Good afternoon, Ladies and Gentlemen. Thank you for standing by. Welcome to the Novatel Wireless Second Quarter 2010 Earnings Conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) I would now like to turn the conference over to Bill Wachovia, Vice President of Finance and Investor Relations. Please go ahead.

Good afternoon. And thank you for joining us on our call today. Today’s call will include a business overview from Peter Leparulo, Chairman and CEO; and a financial overview with third quarter guidance from Ken Leddon, Chief Financial Officer. As a reminder, the conference call is being broadcast on Tuesday, August 3rd, 2010, over the phone and the internet to all interested parties. Information shared in this call is effective as of today’s date, and will not be updated. During this call, non-GAAP financial measure will be discussed. Reconciliations to the most directly comparable GAAP financial measures are included in our Second 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 also be archived there. Today’s discussion will contain 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 may differ materially. Please refer to our SEC filing for a detailed discussion of potential risks. And now, I’d like to turn the call over to Peter Leparulo, Chairman and Chief Executive Officer of Novatel Wireless.

Thanks very much, Bill. I’d like to begin with a quick recap of our second quarter 2010 results, and then talk about our recent development and future plans. Revenues for the quarter were 71.8 million, a slight sequential quarter decrease, but above our guidance. Gross margins were 19.2% with a non-GAAP loss of $0.14 per share. Gross margin happened under pressure principally due to customer mix as well as other factors, such as higher than expected freight charges related to comp runs and shortages. In spite of competitive pressures, we continue to expand our market penetration, and had our best quarter ever in terms of unit shipments. As discussed in our press release, our financial results were also impacted by a write down of deferred tax assets. And our participation in the auction for Centurion wireless modules. We participated in this auction because Centurion, as the number one producer of M-to-M modules, would have been an excellent strategic fit with our existing business. And would have expanded our addressable market. While we are certainly disappointed with the outcome, we were only comfortable with the economics that we proposed, and have no regrets. We always look at opportunities in this area, and will continue to be disciplined in seeking the right fit that broadens our reach and growth potential while benefiting our bottom line. Moving on to our business update, we continue to focus on our key strategies. And during the quarter, it made significant progress on each. First, we continue to move forward in developing a solution-based approach to the market. With our open software platforms providing better customers stickiness and barriers to entry. Second, we are moving aggressively as we migrate our entire product portfolio to prepare for the upgrade to fourth generation error interfaces. And third, we are…

Thank you, Peter. I will begin with a financial overview of the second quarter. And then will provide our third quarter outlook. Please note that non-GAAP results exclude stock-based compensation charges as usual, which were $2 million this quarter including tax impact. We also exclude the M&A related charges and deferred tax asset write-down charges related to assets that were generated prior to 2010 from non-GAAP results. Revenues for the quarter were 71.8 million, a decline of 15% from 84.1 million reported in the prior year period. And a 1% decrease from the first quarter. As you can see on the revenue chart in our press release, the year-over-year declining was due substantially to lower embedded product sales partly offset by increased sales of core products in MiFi. Revenues by-product category are as follows. Core products, which includes USB modems, ExpressCards, and combination products accounted for 46.4 million, or 64.7% of sales versus 34.8 million, or 41.4% in the prior year period. MiFi products accounted for $25 million, or 34.10% of revenue versus, which is 13.5 million, or 16% in the prior year period. Embedded products were $400,000, or less than 1% of our revenue versus a $35.8 million, or 42.6% of our revenue in the prior year quarter. Looking at the FY technology, DVDL products were 93% versus 92% last year. HSPA products including HSPA plots were 7% of revenue versus 8% during the same period last year. From a geographic perspective, North American sales accounted for approximately 95% of total revenue, and international sales were 5%. During the second quarter, we shipped to seven operators and five OEMs in 22 countries. Leading customers in the quarter included Bell, Bright Star, Comcast, Telefonica, Verizon, and Virgin Mobile. Moving to gross margins, there were a number of factors that accounted…

