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Novatel Answers Calls For Change at the Top

Novatel Wireless Inc. heads into its annual meeting June 24 with a newly reconstituted C-suite.

The company board appointed a new CEO and COO on June 13 after more than two months of shareholders publicly scolding Novatel (Nasdaq: NVTL) about its financial performance.

Alex Mashinsky, 48, a member of an activist shareholder group who joined the board in late April, was named interim CEO. He replaces Peter Leparulo, who will keep his board seat.

Novatel said it has engaged a search firm to find a permanent CEO.

In addition, Novatel named its longtime chief technology officer, Slim Souissi, 49, to the posts of president and chief operating officer.

It isn’t the first recent change to the C-suite. Chief Financial Officer Kenneth Leddon departed for another job in late May. A search firm is looking for his replacement.

Mashinsky, the new interim CEO, is managing partner of Governing Dynamics, an early stage venture capital firm. He has been involved in more than 50 startups, including businesses in the telecom and wireless space.

Leparulo, 55, had a law career before becoming general counsel to Novatel in 2000. He served as CEO from 2003 to 2006, and then took the top management job again in 2008.

Turnaround Seen Eventually

Novatel makes wireless hardware and associated software. One of its best-known products is the MiFi intelligent mobile hotspot for Internet connectivity. Novatel also has a line of products for machine-to-machine communications. The corporation is getting out of the underperforming mobile computing laptop business.

The company has not had a profitable year since 2009. Novatel reported $48.3 million in revenue in its most recent quarter, down from $85.9 million in the year-ago quarter. The net loss was around $9 million both times.

Analyst Bryan Prohm of Cowen and Co. wrote that the change at the top may create some excitement, but he sees “limited overall change” to Novatel’s strategy. He predicted Novatel will return to profitability over the medium term and gives the stock an “outperform” rating.

Prohm said Novatel is transitioning from mobile computing, which offers slow growth, to a faster-growing machine to machine or M2M business. Machines — both the common and the complex — are expected to automatically share more data wirelessly in coming years. TechNavio estimates the global market for M2M modules will show a compound annual growth rate of 16.2 percent between 2013 and 2018.

“In mobile computing, given Novatel has historically benefited from a significant first mover advantage with its most innovative products, we expect renewed efforts to deliver more disruptive and/or defensible hardware and software extensions of its MiFi mobile hotspot platform over the medium-term,” Prohm wrote. “The lack of technology disruption of late is a primary reason why lower-cost competition has closed the innovation gap through pricing and pressured gross margins.”

Change Agents

A group of five shareholders calling itself Novatel Shareholders for Change — which included Mashinsky — said in a March 20 securities filing that group members were “disappointed with the continued poor financial and operational performance of [Novatel] and believe that a change in the composition of the board is necessary to improve shareholder value.”

Novatel Shareholders for Change laid out several complaints, criticizing the business for settling a class-action securities lawsuit for $16 million. The group also said Novatel’s plan to sell more shares threatened to dilute their holdings.

Mashinsky and a second activist shareholder, Richard Karp, received board seats on April 29. Sue Swenson was named independent chairwoman at the same time, replacing Leparulo in the chairman’s seat.

Investor Bruce Karsh said in a June 2 securities filing that he approached the new chairwoman on May 30 with the demand that Leparulo leave the CEO’s post. Novatel said it arranged for Mashinsky to take the interim CEO’s job on June 10.

In a statement issued by Novatel, Leparulo thanked the employees who worked for him for 10 years. He will remain a company employee through Aug. 13, according to a securities filing.

Novatel’s executives could not be reached for comment. The company’s investor relations firm referred a request to the company’s public relations firm, which did not respond by press time.

Souissi comes to his new COO job after serving as senior vice president and chief technology officer at Novatel for 10 years. He holds a doctorate in electrical engineering.


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