Wall Street stomped Sierra Wireless Inc. after the company said it expects to post a drop in first-quarter revenues and a huge loss, sending the company’s stock down an astounding 35 percent to $9.38 per share-the company’s lowest share price in more than a year. Just 12 hours later, Sierra’s main rival Novatel Wireless Inc. announced it expects to post solid first-quarter revenues, evidence the company said shows it is “winning market share in a seasonally softer period and best positioned to capitalize on the growth of 3G markets.”
The numbers give clear indication that Novatel’s emphasis on third-generation PC cards for CDMA EV-DO and W-CDMA networks is paying off. Sierra offers EV-DO cards but does not yet have a W-CDMA product. Further, Sierra put much of its revenue hopes on its Voq smart phone, which most wireless carriers have so far treated with antipathy. Sierra has long been one of the frontrunners in the wireless PC card and embedded module space, but its first-quarter expectations could soften its position.
For Sierra’s first quarter, the company expects revenues of between $18 million and $20 million and a staggering net loss of between $9.2 million and $9.9 million. Wall Street had expected revenues of $54 million and a significant profit, according to Thomson First Call. Sierra blamed the dismal numbers on lower sales as a result of its previously announced loss of customer PalmOne Inc. The company also said sales of its PC cards will be lower due to less demand from its carrier customers and “the near-term impact of increased competition, and resulting loss of market share, in the EV-DO PC card market”-a possible nod to Novatel’s increased traction in the space.
Sierra said it plans to increase its research and development efforts to ensure “we are well positioned with new products that will take advantage of market opportunities associated with the deployment of 3G networks.”
For the fourth quarter, Sierra reported revenues and a net income slightly below its expectations. The company’s revenues clocked in at $58 million, below the company’s guidance of $63 million but up from the $34.6 million it posted in the same quarter a year ago. The company’s net earnings for the fourth quarter were $7.3 million, below expectations of $7.7 million but up from the $1.9 million it reported in the same quarter a year ago.
On the flip side, Novatel said it expects first-quarter revenues of between $32 million and $34 million-more than double its revenues from the same quarter a year ago. Although the numbers were down from analysts’ expectations of $36 million, Novatel’s stock was up slightly after the news to $13.35 per share. Novatel will report its fourth-quarter earnings Feb. 10.