Thanks, Ken. Our focus over the next several months will be to continue momentum with product development, new customer wins and new barriers to entry in three principle areas; certifying and launching multiple MiFi OS platforms in new and existing channels across all major error interfaces, leading the transition of 4G on our entire product portfolio and capitalizing on new growth opportunities in multiple segments of the embedded space. And now Ken and I will answer your questions. Operator, please open it up for Q&A.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Matthew Hoffman with Callan and Company. Please go ahead. Matthew Hoffman – Callan and Company : I have a number of questions here. First, I want to take a look at the guidance in some of your commentary. You mentioned specifically the MiFi, which was down sequentially. At the back half of the year, specifically, is that a half-on-half comparison? And if so, what’s going to cause the acceleration and the greater confidence in the back half from MiFi? Thanks.

Could you repeat the first part of your question? Matthew Hoffman – Callan and Company : Yeah. You made a comment that MiFi would add to sales in the back half of the year. Is that a back-half – is that half-on-half comparison? Are you comparing sales of MiFi in the second half of 2010 to the first half of 2010? What’s the basis of comparison for the more bullish MiFi commentary?

Sure. I think it’s – if I read you right, it’s basically as we roll from the second quarter into the third quarter, and then into the fourth quarter, we expect MiFi sales to incrementally increase. MiFi in Q2 is in the process of transitioning really into two different areas. Number one, we’re transitioning that entire portfolio to the open platform. So as we do that, we made the decision to do the entire portfolio there to migrate that over. So as we do that, there is going to be a little bit of lumpiness in MiFi that you saw in Q2. We expect that to return to growth beginning in Q3 with incremental customer adds in Q3 as the principle driver for it. And then migrating at the end of Q3 and into Q4, we expect it to be as a result of the adoption and launch of the open platforms across all technologies and the 4G upgrade cycle of it. So that’s the reason why we’re bullish about it. Underlying this because I think in part where we’re highlighting that is Q2. We have seen where MiFi has been continuous in terms of the error protocol that we’ve launched against in those slots where there’s no disruption as a result of this migration. We’ve seen the greatest sale through since we launched the product. So that gives us confidence about the product category, and then as it migrates forward, we expect the revenue associated with that to incrementally increase as well. Matthew Hoffman – Callan and Company : Okay. So a couple other questions. I think I understood you commentary on MiFi, but basically, it wouldn’t be incorrect to model 3Q up on 2Q and then as you launch LT capabilities, it will be up in 4Q even over 3Q?

Correct. And now just LTE, but all error interfaces with open platforms. Matthew Hoffman – Callan and Company : Okay. All right, good. Next question for Ken, so what’s the approximate cash position today for the company?

It’s approximately, today, somewhere around probably 170 million net. Matthew Hoffman – Callan and Company : All right. And gross margin guidance to be up in 3Q over 2Q. Again, that’s most likely because of – on a proforma basis, that’s because of the better MiFi in the mix, or what’s going on there that makes you more confident on the gross margins, or is it just the cost coming out of the model?

Yeah, this is Ken speaking. Yeah, we see a richer mix next quarter with the MiFi product, which has a higher margin than the USB product at this point. And we expect, you know, some of the charges that we’re incurring some other areas, like extra shipping will hopefully clam down a little bit as well. Matthew Hoffman – Callan and Company : Okay. I have one or two more here. Which [inaudible] LTEs and other complained about, but that’s not a bigger – that’s not a big issue for Novatel. So what are you seeing that’s short, and what’s your confidence that that specific component will be reconciled and improved in the third quarter?

We’re seeing a variety of industry-wide component shortages, memory and a couple of others. And as you might imagine, it’s a daily challenge in terms of what’s on hand, what’s on order and getting our fair share of the allocation. I think we’ve got greater visibility that has allowed us to sort of clam the allocations down in the shortages that we’ve seen. And we also think that some of them are resolving themselves as we go forward. Matthew Hoffman – Callan and Company : All right. Last one for me and I’ll leave the others ones for behind me. So DSOs, they look to have been up pretty sharply here. AR was up on an absolute basis, and I’ve got DSOs up 15-16 days in the model. Anything we should be concerned about in that or is that a timing of sales towards the end of the quarter? What drove that, Ken?

