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NOVATEL WIRELESS (NVTL): A TIMELY, COMPELLING INVESTMENT IDEA

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Key Investment Metrics

Novatel Wireless, Inc. meets the critical value investment criteria for Shaylor Value Fund. It offers a compelling risk/reward ratio and is a timely investment given the improved outlook for NVTL products as recently noted by Verizon
Novatel Wireless (NVTL) is Shaylor Value Funds largest position: Sweet spot: small cap, deep value stock trading for little more than cash on the balance sheet Bottom-up analysis: MiFi launch reaching critical mass; M2M (machine-to-machine) business is underappreciated by the market. Currently no value being assigned to core wireless mobile business (~$330MM of Rev.) Value creation opportunity: Verizon subscriber base will drive market share gains leading to above average revenue growth in MiFi hotspot devices Novatel is a critical Verizon partner Valuation: based on break-up analysis or looking at potential earnings power, Novatel is worth conservatively $8-12/share By way of note, NVTL sold for over $25/share in 2007 and was north of $11/share as recently as a year ago Margin of safety: $3.86/current share price. 50%+ margin of safety Short sellers overextend: 10.5% of shares outstanding are short with a small float

Catalysts: successful adoption of MiFi hotspot devices; improved operational performance attracting analyst re-rating; almost no European exposure (95% of 2010 revenue in North Amer.)

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Investment Thesis
Novatel represents an excellent opportunity to invest in a growth company at a stock price below liquidation value. NVTL is a premiere player in the fast growing mobile hotspot industry which is currently benefiting from the 3G 4G upgrade cycle
Novatels MiFi product line is in the early stages of rollout and is the market share leader The MiFi4082 offers fast 4G WiMAX mobile broadband and allows up to five devices to get access to WiFi on the go Teamed up with the right partner in Verizon: 1) heavily promoting NVTL product, 2) best 4G network

Riding the organic subscriber growth of Verizons 4G network (>20% CAGR)

Verizon conference call 10/21/11 Major catalyst for the recent stock price rise on Friday 10/21/11 (+16.6%)
($200 billion company, mentioning key strategic focus of product supplied by $48.5 million TEV, Novatel): Internet data devices have an ARPU of about $49. While the growth of these devices is diluting our postpaid ARPU growth at this time, expanding this category remains a key strategic focus for us. We continue to see strong demand for our 4G LTE mobile Hotspot devices and PC cards as well as tablets. This category of devices represents nearly 8% of all our retail postpaid subscriber base. I would also note that these data-only devices typically carry a much lower subsidy than phones. They have a very short payback period and contribute to profitability fairly quickly. In addition, the migration of data traffic from our 3G to our 4G network will enhance our capital and operating efficiency and will help us drive improved returns going forward.

Substantial, unrecognized value in Novatels M2M business. The wireless metering business is in its infancy; via its Enfora unit, NVTL has substantial exposure to this dynamic industry. This is a quiet growth engine that we believe is worth at least the current TEV of the entire company. At a $48.5 million TEV and $375 million of LTM growth revenues (0.1x LTM Rev.), Novatel represents one of the cheapest growth stocks in the market today

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Current Stock Market Valuation

We believe the valuation has become very compelling for long-term investors based on a number of valuation metrics with approximately $2.30/share in cash on the B/S (60% of mkt. cap.)
Current Capitalization (Millions) Currency USD Share Price as of Oct-21-2011 $3.86 Shares Out. 32.1 Market Capitalization** - Cash & Short Term Investments + Long-term Inv. (Cash) = Total Enterprise Value (TEV) 123.7 58.1 17.1 48.5
The Total Enterprise Value of the Company is $48.5 million; Novatel is expected to generate over $400 million in revenues in 2011 Only 11 months ago Novatel acquired Enfora for approx. $83 million TODAY: all of Novatel is worth only 60% of the price paid for Enfora; thus attributing zero value to the MiFi hotspot franchise Investors have valued Novatel at the bottom 5% of Companies in the stock market in terms of key valuation parameters: Price/Book Value TEV/Forward EBITDA TEV/LTM Revenue

Valuation Multiples based on Current Capitalization LTM 12 m onths 12 m onths 12 m onths Jun-30-2011A Dec-31-2011E Dec-31-2012E 0.1x 0.1x 0.1x NM NM 0.8x 0.8x 3.3x 7.0x 0.7x -

For the Fiscal Period Ending TEV/Total Revenue TEV/EBITDA P/Diluted EPS (Cash adj.) P/BV Price/Tang BV

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How much might Novatel be worth?

We believe on a sum-of-the-parts basis, Novatel is worth over $8/share

Sum of the parts: M2M Segment conservatively worth price paid (i.e. $42.5MM)

Cash and long term investments ($75 million)

The Mobile Computing Segment and patents: Comparable companies trade at 0.4-0.8x revenues ($150-$300 million)

TOTAL ENTERPRISE VALUE RANGE: $250-$400 million

SOP = $8-$12 share price Novatel currenty trades for $3.86/share (not for long, in our opinion)

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How much might Novatel be worth?

