February 27, 2007

Novatel Wireless Reports Record Quarterly and Full Year Revenue

Fourth Quarter Revenue Increases 58% Year Over Year and 40% Sequentially GAAP EPS of $0.08 Per Diluted Share and Non-GAAP EPS of $0.14 Per Diluted Share

SAN DIEGO, Feb 27, 2007 (BUSINESS WIRE) -- Novatel Wireless, Inc. (Nasdaq:NVTL), a leading provider of wireless broadband access solutions, today reported financial results for the fourth quarter and full year ended December 31, 2006.

Revenue for the fourth quarter was up 40% sequentially to $77.0 million versus revenue of $55.1 million in the prior quarter and up 58% over revenue of $48.7 million reported in the same period last year. Fourth quarter GAAP net income was $2.4 million or $0.08 per diluted share. This compares to GAAP net income of $121,000 or $0.00 per diluted share in the prior year period. 2006 fourth quarter GAAP results reflect the fiscal year 2006 adoption of Statement of Financial Accounting Standards No.123R resulting in the expensing of $2.0 million of non-cash share-based compensation during the fourth quarter, or $0.06 per diluted share, net of taxes. Excluding the effect of these charges, non-GAAP net income was $4.4 million or $0.14 per diluted share for the fourth quarter of 2006.

GAAP and non-GAAP results for the three months ended December 31, 2006 include approximately $1.5 million in charges, net of taxes, related to inventory provisions and an allowance for doubtful accounts receivable.

"We believe our record fourth quarter revenue reflects the underlying strength of our market and the success of our diversification strategy with approximately 30% of sales coming from non-PC card products," commented Brad Weinert, Novatel Wireless' acting Chief Executive Officer. "Wireless carriers are increasingly focusing on data as a key growth driver, as consumer and enterprise adoption continues to ramp. We have seen a broad increase in demand, especially for our latest generation EV-DO products from our customer base of many of the world's leading wireless operators and laptop manufacturers. This demand led to a 40% sequential increase in revenue in the fourth quarter and record backlog at the end of the year."

"Our record backlog and strong Q1 order flow has increased our visibility and we are expecting sequential and year-over-year growth in what has historically been a seasonally softer first quarter for us," added Mr. Weinert. "Our focus is primarily on execution and innovation, as we continue to ramp to meet increasing demand in the marketplace, while increasing our R&D effort in absolute dollars to drive the next generation of wireless innovation."

"Our business model has improved considerably," added Dan Halvorson, Novatel Wireless' Chief Financial Officer. "In the fourth quarter of 2006, gross margin increased and, even with the inventory charges, our operating margin more than tripled to 6.7% of sales, excluding share-based compensation charges, compared to the prior quarter, demonstrating the operating leverage in our model. Moving forward, we are focused on continuing to improve gross margin and operating margin."

Revenue for the year ended December 31, 2006 was $218 million, a 35% increase from $161.7 million reported for the prior year. GAAP net income for 2006 was $253,000 or $0.01 per diluted share which compares to GAAP net income applicable to common shareholders of $11.1 million or $0.37 per diluted share for 2005. Non-GAAP net income for 2006 was $5.4 million, or $0.18 per diluted share, excluding the impact of the fiscal year 2006 adoption of Statement of Financial Accounting Standards No.123R resulting in the expensing of $5.1 million of non-cash share-based compensation, or $0.17 per diluted share, net of taxes.

Q1 and 2007 Outlook

The following statements are forward-looking and actual results may differ materially. Please see the section titled, "Cautionary Note Regarding Forward-looking Statements" at the end of this press release for a description of risks. Please see the Company's quarterly and annual reports on file with the Securities and Exchange Commission (SEC) for a more detailed description of risk factors.

The following table summarizes the Company's financial guidance for the first quarter and fiscal year of 2007. These estimates are based on the Company's current business outlook as of the date of this press release. Non-GAAP earnings per diluted share are based on a projected tax rate of 35% and exclude FAS 123R stock-based compensation expenses.

First Quarter 2007:
Revenue                                     approximately $80 million
Non-GAAP Earnings Per Share, Diluted        approximately $0.16

Fiscal Year 2007:
Revenue                                     $330-350 million
Non-GAAP Earnings Per Share, Diluted        $0.55 - $0.70

Conference Call

The Company will host a live conference call for equity analysts and investors today to discuss its quarterly and full year results at 4:30 p.m. ET. The conference call may be accessed by dialing 800-240-5318 for domestic callers and 303-262-2137 for international callers. The conference call will be webcast live on the Novatel Wireless website at www.novatelwireless.com, under the "Investor Relations" section. Following the live webcast, an archived version will be available on the Novatel Wireless website. A telephonic replay of the conference call will also be available approximately two hours after the call and will be accessible for two business days. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11083768. International parties should call 303-590-3000 and enter pass code 11083768.

