in volume in the new quarter. Secondly sales of our enterprise class MC 727 products were lower than expected at one key customer. However our first generation MCB 3000 products sold well during the first quarter and lastly we did not adequately execute both from an operations basis and with our sales effort, especially towards the end of the quarter. Never the less we believe that the overall market is experiencing solid growth and an aggressive market opportunity continues to grow. Wireless data has never been more important to wireless carriers and there is also a new category of devices with the presence of immediate specific broadband connection greatly improves or altogether transforms the user experience. We believe the challenges we face now are primarily within our control and we have a plan to return the company to top line and bottom line growth. That plan includes; accelerating our product development efforts to bring innovative product to market faster, refocusing our sales effort on the largest carriers in Europe and North America and streamlining our management reporting structure and adding to our teleport Novatel wireless to improve efficiencies and proceed new opportunities and it's hard as our strategy for the current market is to focus on what we do best bringing innovative, broad band, internet access products to market well ahead of our competitors. We believe if we can execute on this plan, we can quickly regain our leadership position. To explain how we are going to accomplish this I would like to frame a discussion around our three strategic product areas. The first strategic product area is our core products. In the past core products consisted of PC and ExpressCards and to a lesser extent embedded modules. Those products have been largely subtracted by the introduction of our first and second generation USB products. In the second half of this year we will launch our third generation USB products across multiple technology standards and customer interest has been high. We have launched commitment from multiple tier I carriers both in the U.S and in Europe. Our third generation USB family of products capitalizes on the small side and usability of USB while delivering additional personal networking capabilities. Clearly we are excited by the rich market potential of our core product road map and we look forward to sharing many more details when we officially announce those products this summer. The next strategic product area is what we call our evolution products. Evolution products will allow us to ship additional differentiated standalone products into our tier 1 carrier and PC OEM customers and already we have commitments to launch from leading carriers. A great example of our product in this category is NovaSpeed which was introduced at CTIA last month. NovaSpeed is a software solution that fits deep in the firmware and is capable of enhancing the speed and performance of wireless broadband modems up to 400% while enabling simultaneous upload and download data transfer. We developed NovaSpeed to enhance the speed and performance of our products through the use of an industry first network traffic prioritization protocol. We believe NovaSpeed is a significant differentiator for carriers and for Novatel Wireless and we have filed patents on the core technology. NovaSpeed will even work on non-Novatel Wireless devices and it is launching initially on our products in the third quarter with a major carrier. This is the first of multiple evolution products in development. The third strategic cost area is wireless content delivery devices. The first example of this is our innovative application with our partner Autonet. Autonet will enable passengers to easily search the web, check email and play games online as well as access personal content using any WiFi enabled device within close proximity to the vehicle. This offers a peek into a new category of devices and products which are enabled by wireless broadband connection. We have other wireless content delivery products in development and have secured design wins from major partners. Importantly, we expect wireless content delivery products to expand our addressable market opportunity and expand our customer base beyond carriers and PC OEMs. We expect to see revenues from this product area by the end of the year. Our growing market, continued new product innovation and close relationship with the world's leading carriers and manufacturers gives us confidence that we will have Novatel Wireless back in a leadership position in the second half of this year. And now I would like to turn the call over to Ken to review Q1 results and Q2 guidance.

[Kenneth Leddon:]

