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Segment Information and Concentrations of Risk
 9 Months Ended
Sep. 30, 2012
Segment Information and Concentrations of Risk [Abstract]  
Segment Information and Concentrations of Risk

7. Segment Information and Concentrations of Risk

Segment Information

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by senior management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company operates in the wireless broadband technology industry and senior management makes decisions about allocating resources based on the following reportable segments:

 

  •  

Mobile Computing Products segment — includes our MiFi products, USB and PC-card modems and Embedded Modules that enable data transmission and services via cellular wireless networks.

 

  •  

The M2M Products and Solutions segment was established as a result of our acquisition of Enfora in 2010. It includes our intelligent asset-management solutions utilizing cellular wireless technology, and M2M communication devices, and embedded modules that enable M2M data transmission and services via cellular wireless networks.

 

Segment revenues and segment operating income (loss) represent the primary financial measures used by senior management to assess performance and include the net revenues, cost of net revenues, sales and other operating expenses for which management is held accountable. Segment expenses include sales and marketing, research and development, administration, and amortization expenses that are directly related to individual segments. Segment earnings (loss) also includes acquisition-related costs, purchase price amortization, restructuring, impairment and integration costs. The table below presents net revenues from external customers, operating income (loss) and identifiable assets for our reportable segments (in thousands):

 

                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2012     2011     2012     2011  

Net revenues by reportable segment:

                                

Mobile Computing Products

   $ 65,189     $ 102,691     $ 248,620     $ 258,268  

M2M Products and Solutions

     5,828       10,572       24,993       34,800  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 71,017     $ 113,263     $ 273,613     $ 293,068  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss):

                                

Mobile Computing Products

   $ (7,513 )    $ 1,311     $ (11,701 )    $ (14,359 ) 

M2M Products and Solutions

     (24,340 )      (7,359 )      (62,424 )      (16,860 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (31,853 )    $ (6,048 )    $ (74,125 )    $ (31,219 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
         
                September 30,
2012		     December 31,
2011		  

Identifiable assets by reportable segment:

                                

Mobile Computing Products

                   $ 148,855     $ 181,180  

M2M Products and Solutions

                     16,747       67,999  
                   

 

 

    

 

 

  

Total

                   $ 165,602     $ 249,179  
                   

 

 

    

 

 

  

The Company has operations in the United States, Canada, Europe, Latin America and Asia. The following table details the geographic concentration of the Company’s assets in the United States, Canada, Europe, Latin America and Asia (in thousands):

 

                 
    September 30,
2012		     December 31,
2011		  

United States

   $ 160,345     $ 243,030  

Canada

     3,922       4,764  

Europe, Latin America and Asia

     1,335       1,385  
   

 

 

    

 

 

  
    $ 165,602     $ 249,179  
   

 

 

    

 

 

  

The following table details the concentration of the Company’s net revenues by geographic region:

 

                                 
    Three months ended
September 30,		     Nine months ended
September 30,		  
    2012     2011     2012     2011  

United States and Canada

     94.0 %      95.2 %      92.7 %      95.5 % 

Latin America

     —         —         2.2       —    

Europe, Middle East and Africa

     5.7       4.5       4.7       4.3  

Asia and Australia

     0.3       0.3       0.4       0.2  
   

 

 

    

 

 

    

 

 

    

 

 

  
      100.0 %      100.0 %      100.0 %      100.0 % 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

Concentrations of Risk

Substantially all of the Company’s net revenues are derived from sales of cellular wireless access products. Any significant decline in market acceptance of the Company’s products or in the financial condition of the Company’s existing customers would have an adverse effect on the Company’s results of operations and financial condition.

A significant portion of the Company’s net revenues are derived from a small number of customers. For the three months ended September 30, 2012, sales to our two largest customers accounted for 57% and 10% of net revenues. In the same period in 2011, sales to our two largest customers accounted for 49% and 11% of net revenues. For the nine months ended September 30, 2012, sales to our two largest customers accounted for 58% and 10% of net revenues. In the same period in 2011, sales to our three largest customers accounted for 45%, 13%, and 10% of net revenues. The Company outsources its manufacturing to several third-party contract manufacturers. If one or more of these manufacturers were to experience delays, disruptions, capacity constraints or quality control problems in manufacturing operations, product shipments to the Company’s customers could be delayed or its customers could consequently elect to cancel the underlying product purchase order, which would negatively impact the Company’s revenues and results of operations.