About Novatel Wireless

Novatel Wireless, Inc. is revolutionizing wireless communications. The company is a leader in the design and development of innovative wireless broadband access solutions based on 3G WCDMA (HSDPA & UMTS), CDMA and GSM technologies. Novatel Wireless' Merlin(TM) PC Cards and ExpressCards, Expedite(R) Embedded Modules, MobiLink(TM)Communications Software Suite, Ovation(TM) Fixed Mobile Convergence Products and Conversa(TM) Software Suite enable high-speed wireless access. 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 please visit www.novatelwireless.com. (NVTLE)

Cautionary Note Regarding Forward-Looking Statements

Some of the information presented in this release constitutes forward-looking statements based on management's current expectations, assumptions, estimates and projections. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as "may," "estimate," "anticipate," "believe," "expect," "intend," "plan," "project," "will" and similar words and phrases indicating future results. Forward-looking statements, including without limitation, the information above under "Q1 and 2007 Outlook", involve risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. The Company therefore cannot guarantee future results, performance or achievements.

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 and include, without limitation, (1) the future demand for wireless broadband access to data, (2) the future growth of wireless wide area networking, (3) changes in commercially adopted wireless transmission standards and technologies, (4) continued acceptance of the Company's current products and market demand for the Company's anticipated new product offerings in 2007, (5) increased competition and pricing pressure from current or new wireless market participants, (6) dependence on third party manufacturers in Asia and key component suppliers worldwide, (7) unexpected liabilities or expenses, (8) the Company's ability to introduce new products in a timely manner, (9) litigation, regulatory and IP developments, (10) dependence on a small number of customers, (11) the effect of changes in accounting standards and in aspects of our critical accounting policies and (12) the Company's plans and expectations relating to strategic relationships, international expansion, software and hardware developments, personnel matters and cost containment initiatives.

These factors, as well as other factors detailed from time to time in the Company's SEC reports and filings (available at www.sec.gov), could cause actual results to differ materially. Novatel Wireless assumes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as otherwise required pursuant to applicable law and our on-going reporting obligations under the Securities Exchange Act of 1934, as amended.

Non-GAAP Financial Measures; GAAP EPS

Novatel Wireless has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP diluted earnings per share. Novatel Wireless uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Novatel Wireless's ongoing operational performance. Novatel Wireless believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in Novatel Wireless's industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial measures discussed above exclude FAS 123R stock based compensation expense.

The Company continues to evaluate the factors that might impact first quarter and 2007 diluted GAAP EPS, which consist primarily of FAS 123R stock based compensation items and accruals for income tax expense. The FAS 123R stock based compensation items are expected to vary depending on the number of equity options exercised by employees during the year and the number of new grants issued to both current and new employees (both of which are difficult to estimate). In addition, the factors that impact the Company's deferred tax assets are expected to vary from period to period, also making diluted GAAP EPS difficult to estimate. As a result, the Company has not provided information regarding first quarter and fiscal year 2007 diluted GAAP EPS.

(C)2007 Novatel Wireless. All rights reserved. The Novatel Wireless logo, Merlin, Expedite, MobiLink, Ovation and Conversa are trademarks of Novatel Wireless, Inc. Other product or service names mentioned herein are the trademarks of their respective owners.

                        NOVATEL WIRELESS, INC.
                     CONSOLIDATED BALANCE SHEETS
                            (in thousands)
                             (unaudited)

                                                      As of
                                           December 31,   December 31,
                                              2006           2005
                                           ------------   ------------

ASSETS

Current assets:

Cash and cash equivalents                  $    34,612    $    36,653
Marketable securities                           48,071         47,075
Accounts receivable, net                        47,774         28,121
Inventories                                     25,662         23,132
Deferred tax assets, net                         5,931          5,253
Other current assets                             3,344          9,821
                                           ------------   ------------
Total current assets                           165,394        150,055

Property and equipment, net                     15,501         13,865

Marketable securities                            1,479          6,611

Intangible assets, net                           2,411          3,459

Deferred tax assets, net                         6,440          1,849

Other assets                                       230            225
                                           ------------   ------------
                                           $   191,455    $   176,064
                                           ============   ============


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                           $    39,346    $    34,226
Accrued expenses                                18,063         11,888
Line of credit                                       -          5,000
Capital lease obligation                             -          3,891
                                           ------------   ------------
Total current liabilities                       57,409         55,005


Stockholders' equity:

Common stock                                        30             29
Additional paid-in capital                     356,138        343,738
Accumulated other comprehensive loss               (31)          (364)
Accumulated deficit                           (222,091)      (222,344)
                                           ------------   ------------
Total stockholders' equity                     134,046        121,059
                                           ------------   ------------

                                           $   191,455    $   176,064
                                           ============   ============

                        NOVATEL WIRELESS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except per share data)
                             (unaudited)

                               Three months ended  Twelve months ended
                               ------------------- -------------------
                                  December 31,        December 31,
                               ------------------- -------------------
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------