Thank you, Peter. I specifically noted all comments about financial results exclude the impact of share-based compensation expense under FAS 123R. Share-based compensation expense net of taxes was approximately $1.2 million in the first quarter of 2008. Let's begin with the first quarter results. Revenues for the first quarter were $91.3 million, a decrease from the $118 million reported last quarter and from the $109.8 million reported in March quarter a year ago. USB products accounted for $49.9 million or 55% of revenue. Embedded products were $26.6 million or 29% of revenues. Sales of EV-DO products accounted for 55% of revenues. HSDA products accounted for 45% of revenues. During the first quarter, we shipped to nine operators and ten OEMs in 30 countries. Leading customers in the quarter included Verizon, Sprint, Dell, Telefonica, Vodafone, Panasonic, Sony, and Toshiba. We also added a new carrier, Rogers Wireless in Canada. Rogers' lines hold the MC950D USB product and the X950D ExpressCard. From a geographic perspective, domestic revenue accounted for approximately 63% of total revenues and international revenue was 37%. On a non-GAAP basis, gross margins were approximately 28% in line with our guidance. The operating margin was 8.6% of revenues lower than our target due to the lower revenue. Operating expenses were at $17.6 million or 19.3% of revenues, R&D expenses were at $8.6 million or 9.4% of revenues, sales and marketing was $5.2 million or 5.7% of revenues, G&A with $3.8 million or 4.2% of revenues, EBITDA was $10.5 million, free cash flow was $8.8 million. Including the share based compensation charges of $1.2 million net of taxes we reported GAAP net income of approximately $4.4 million for the quarter, about $0.14 per diluted share. On a non-GAAP basis excluding the non-cash compensation charges we reported net income of $5.6 million or $0.17 per diluted share. Now I will review some balance sheet highlights. At March 31, 2008 we had approximately a $146 million or $4.46 per share in cash in investments with no debt. Our cash in investment represented a net decrease of approximately $7.1 million from the prior quarter. AR was flat in the past quarter with last quarter at $72.1 million but DSO's grows to 72 days on lower revenue given our customer base the quality of our receivables is up front. Inventory increased by $5.3 million in the first quarter to $31.2 million which resulted in an annualized inventory turn of 8.5 times per year. The GAAP to non-GAAP reconciliation included a $144,000 in cost of goods sold approximately $1.5 million in operating expenses and $452,000 in income taxes. Turning to the second quarter 2008 guidance, our guidance for the second quarter of 2008 is as follows

[Peter Leparulo:]

Just a quick note on the status of our $25 million share repurchase program. As of mid-April we have purchased approximately $9 million worth of Novatel wireless stock. The board will consider whether to expand this program in the coming months, in the mean time we plan to be aggressive in purchasing our stock in the open markets. Now, Brad, Ken and I are happy to answer your questions. Operator you can now open up for questions.

[Operator:]

Thank you, sir. (Operator instructions). Our first question is coming from George Iwanyc with Oppenheimer.

[George Iwanyc:]

Thank you for taking my question. Peter can you give us an idea of the type of near term trends you see – the guidance reflects another decline in sales. How is business at this point?

[Peter Leparulo:]

Sure, our core business is strong. Like I mentioned we have some execution items that we need to fix. We think we have taken a lot of strides in the last several weeks to address those but the core business really is strong. If you look to some of the places that we see the incremental growth, it really is in getting to operators that we historically have not had a presence where in the broader market, there certainly has been robust growth in those spaces.

[George Iwanyc:]

Can you give us an idea then, how trends look at Verizon and Sprint here in North America?

[Peter Leparulo:]

Sure. Verizon and Sprint both have obviously – in the broader space have a keen focus on wireless data revenues and have digital activations, the digital usage, has gone up at both of them. What we need to do is address particularly one of those operators – we need to address them better going forward. Frankly, I think we have taken the steps to do that in fairly short order and we will see progress along those lines again in fairly short order towards the end of this quarter or at the beginning of the third quarter.

[George Iwanyc:]

Okay. And can you give us an idea of what products we should anticipate in the second half that will allow you to get back into a leadership position?

[Peter Leparulo:]

Sure. In our core space, what you will see is a long all product client in our core space, so that's USB – to a lesser extent, it's the ExpressCards and modules. You will see next generation modules which – next generation products in each of those lines that we believe actually what the generations get to those of our competitors. So it will be the best performing products on the market, best in class and they will be fairly feature-rich in the core space. Towards the end of the year in the content delivery solution space that we are talking about, you will also see us commercialize products in that space and bring them to market towards the end of the year. Then in the middle category of what we are calling evolution products, you will see those again launch towards the end of Q3, the beginning of Q4 this year and in that space, that will be coupled with value-added applications and tied-to services as a whole package. That space, we believe the products will be very novel products which open up additional revenue streams for the operators and again returning us in that space to more of a green field strategy where we don't believe that we will see competing products out there.

[George Iwanyc:]

Okay and embedded looks to continue to be strong for you. What type of that you anticipate there and what type of impact you expect Gobi to have?