Yeah, Matt. That’s exactly right. We shipped – we were very heavy in shipments at the end of Q2, at the end of June as we kind of unclogged or supply chain with new product that came in at the end of the quarter, which we sold to them in billings that were, you know, back-in loaded for the quarter. Matthew Hoffman – Callan and Company : Okay. So no other issues for getting paid on that product that was shipped? You’re not worried about increasing bad debt? It’s hard for us to look [inaudible] at the balance sheet at this time.

Yeah, no, not at all Matt. As matter of fact, we kind of have a smoothing algorithm for our DOS and our DSO has been under that algorithm that indicates, you know DSO is very similar path that’s run 40 days because we deal smoothing out to kind of iron out some of these bumps and valleys. No, no concerns with the AR at all. Matthew Hoffman – Callan and Company : Great. Thank you, guys.

Thank you. (Operator Instructions) Our next question comes from the line of Anthony Staff with Craig Hallum. Please go ahead. Anthony Staff – Craig Hallum : I have a two-part question for you, Peter. You mentioned on the OEM basis, or on the embedded basis, that you except it to be significant revenue in 2011. If memory serves me correctly, I think you guys had been kind of chugging along when you still had embedded business around 20 million bucks a quarter. Quantify for us significant, do you think you can get back to kind of that $20 million quarterly number? And then, I’ll follow up with the other part when you’re done.

Sure. The reason in part, Tony, that this is business is being rebuilt, as you probably know, is that there’s been somewhat of a – Gobi certainly had a competitive impact and took market share on this business. As we migrate to LTE, the laptop OEMs as well as mobile internet devices and a whole host of consumer devices that are going to bring mobility as part of the offering, now deal with direct – with vendors directly. In terms of – and that’s why we do this to be a significant contributor. In terms of the actual quantifiable amounts, if you can give us another quarter to get to actual launch rollout – as I mentioned, we have design wins in this space across pretty much all of those different categories, MIDs as well as the traditional PC OEMs and then even some of the other consumer devices. But it really goes by the rollout plan for the PC OEMs. So some of them will have enterprise models. Some of them will have build-to-suit models. The enterprise models, I think really is where the rub is. LTE is a more expensive technology, so I think we are possibly less likely to see a complete enterprise platform which is preloaded with an LT module, and then regardless of whether an activation takes place. Nevertheless, we do think that that will be compensated by having a greater number of applications just because of the capacity of LTE. So there’s going to be some tradeoffs in terms of what the rollout plans that we’re seeing. But in all honesty, these are very reasonable design wins and we’re seeing this table be set among the operators, the laptop OEMs and the vendors as ourselves, almost in real time. But in terms of significance, we think it will be a good driver for growth in 2011 based on the rollout plans that we’ve seen to date. Anthony Staff – Craig Hallum : Okay. And then secondly, given your 8K this morning, can you comment about your plans for the CFO position and also Rob Hadley’s departure?

Rob Hadley is still here, and Kenny’s still here. So I don’t think there’s any CFO departure. I’m not sure there’s – we’ve made no announcements on that and none of that is happening. Anthony Staff – Craig Hallum : Okay. All right. I guess that’s all.

Okay.

Thank you. And our next question comes from the line of Bob Sales with LMK Capital Management. Please go ahead. Bob Sales – LMK Capital Management: Hi. I have a couple questions. I know in this environment it’s difficult to look out past the quarter, but can you give us some sense as you get back into the embedded business and independent similar to 4G traction, what longer-term model might look like in terms of gross margins?

On the embedded business? I don’t expect it to be different all that much from what it was historically. It does have lower gross margins in that business, but it also doesn’t have the associated expenses. So on an operating margin level, or an ROI, it ends up coming out to be still very healthy. And even within those bands, there’re pretty big variations in terms of what the gross margin is in the embedded business. Bob Sales – LMK Capital Management: Okay. So nothing in terms of the company long-term gross margin target that you want to offer at this point?

