Leading navigation
device maker in the United States, Garmin, announced on
Wednesday 31 October that it had made an unsolicited $3.3
billion bid for Dutch digital map provider Tele Atlas,
setting off a bidding war with its European rival TomTom.
At €24.50
($35.40) a share in cash, Garmin''s offer for Tele Atlas
is 15 per cent higher than TomTom''s $2.6 billion bid in
July. It is offering a 48 per cent premium over Tele Atlas''s
20 July stock price, and wants Tele Atlas to tender at
least 66.67 per cent of its shares.
Garmin has
said it plans to officially launch the offer on 4 December,
the date on which TomTom''s bid expires. But analysts believe
that TomTom will come back with a higher offer, as acquiring
Tele Atlas is in TomTom''s strategic interest, while for
Garmin it''s more a defensive move.
Analysts feel
Tele Atlas could end up fetching as much as €30 ($43.35)
a share. A wave of consolidation is sweeping makers of
digital maps for in-car or hand-held navigation devices.
Some analysts have predicted that bidders like Microsoft
or Google could also enter the fray.
Earlier this
month the world''s largest maker of mobile phones Nokia
Corp offered to buy Navteq, Tele Atlas''s larger competitor,
for $8.1-billion. Navteq last month agreed to the takeover.
It''s a sign
that Nokia plans come up with smart phones that, apart
from e-mail and multimedia, have capabilities based on
location information. The market for digital maps is dominated
by a duopoly between Tele Atlas and Navteq Corp.
Based in the
Netherlands, Tele Atlas maintains a database of digital
maps of more than 200 countries, spanning all of North
America and most of Europe, Russia, China, India and Pacific
Asia. Garmin wants to integrate these maps in the company''s
25 million GPS devices, which help customers figure out
where they are going or find addresses.
The market
for navigation systems that guide travellers is soaring.
Shipments of car navigation and global positioning systems
are expected to triple worldwide by 2012 to 65.1 million
units from 19.8 million in 2006.
Personal GPS-based
navigation devices have taken over the car navigation
market, that was once dominated by in-car systems. Both
TomTom and Garmin have seen dramatic growth in the last
four years. But TomTom''s rise has been the fastest, reaching
nearly $1.6 billion in revenue last year from only $10
million in 2002.
But the fight
over Tele Atlas has more to do with GPS manufacturers
from Taiwan and Korea that want to grab a portion of the
sales boom. The biggest threat comes from Mitac of Taiwan,
which owns the Mio brand and recently bought Navman.
Mio and Navman
together captured 20 per cent of the market last year,
placing Mitac in the No: 3 spot behind TomTom and Garmin,
which had 37 per cent and 25 per cent market shares respectively.
On the same
day as its bid offer announcement, Garmin reported that
revenue rose 79 per cent in the third quarter to $729
million from $408 million during the same period a year
ago.
Revenue from
its car navigation business was up 118 per cent at $519
million. Net income increased to $193.5 million or 88
cents a share, from $123 million, or 56 cents a share,
a year ago. The company forecast revenue of more than
$2.9 billion for the year, and earnings per share to exceed
$3.40.
Apart
from Garmin''s fabulous figures, most analysts said the
offer was a good move. But investors still dumped the
stock on the news. Garmin shares fell sharply on Wednesday,
giving up almost 11 per cent to close at $107.40.
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