[Peter Leparulo:]

Let me just talk about Gobi real fast. Gobi is certainly in the embedded space and at the laptop OEM space. Remember, there is a big embedded space atop there. It remains to be seen I believe in the laptop OEM space. There has been varied responses to Gobi. Some laptop manufacturers like what they view as a certain simplification and integration effort and like the ability to launch on multiple networks. Other laptop manufacturers are not focused on that. So it doesn't address the entire space, but also that's in the embedded space, there are systems integrators in vertical markets that our products will focus on those channels that Gobi really does not address and is not intended to address.

[George Iwanyc:]

Alright, one last question. Can you tell us how the stock option expenses splits out between cost of goods and OpEx categories?

[Peter Leparulo:]

Stock FAS 123 charges?

[George Iwanyc:]

Yeah.

[Peter Leparulo:]

Sure. A couple of it sold, it's a $144,000 operating expenses about a $1.5 million.

[George Iwanyc:]

And R&D

[Peter Leparulo:]

The break out in operating expenses is about 560 for R&D, sales and marketing 256, general administrating 658 and income tax is 452.

[George Iwanyc:]

Thank you.

[Operator:]

Thank you. Our question is from the line of Mike Walkley with Piper Jaffray. Please go ahead.

[Mike Walkley:]

Great thanks. It's just a follow-up question on the income statement. Can you tell us what's on the other income line, just that?

[Peter Leparulo:]

Primarily the interest earnings are tax equivalents and investments and secondly foreign exchange gain of about a $0.5 million.

[Mike Walkley:]

Okay that's fine and just foreign exchange gain, great thank you and then in terms of your next generation products can you give us any color on – you said you have some operating interest. Are those any new customers or is it mainly your core base on both the U.S and Europe?

[Peter Leparulo:]

It's both. Some of them are on the roadmaps of current customers, some are currently on the road maps of European operators that we have not addressed in the past with the same level of focus. They have been customers in the past, but we expect to increase the split between is and other vendors among those customers and then some of the new products as well in the third category are brand new channels with customers outside or both PC OEM's and carrier channels.

[Mike Walkley:]

Great and then just building on that, when you look at evolution of the software solution, how should we think about margins on that and also may be margins for your new products for customers relative to the company gross margins.

[Peter Leparulo:]

Sure. On the new product side, our target is 30% gross margins where we have hardware products that we are launching into the market, but I can tell you over and above the more we have differentiated products that are out there where we have a green field approach to the market, the more we become optimistic about enhancements to those gross margins. On the software, that somewhat remains to be seen. We are actually now putting in place business models for that software as an independent value add decoupled from a hardware, at least from a Novatel hardware platform. So, on the last one that is our work in progress and the other ones they are consistent with our business model.

[Mike Walkley:]

Alright guys, thank you very much.

[Operator:]

Thank you. Our next question is from the line of John Bright with Avondale Partners. Please go ahead.

[John Bright:]

Thank you, good afternoon Peter. Help me reconcile these three statements; have I got them right. One, when you started your comments today, you gave the third reason for the difficulty in the current quarter to the execution at the end of the quarter. Can you talk about what the missed opportunities were in that execution but then reconcile that with the other comment made when you pre-released about the demand shifting toward lower end products and now the plan looking forward is to sell differentiated products into the markets. Help we reconcile those three if you would please.

[Peter Leparulo:]

So, let me go to a sort of broad rush on how the last quarter evolved John because that's the route of what you are getting at. Our quarters progress very dynamically. We have forecasted a change, lots of changes. We typically have multiple sources of both revenue and sales opportunities. As the quarter progresses, we close those up and often that goes right to the very end of the quarter and that's the balancing really of skew availability, built schedules and the product that there is a shifting demand for in that quarter. Unfortunately, in the last quarter, that didn't happen but all of that really went to the very end of the quarter and I'm sorry the rationalization of that with new products?

