Did Novatel and Sierra Just Get Garmin'd?

The evolution of Apple (NAS: AAPL) has left many former tech darlings reeling in its wake. It may now be time for mobile hotspot makers Novatel (NAS: NVTL) and Sierra Wireless (NAS: SWIR) to meet similar fates.

One of the interesting nuggets in yesterday's iPad unveiling is that the new tablet will function as a mobile hotspot. Firing up the feature will allow up to five other devices to go online through Wi-Fi, Bluetooth, or USB. This is something that wasn't available in the first two generations of the iPad.

This is a niche that Novatel pioneered with its MiFi intelligent mobile hotspot, and Sierra quickly followed with its AirCard. Both companies also make a range of the plug-in USB modems and data cards that their own mobile hotspots are disrupting.

Apple introduced built-in mobile hotspots with October's debut of the iPhone 4S, but the new iPad is the tech giant's first true 4G LTE device. In other words, it should give approved neighboring devices more-than-adequate connections. There has never been a better reason to pay the extra $130 to get the 4G LTE model over the Wi-Fi version that has historically been the better seller.

This is bad news for Novatel and Sierra, obviously, and the shares fell 2.6% and 0.3%, respectively, during an otherwise positive day for the market.

There are now more than 100 million smartphone owners in this country, and several Android smartphones have doubled as mobile hotspots for some time. It's been nearly two years since the HTC Evo hit the market as a 4G Android with mobile hotspot functionality.

Connectivity is a great thing, but it's also disruptive. Many will argue that GPS leader Garmin (NAS: GRMN) has never been the same since Apple's iPhone ushered in an era where mobile phone owners can grab turn-by-turn navigation without having to pay up for clunky GPS devices. Now many new model cars allow smartphone owners to turn their connectivity into a navigation service with no monthly charges.

Garmin lives on, though. It adapted. All the proof you need is in Garmin's latest quarter, where revenue grew -- yes, grew -- and the company posted blowout bottom-line results. It survived the disruption by keying in products that Apple couldn't easily squash, including fitness, outdoors, aviation, and marine products.

Now it will be time for Novatel and Sierra to prove that either they can raise the bar on mobile hotspots or offset the disruption by growing elsewhere. It can be done. Garmin's living proof.

You say you want a revolution
A new special report singles out three winners in the iPhone, iPad, and Android revolution. The report is free, but it won't be around forever, so check it out now.

At the time thisarticle was published The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.