On an earnings basis, we believe Novatel has $0.60-$0.75/share in earnings power in the late-2012 to 2013 timeframe

Management is targeting 10% operating margins by 2013 Implies $40-$50 million of operating earnings power

Consistent with our analysis

Company is leveraged for high flow-through margin should volumes of MiFi devices be greater than anticipated

At a conservative 15-17x LTM EPS in 2013, stock could be $10-$15/share within 24 months (2-4x current price)

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Shorts have become overextended

With 10.5% of the shares outstanding already short and a significant block of long-term holders in the stock, short sellers may find it hard to cover even at materially higher prices

As Fridays price action shows (+16.6%), it is our experience that when the stock moves, it moves fast and powerfully

Latest Holders

Long-term value investors (45% CSO) invested at prices >$5.50/share

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Holder Royce & Associates, LLC Severn River Capital Management, LLC BlackRock, Inc. (NYSE:BLK) Wellington Management Company L.L.P. The Vanguard Group, Inc. Diker Management, LLC Brightfield Capital Management, L.L.C.

CSE 3,720,076 2,619,021 2,514,320 2,078,100 1,694,604 1,085,818 725,000

% Of CSO 11.6% 8.2% 7.8% 6.5% 5.3% 3.4% 2.3%

$MM $12.3 $8.7 $8.3 $6.9 $5.6 $3.6 $2.4

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Potential Risks

Can the Company manage growth? Servicing very demanding OEM customer base (i.e. Verizon, others) Foreign competition over time Samsung MiFi product offering is competitive Further delays in 3G 4G rollout M2M is still in cash burn mode in order to grow the platform can management manage FCF well?

Always the risk of a poor acquisition when sitting on all that cash
Proliferation of embedded hotspot technology on the horizon when will smartphones have hotspot technology embedded that can meet the small size and battery demands? (2014 will see greater embedded penetration according to research done by InStat and ABI)

Will Novatel transition to be the leader in embedded technology too?

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BUSINESS DESCRIPTION AND COMPANY STRATEGY

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Novatel Wireless
Novatel Wireless, Inc. is a leader in the design and development of intelligent wireless solutions based on 2G, 3G and 4G technologies providing wireless connectivity Serving the burgeoning wireless market Quality, reliable, innovative products that serve a broad audience Partnering with wireless network operators, distributors, original equipment manufacturers (OEMs), and vertical markets worldwide to offer wireless connectivity solutions An innovation leader First to introduce USB in North America Invented Intelligent Mobile Hotspot First with mobile broadband solutions for all 3G-4G platforms Significant technological and IP achievements Leader and innovator in mobile broadband solutions Smart M2M platforms with Enfora Strong patent portfolio: 42 issued and 60 patent applications pending

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Business Description
Novatel has two business segments Mobile Computing and M2M - each offering a suite of products to growth markets in the wireless space
Mobile Computing Products Segment Offers MiFi Intelligent Mobile Hotspots, which offer a connectivity option for Wi-Fi-enabled devices, such as the iPad, Kindle, tablets, PCs, MP3 players, and gaming devices USB and wireless PC-Card modems that are used to access wireless broadband networks Embedded modules, which are used in a range of computing devices, including laptop PCs, netbooks, and various other electronic products to provide wireless broadband access MobiLink mobile communications software suite, an object-oriented application that enables a user to gain access to connectivity features, such as SMS, multimedia messaging, and virtual private networking. M2M Products and Solutions Segment Provides asset-management solutions utilizing wireless technology and machine-to-machine (M2M) communications devices. It offers Spider MT, SA, and AT integrated solutions and accessories for monitoring and managing mobile and fixed assets, vehicle tracking and telemetric, and workforce tracking and management N4A software and design services that include software, as well as design services primarily for asset management solutions and custom product designs. This sub-segment serves transportation companies, industrial companies, manufacturers of medical devices and geographical-location aware devices, and providers of security systems.