[John Bright:]

Yes, the differentiated features that you are expecting then to drive the sales in the future. So pursuing the market shift – if you are seeing the market shift to lower end products, then that was the case in the past quarter. When we look forward to the second half, when you bring differentiated features to the new products, I'm looking at it and thinking okay, why is the market demand going to shift in the second half, one and two, when I think about, the drivers of a lot of the differentiation you brought in the past few years, one being the USB foam factor, a big shift; two, bringing – getting ahead from an infrastructure built standpoint or called the jump up, certainly jumping in doing UMPS and jumping over that as well. So when I put those two thoughts together I say, “Okay, why is that going to meet the demand correctly? Why is that the correct plan do you think if the market is shifting to lower end products?”

[Peter Leparulo:]

It's really both John. In the core space in USB, there has been a promotional shift among the operators to bring in consumers. I wouldn't call those low end products; I would call those consumer channels. Those channels require a couple of different features in their products to address them properly. So I think that first category which is what I would call opening up consumer channels among the operators. That category is highly dependent on rate plans and as rate plans come down and subscription agreements come down, those channels will open up. What we intend to do in that space is migrate over to products which have a low product cost to them, which have consumer features to them. So things like NovaSpeed, one of the highest elements of penetration into the consumer space is keeping the throughput speed up in that space and thirdly, there is a higher branding content to those products that we have to do in conjunction with the carriers that are focused in that direction. That's in that core space but I will also tell you it is not migrated directly away from the enterprise space and what we are doing with some additional products is we are putting together a multifaceted approach to address all core aspects of the wireless data space both in the consumer products on – in our core space as those products become more and more ubiquitous and as wireless data, wide area connectivity becomes more main streamed if you will in that space. On the second grouping of products, what we are looking to is those are more enterprise solutions. Some of them have consumer solutions because they will be able to connect different devices that have not been in the wireless space before, but some of those applications you are right, they will address real problem that we see developing in the enterprise space and we will go through two different end users, so we are trying to do both I guess is the way out to rationalize it.

[John Bright:]

Okay then. Let me then go on the Qualcomm Gobi question as well. I think you talked about –embedding being about 29% of the revenues in the quarter, but then you – when asked about Gobi and the future of it, Qualcomm's talked about it in the later half of this years potentially in greater degree in '09, what percent of laptop OEM's – laptop OEM's are what percentage of your embedded revenues in the quarter? Because you said that's what Gobi – they are not as focused on that side of the equation, is that right?

[Brad Weinert:]

Hey John, this is Brad.

[John Bright:]

Hey Brad.

[Brad Weinert:]

On Gobi and on the better revenue, the better revenue of the quarter was 29% of our business, but that was skewed quiet a bit from the fact that our top line revenue didn't come out where we wanted it to, so embedded was a little bit better than we had forecast, but if the USB products were coming where we had anticipated them to be, it would have been more in line with the 20% that we have been experiencing going forward and I think the point that we are trying to make on Gobi is, that Gobi is certainly is going to have some impact on the mainstream embedded market going forward. I think that Qualcomm has certainly targeted certain large laptop OEM's for certain platforms but we also have identified it as seeing a lot of other opportunities, permitted modules which are far beyond the main stream laptop configurations and our focus was exactly shifted to additional opportunities. In fact some of the products we have coming up in the second half of the year are specifically targeted for those opportunities for things like different – with that giving away the final different configurations of standard based modules that will go into small platforms and have additional capabilities.

[John Bright:]

Okay. So let me try a different question on Gobi. Would you expect Gobi to be incorporated into a USB form factor?

[Brad Weinert:]

We don't currently – we have not seen anything like that. That requires a different interface essentially.

[Peter Leparulo:]

Let me add to that John. With our first generation product that actually used to mini card, the MCD3000 we thought that was not an effective way of doing a USB device; number one, it adds additional cost to the product, number two it's restricts you to the size and the size of USB is a very big selling point and Gobi is a mini card form factor, so it does not integrate well into a USB's technique. It could be a first market strategy for somebody, but they would be two or three generations behind where the rest of us are with USB.

[John Bright:]

Got you, two last ones then; one, AT&T is a big customer that's not a significant customer for Dell, what do you think about the opportunity and what's the potential of that AT&T could be common meaning for customer into 2008 for Novatel?

[Peter Leparulo:]

It' is one of our primary focuses John that is the source of a lot of our initiative and we are putting a lot of that to consistently bring AT&T into the full as you can tell from the results of our competitors. We really have not had our presence steps in; that's a big driver of the growth that we have seen out there. What we will do though is well John is, what we expect to do with AT&T is to go into with some of our more differentiated solutions with AT&T and an eco system of products and all of the categories that we talked about. I would not look to that until the end of the year or beginning in 2009.