Our long-term target on gross margins, I would say it like this. In terms of our overall business model, we are targeting every model where we have OpEx less than 20% of revenue. And we tend to focus on operating margins as a result of that. The first goal that we have right now though is to turn momentum and improve gross margin structure, get gross margins back to their historical levels. We think we can do that with the direction that we’re going and the traction that we’re getting with our new product rollouts. And then what will happen on the gross margin side as we do that, as we introduce some of the results, or we see some of the results of the strategic initiative that we’ve been building for the last 12 months, we’ll blend in additional revenue streams with improved margin profiles associated with them. So I can say narratively how we expect to see this evolve over time.

Thank you. And our next question is a follow-up question from the line of Anthony Staff with Craig Hallum. Please go ahead. Anthony Staff – Craig Hallum: Thanks. Two more questions for you, Peter. A lot of handsets are coming with WiFi hotspot capabilities built in. I’d love to hear your thoughts on whether or not you think that will have an impact on your business. And at what point do you start cutting operating expenses? And if you wouldn’t mind sharing what you think your break-even revenue per quarter might be once you cross back into profitability?

Sure. Let me just go to the Smartphones because this has been around for a long time actually in various combinations, and we’re seeing the issue coming up again. This is never been, even since before Smartphones, this has really never become a broad-based solution in terms of the data space. There’s several reasons for it, but overarchingly, Tony, the MiFi USBs are optimized for mobile broadband. Smartphones are not optimized for mobile broadband. It just ends up manifesting itself in a lot of different ways. So I guess to my mind, the number one reason why this is not taken off is because of the user experience. It’s a very big issue. It ends up being a terribly awkward solution. We optimize our products in terms of their antenna performance, their battery life. We optimize them for data. If you think about it in terms of user experience for the Smartphone, take it against a MiFi, it would be a very awkward solution to put your Smartphone in the middle of a room and have five people using their laptops off of it. There also are some technical issues. There are power-management issues that historically have always been a problem in that space in terms of the useability of that type of solution. There is a discontinuity that you’ll get between data and voice. So if you’re on a voice call, you’ll have an interruption for a data session and vis-a-versa. The market dynamics have not accepted this type of solution. The data plans that you get supplementally might be good for some casual users on a one-time basis, but for a data user who wants the device optimized for data, you really need to go for a rate plan that allows you to use an amount of data that would be commentary with what your goals are for data on the device. So you know, overall, there are a lot of reasons for this, but they really boil down to that Smartphones are optimized for voice and downloading apps, and we deal on a different space. And I think it has never taken off. And I don’t expect it to be a big disturbance. In terms of cutting our OpEx, we’re pretty actually happy with our operationally discipline and our expense management right now. You know, we did reduce some expenses in Europe, but that was actually when sales started to decline in Europe. If you look at our year-over-year OpEx, you know, 18 million last year, 18.4 now, we think that our expense management has been very good. And we’ll monitor this, of course, and build then business in a sustainable way. But we’re also doing this commentary with our balancing this against our strategy, which is to migrate the company towards end-ten solutions, migrate up to 4G, have the company have a product portfolio with the best competitive position for growth. And break even. I apologize.

Yeah. This is Ken speaking, Anthony. At our 20% gross margin we’re guiding to next week in our $20 million OpEx level, that would give you an inferred break even of about 100 million with today’s margin structure and cost structure. Again, you know, as we go to 4G products, and introduce open-platform MiFis, we’re optimistic that, you know, margin levels, as well as revenue levels will improve and our OpEx will remain relatively flat with maybe a little bit more investment in R&D for the product launches so that we can get the operating leverage back into the business. Anthony Staff – Craig Hallum: Thank you.

Thanks, Tony.

Okay, thank you. Ladies and Gentlemen, this concludes our question-and-answer session for today’s call. I will turn the call back over to Mr. Leparulo for any closing remarks at this time.

Thank you, Operator. And thanks, everybody, for your time and attention, and questions today. We look forward to updating you on our progress next quarter.

Thank you. Ladies and Gentlemen, this concludes the Novatel Wireless Second Quarter 2010 Earnings Conference Call. Thank you for your participation. You may now disconnect.