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Novatels MiFi Device has been well-received

Verizon Wireless has heavily promoted the Novatel MiFi device on TV The more devices Verizon can sell, the more wireless customer contracts it can capture in order to leverage the fixed cost of its investment in its 4G network

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Customer Reviews

Customer Reviews (n=293) have been strong Average rating of 3.5/5 stars Biggest pros: Flies like the wind. Speed, Speed, Speed. Powerful. Easy to use Great signal and small Management estimates that Novatels MiFi suite of products are capturing approximately 70% of the market[1] Most frequent cons: Drops connection Not as fast as I had hoped. [These complaints are related to Verizons 4G rollout and are largely temporary network issues] Battery life *we think this has a positive side it will be a long time before embedded technology will reach the size requirements or battery life of Novatels wallet sized device]

Q2 Novatel conference call

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M2M Segment: Enfora long-term growth engine

Enfora expands Novatels addressable market, broadens its range of complementary products, diversifies its customer base and provides significant operating leverage
In December 2010, Novatel acquired Enfora for approximately $83 million Provider of intelligent asset-management solutions utilizing wireless technology and machine-tomachine (M2M) communications Enable enterprises to access, analyze, and leverage information from geographically dispersed assets via wireless metering technology The price paid for Enfora less than one year ago is more than 1.7x Novatels current TEV

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Enfora acquisition strategic rationale

[The acquisition of Enfora] will strengthen our competitive position by leveraging our combined research and development talent and customer relationships - Management
Diversifies Novatel Wireless' customer base and product lines into adjacent markets Advances the company's strategy of providing intelligent devices to all end markets enterprise, consumer, and vertical applications Enfora has developed differentiated solutions for key market segments, including transportation, industrial automation, security, and healthcare Creates a strong growth profile by bringing together long-term customer relationships with wireless carriers, cable operators, distributors, retailers, MVNOs, leading OEMs in both mobile computing and vertical markets, enterprises, and application service providers Leverages the research and development, product portfolios, and geographic reach of the combined company

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HISTORICAL FINANCIAL PERFORMANCE

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Novatel Wireless EPS

Financial performance to-date has been disappointing as product successes have not translated into profits: 3G 4G rollout has taken longer than many analysts and investors were expecting

Source: Company presentation given at Cowen conference June 2, 2011; Q3E11 and Q411E based on CapitalIQ consensus estimates.

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Financial picture improving

Analyst coverage of the company is limited and we believe estimates are too low we expect upgrades based on the recent Verizon conference call median price target of $5.50/share (+42% from today)
Key Financials For the Fiscal Period Ending Currency Total Revenue Growth Over Prior Year Gross Profit Margin % EBITDA Margin % EBIT Margin % Earnings from Cont. Ops. Margin % Net Incom e Margin % Diluted EPS Excl. Extra Item s Growth Over Prior Year 12 m onths Dec-312007A USD 429.9 97.2% 130.8 30.4% 64.4 15.0% 53.4 12.4% 38.8 9.0% 38.8 9.0% 1.21 NM 12 m onths Dec-312008A USD 321.0 (25.3%) 69.6 21.7% 6.7 2.1% (4.9) (1.5%) (1.2) (0.4%) (1.2) (0.4%) (0.04) NM 12 m onths Dec-312009A USD 337.4 5.1% 87.8 26.0% 17.9 5.3% 4.9 1.5% 3.9 1.2% 3.9 1.2% 0.13 NM 12 m onths Dec-312010A USD 338.9 0.5% 67.7 20.0% (8.7) (2.6%) (19.7) (5.8%) (33.5) (9.9%) (33.5) (9.9%) (1.06) NM LTM 12 m onths 12 m onths 12 m onths Jun-30- Dec-31-2011E Dec-31-2012E USD USD USD 374.7 14.6% 68.5 18.3% (18.9) (5.0%) (34.2) (9.1%) (34.0) (9.1%) (34.0) (9.1%) (1.066) NM 417.9 (3.9) (15.1) (17.8) (4.3%) (0.587) 466.5 11.6% 14.6 3.1% 20.6 4.4% 7.3 1.6% 0.208 -

Note: Based on CapitalIQ estimates

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Novatels Stock Performance

Over the last two years, Novatels stock price has significantly underperformed the overall market and has lost over 65% of its value many investors have lost patience with the story

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Key Investment Metrics

Novatel Wireless, Inc. meets the critical value investment criteria for Shaylor Value Fund. It offers a compelling risk/reward ratio and is a timely investment given the improved outlook for NVTL products as recently noted by Verizon
Novatel Wireless (NVTL) is Shaylor Value Funds largest position: Sweet spot: small cap, deep value stock trading for little more than cash on the balance sheet Bottom-up analysis: MiFi launch reaching critical mass; M2M (machine-to-machine) business is underappreciated by the market. Currently no value being assigned to core wireless mobile business (~$330MM of Rev.) Value creation opportunity: Verizon subscriber base will drive market share gains leading to above average revenue growth in MiFi hotspot devices Novatel is a critical Verizon partner Valuation: based on break-up analysis or looking at potential earnings power, Novatel is worth conservatively $8-12/share By way of note, NVTL sold for over $25/share in 2007 and was north of $11/share as recently as a year ago Margin of safety: $3.86/current share price. 50%+ margin of safety Short sellers overextend: 10.5% of shares outstanding are short with a small float

Catalysts: successful adoption of MiFi hotspot devices; improved operational performance attracting analyst re-rating; almost no European exposure (95% of 2010 revenue in North Amer.)

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