[John Bright:]

Alright, last one then. What was the head count at the end of the quarter and Peter any changes expected in the head count as we look forward to the rest of the year?

[Peter Leparulo:]

The head account at the end of the quarter was 320 and we do not expect – we do not anticipate that changing significantly.

[John Bright:]

Thank you.

[Operator:]

Thank you. (Operator instructions) Samuel Wilson with JMP Securities, that's the next question. Please go ahead, sir.

[Doug Ireland:]

Thank you. This is Doug Ireland for Sam Wilson. I was wondering one of the things we have been hearing is that there has been an increase in competition from Asian competitors and I was wondering if you have seen that especially in the EMEA region and if that's been putting any pressure on ASP or other slots at carriers?

[Brad Weinert:]

Hey Doug, this is Brad. We have seen extensive competition in the EMEA region with Huawei in particular and there are some of the secondary players there but I would also their strategy today has been fairly successful. EMEA continues to be a growth market for us and we have forecast for continued growth going forward. We have competed against those competitors by innovation, time to market and a variety of carrier specific-solutions. I can give you a good example. In EMEA this quarter, we will have three different USB foam factors, all at the same level of your generation two, generation three products shipping to different carriers specific to their requirements. So we have found ways to compete but certainly Europe in particular is extremely competitive, especially in the mainstream high volume markets and I think if you are going to be successful there, you have to differentiate yourself and continue to lead the market or you will quickly become – it will quickly become just certainly a pricing issue which sort of (inaudible)

[Doug Ireland:]

Great, thank you. And then I was wondering about continuing carrier consolidation. That's something that we were hearing early in the year late last year. If you have seen any continued effects from that, whether positive or negative?

[Brad Weinert:]

Yeah, I think that we have seen that stabilize and I think that was one of the effects that we are dealing with right now is the fact that the carriers have limited the number of skews and partners that we were going to deal with and a particular market genre within a particular time frame. So the good news is that if you get that business, you will have substantial revenue and if you miss that, you will have to get back in again, which is one of things that we are dealing with right now. So, yes I think that that has come to fruition and I think the strategy is sound because it gives us the carrier more leverage and makes the field competitive – what we have to do as a company to address that is to make sure that we execute and we continue to lead the innovation of the preview that will be in good shape.

[Doug Ireland:]

Thank you.

[Operator:]

Thank you and our next question is coming from the line of Kevin Dede with Morgan Joseph. Please go ahead.

[Kevin Dede:]

Good afternoon gentlemen. Thanks for hosting the call. Peter, your core or actually your product discussion didn't include Ovation which not too long ago seemed to be a pretty big hope for you folks and I'm kind of wondering what you see going on in that market that converts communications market in western Europe.

[Peter Leparulo:]

Sure. We very much believe in fixed mobile conversion on Ovation going forward, especially in the European market, what we see is not only consolidation among not the wireline operators but the wireless operators but also competition between fixed line solutions and mobile solutions but that initiated in a little bit in fits and starts to couple of years ago Kevin. We actually see that coming together more going forward and that again is a market we will address, but as of now it is not a lot of attraction but we certainly see convertibles taking place coupled with things like Pentasel [ph] and Pekosel [ph] solutions as well on that space. We think we even accelerate that further.

[Kevin Dede:]

Do you have designs in participating in a Femto type solution?

[Peter Leparulo:]

As part of – I don't think in terms of an actual base station type solution but yes we look to and keep up and keep our eyes closely on the ego system that surrounds that space.

[Kevin Dede:]

Okay. Would be mind being more specific with regard to the organizational changes that you are contemplating and making in sales in order to I guess prevent some of the missed opportunities that you saw in this past quarter.

[Peter Leparulo:]

I think what we will do is we will centralize sales a bit more. We will move sales to address – we will have more dedicated focus on some of our longer term sales cycles which end up being 6 to 9 months and we will also supplement sales with further business development activities for some of these downstream opportunities, but in terms of the missed opportunities if you will that you spoke of, if really we will just be more than a compound of focused in anticipating shifts and demand into our quarter.