Revenue                        $ 77,016  $ 48,683  $217,972  $161,736

Cost of revenue                  56,567    38,137   162,749   115,568

                               --------- --------- --------- ---------
   Gross margin                  20,449    10,546    55,223    46,168
                               --------- --------- --------- ---------

Operating costs and expenses:

Research and development          8,768     7,352    31,317    20,515
Sales and marketing               4,249     2,415    14,168     7,611
General and administrative        4,891     1,970    16,306     7,528
                               --------- --------- --------- ---------
Total operating expenses         17,908    11,737    61,791    35,654

Operating income (loss)           2,541    (1,191)   (6,568)   10,514

Other income (expense):

Interest income and expense,
 net                                982       572     2,899     2,224
Other, net                          177        72     1,406      (216)
                               --------- --------- --------- ---------

Income (loss) before income
 taxes                            3,700      (547)   (2,263)   12,522

Income tax expense (benefit)      1,301      (668)   (2,516)    1,406

                               --------- --------- --------- ---------
Net income                     $  2,399  $    121  $    253  $ 11,116
                               ========= ========= ========= =========

Per share data:

Net income per common share:
Basic                          $   0.08  $   0.00  $   0.01  $   0.38
Diluted                        $   0.08  $   0.00  $   0.01  $   0.37


Weighted average shares used
 in computation of Net income
 per share:
Basic                            29,723    29,298    29,580    29,132
Diluted                          30,224    30,467    30,002    30,319

       Reconciliation of GAAP Net Income to Non-GAAP Net Income
                 Three Months Ended December 31, 2006

                                    GAAP    Adjustments (a)  Non-GAAP
                                 ---------- --------------- ----------

Revenue                          $  77,016                  $  77,016

Cost of revenue                     56,567  $         (150)    56,417

                                 ---------- --------------- ----------
   Gross margin                     20,449             150     20,599
                                 ---------- --------------- ----------

Operating costs and expenses:

Research and development             8,768            (583)     8,185
Sales and marketing                  4,249            (479)     3,770
General and administrative           4,891          (1,400)     3,491
                                 ---------- --------------- ----------
Total operating expenses            17,908          (2,462)    15,446

Operating income                     2,541           2,612      5,153

Other income (expense):

Interest income and expense, net       982                        982
Other, net                             177                        177
                                 ---------- --------------- ----------

Income before income taxes           3,700           2,612      6,312

Income tax expense                   1,301             634      1,935

                                 ---------- --------------- ----------
Net income                       $   2,399  $        1,978  $   4,377
                                 ========== =============== ==========

Per share data:

Net income per common share:
Basic                            $    0.08                  $    0.15
Diluted                          $    0.08                  $    0.14


Weighted average shares used in
 computation of Net income per
 share:
Basic                               29,723                     29,723
Diluted                             30,224                     30,224


(a) Adjustments reflect stock-based compensation expense recorded
 under SFAS 123R, and its effect on taxes.

       Reconciliation of GAAP Net Income to Non-GAAP Net Income
                Twelve Months Ended December 31, 2006

                                    GAAP    Adjustments (a)  Non-GAAP
                                 ---------- --------------- ----------

Revenue                          $ 217,972                  $ 217,972

Cost of revenue                    162,749  $         (487)   162,262

                                 ---------- --------------- ----------
   Gross margin                     55,223             487     55,710
                                 ---------- --------------- ----------

Operating costs and expenses:

Research and development            31,317          (2,269)    29,048
Sales and marketing                 14,168          (1,997)    12,171
General and administrative          16,306          (5,258)    11,048
                                 ---------- --------------- ----------
Total operating expenses            61,791          (9,524)    52,267

Operating income (loss)             (6,568)         10,011      3,443

Other income (expense):

Interest income and expense, net     2,899                      2,899
Other, net                           1,406                      1,406
                                 ---------- --------------- ----------

Income (loss) before income
 taxes                              (2,263)         10,011      7,748

Income tax expense (benefit)        (2,516)          4,880      2,364

                                 ---------- --------------- ----------
Net income                       $     253  $        5,131  $   5,384
                                 ========== =============== ==========

Per share data:

Net income per common share:
Basic                            $    0.01                  $    0.18
Diluted                          $    0.01                  $    0.18


Weighted average shares used in
 computation of Net income per
 share:
Basic                               29,580                     29,580
Diluted                             30,002                     30,002


(a) Adjustments reflect stock-based compensation expense recorded
 under SFAS 123R, and its effect on taxes.

SOURCE: Novatel Wireless, Inc.

Novatel Wireless
Dan Halvorson, 858-320-8821
Chief Financial Officer
www.novatelwireless.com
or
The Blueshirt Group, Investor Relations
Chris Danne, 415-217-7722
chris@blueshirtgroup.com
Rakesh Mehta, 415-217-7722
rakesh@blueshirtgroup.com

Copyright Business Wire 2007

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