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Segment Information and Concentrations of Risk
 9 Months Ended
Sep. 30, 2014
Segment Reporting [Abstract]  
Segment Information and Concentrations of Risk

8. 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:

 

  •  

The Mobile Computing Products segment includes the Company’s MiFi products, USB and PC-card modems and embedded modules that enable data transmission and services via cellular wireless networks.

 

  •  

The Machine-to-Machine (“M2M”) Products and Solutions segment was established as a result of the Company’s acquisition of Enfora in 2010. It includes the Company’s intelligent asset-management solutions utilizing cellular wireless technology, M2M communication devices, and embedded modules that enable M2M data transmission and services via cellular wireless networks.

 

Segment revenues and segment operating 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 loss also includes acquisition-related costs, purchase price amortization, restructuring, impairment and integration costs. The table below presents net revenues from external customers, operating loss and identifiable assets for the Company’s reportable segments (in thousands):

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2014     2013     2014     2013  

Net revenues by reportable segment:

         

Mobile Computing Products

    $ 34,788      $ 84,067      $ 98,483      $ 240,510   

M2M Products and Solutions

      9,542        8,606        31,401        29,208   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 44,330      $ 92,673      $ 129,884      $ 269,718   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating loss by reportable segment:

         

Mobile Computing Products

    $ (1,704 )    $ (953 )    $ (20,076 )    $ (9,801 ) 

M2M Products and Solutions

      (2,192 )      (3,911 )      (10,145 )      (11,992 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ (3,896 )    $ (4,864 )    $ (30,221 )    $ (21,793 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

     September 30,      December 31,  
     2014      2013  

Identifiable assets by reportable segment:

      

Mobile Computing Products

    $ 80,551       $ 96,516   

M2M Products and Solutions

      12,494         14,949   
  

 

 

     

 

 

  

Total

    $ 93,045       $ 111,465   
  

 

 

     

 

 

  

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,      December 31,  
     2014      2013  

United States

    $ 91,241       $ 108,932   

Canada

      951         808   

Europe, Latin America and Asia

      853         1,725   
  

 

 

     

 

 

  
   $ 93,045       $ 111,465   
  

 

 

     

 

 

  

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

 

     Three months ended     Nine months ended  
     September 30,     September 30,  
     2014     2013     2014     2013  

United States and Canada

      90 %      97 %      90 %      96 % 

Latin America

      1        1        1        1   

Europe, Middle East and Africa

      7        2        8        3   

Asia and Australia

      2        0        1        0   
  

 

 

    

 

 

    

 

 

    

 

 

  
     100 %      100 %      100 %      100 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

During the third quarter of 2013, the Company began implementing restructuring initiatives designed to refine its business operations, reduce expenses to better correspond to its decreased revenue and capitalize on synergies in its target markets with the goal of driving long-term profitability.

 

In connection with the restructuring plan, the Company made organizational changes across some of its Mobile Computing and M2M business operations to consolidate its research and development resources and consolidate global manufacturing activities. The Company also closed development sites to drive efficiencies, enhance margins and improve capital efficiency.

Historically, the Company’s business units have their own management teams and offer different products and services. The business units have been aggregated into two reportable business segments based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics and the manner in which management reviews results, among other considerations. The Company is currently reevaluating its reportable segments composition.

Concentrations of Risk

Substantially all of the Company’s net revenues are derived from sales of wireless access products. Any significant decline in market acceptance of the Company’s or its customers’ products or in the financial condition of the Company’s 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, 2014, sales to the Company’s two largest customers accounted for 54% and 12% of net revenues, respectively. In the same period in 2013, sales to its largest customer accounted for 59% of net revenues. For the nine months ended September 30, 2014, sales to the Company’s largest customer accounted for 44% of net revenues. In the same period in 2013, sales to its largest customer accounted for 61% 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, including delays caused by component shortages, 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 their underlying product purchase orders, which would negatively impact the Company’s revenues and results of operations.