[Kevin Dede:]

Will these changes preclude you from opportunistic – I guess situations that might come up with regard to may be some other smaller carriers that are off the beat in track in developing countries.

[Peter Leparulo:]

No, I don't think they will. We have certainly good coverage on emerging countries right now and as you say some of those are opportunistic, we look at ones that will develop into revenue streams, but we have fairly good coverage on that I believe.

[Kevin Dede:]

Can you give us a ballpark on what you think the share count might be at the end of the June quarter?

[Peter Leparulo:]

Yes we can – speaking we are expecting to be in the neighborhood of about $32 million.

[Kevin Dede:]

Okay and I know you address the competitive environment particularly in Western-Europe and I am just wondering how you expect those largely HSPA competitors to influence your decision in attacking business at AT&T. I would imagine given some of the pressures that those folks are putting on ASP's in that market and I would expect them to force them in dealing with AT&T. I just was wondering how you planned on being competitive there and what you think the advantages that Novatel brings to that environment.

[Brad Weinert:]

Hey Kevin, this is Brad, I'll try to answer that questions for you. Never the less I think that the inverse is what has kind of gotten us to where we are that we focus entirely on EMEA and to a degree, probably neglect of some of the specific requirements, so that a partner like AT&T would require. They are different in the fact that there is different radio mat frequencies etc. In this cost competitive market it's difficult to design a product that works in both markets effectively. For example, in North America, there is different requirements in terms of the diversity and they are on different radio frequencies. So if you design that in a global sense, you are actually loosing a part of the service because you are adding to the cost of a product in Europe and so what we are actually seeing is that our customers are demanding more specific devices – specifically for their networks that makes the roadmap more complex but the idea of a product that can address markets globally is a bit of a misconception if you want to play in the competitive market. You can certainly do it at a sacrifice of cost. The other thing that we are doing specifically as a company is we are getting back to the leading edge paradigm that we have had going forward and that our next generation products not only are going to be the latest in terms of design and performance and chip sets but we also are adding value added software features that are offering additional capabilities that I don't think that our competitors in particular the Asian competitors can offer or doing that at a very attractive price. So we believe the equation works. Time will tell obviously but I think that we have a fairly clear understanding of what we have to do to get some of these major customers. Hope that answered your question.

[Kevin Dede:]

Yeah, so just let me paraphrase. In a nutshell, what you are saying is you need a specific product designed for the frequencies that AT&T's focused on and you need to bring features and functionality that you differentiate you?

[Peter Leparulo:]

Exactly. If you are come in with ME2 products, it's not going to be successful in terms of fitting into our business model. So we need to differentiate ourselves and be competitive at the same time.

[Kevin Dede:]

Last question for me; seems that T-Mobile is launching 3G in New York today. I'm wondering what your plans might be to address that operator as a customer.

[Peter Leparulo:]

It's a good question Kevin. They are obviously on our radar screen a tier 1 customer. They do have – we would have to address them in some kind of a proprietary way because of the bandwidth – the AWS bandwidth that they use but to the extent that they will have a wireless focus. We have them in our sites obviously.

[Kevin Dede:]

So, nothing outside of the ordinary but just the frequency bands?

[Peter Leparulo:]

Yeah, for the most part, correct.

[Kevin Dede:]

Very good. Thanks for taking the questions, gentlemen.

[Peter Leparulo:]

Thank you.

[Operator:]

Thank you. There are no further questions, Mr. Leparulo. Please continue with your closing comments.

[Peter Leparulo:]

Great, well but everybody, thank you very much for being on today's call and we look forward to seeing you at several of our upcoming investor conferences which will be in May and June. Thanks again.

[Operator:]

Thank you ladies and gentlemen, this does conclude the Novatel Wireless first quarter 2008 conference call. If you would like to listen to a replay of today's conference in its entirety, you can do so by dialing 1-800-405-2236 or 303-590-3000 and put the access code 11113334. Those numbers again; 1-800-405-2236 or 303-590-3000 and put the access code 11113334. I just too would like to thank you very much for your participation today. You may now disconnect. Have a very pleasant rest of your day.