Lost in the hype behind Verizon's (NYSE: VZ) move to begin selling its own network's version of Apple's (Nasdaq: AAPL) iPhone 4 next month, the "Can you hear me now?" carrier also revealed that it would soon begin selling iPads with internal connectivity.
Verizon's CFO didn't give Bloomberg details on when the new iPads would hit the market. He also didn't reveal whether the tablet would be surfing on 3G or the wireless giant's nascent 4G LTE platform. Either way, this is bad news for Novatel Wireless (Nasdaq: NVTL).
Shares of Novatel plunged 19% yesterday, as investors absorbed the news.
For now, Verizon's workaround to counter Apple's 3G iPads running exclusively on AT&T (NYSE: T) is to bundle Wi-Fi iPads with Novatel's MiFi mobile hot spots. The ability to tether several devices is a winner for Verizon, but it also means that customers need to lug around the pocket-sized MiFi. The moment Verizon can market iPads with internal connectivity, the MiFi bundle is going to take a hit.
In theory, this shouldn't be a big deal for Novatel. Verizon only began offering these bundles three months ago. MiFi portable hot spots are popular as stand-alone gadgets that power several surfing sessions at the same time. Who cares if Verizon will eventually be offering a self-contained iPad connectivity solution?
Well, the trend is more damaging than the news. Remember yesterday's Verizon iPhone 4 announcement? One feature of the smartphone on Verizon's network is that it will be able to serve as a mobile hot spot for customers upgrading to a tethering plan. We'll have to wait until we get official data plan pricing to weigh the value proposition, but at the very least it will become more convenient to just carry a smartphone that does it all.
This is the nugget that is apparently lost on Sierra Wireless (Nasdaq: SWIR). Shares of the mobile broadband specialist actually inched higher yesterday, even though its Overdrive is the only other major mobile hot spot device competing with MiFi. As more smartphones offer tethering at realistic price points, both Novatel and Sierra will be challenged to move mobile hot spots and wireless USB modem sticks.
Novatel's drop may have been extreme in the near term, but Sierra's immunity from the malaise is downright puzzling.
Do you have a mobile broadband subscription? What are you using, and what do you think about the MiFi, Overdrive, or smartphone tethering? Share your opinions in the comment box below.
