Garmin: Something’s Up, Maybe, Or Maybe Just Down With Navteq, Tele-Atlas
Rumors passing here and there today suggest portable navigation device (PND) maker Garmin (GRMN) may have a deal in the works with Nokia (NOK) for global positioning system-enabled handheld devices. I checked in with analyst Jeff Rath of Canaccord Adams who covers Garmin and while he’s heard the rumors but has nothing specific on them, he offered some intelligent speculation and pointed to something more interesting from a stock perspective.
Garmin may be benefitting from the fact that the European Union is sounding not so friendly to Nokia’s bid to purchase Navteq (NVT), one of two providers of mapping data that’s used in PNDs, says Rath. The thinking is that if Nokia’s deal is broken by the EU, Nokia may turn around and do a deal with Garmin. The EU is also throwing up objections about Dutch PND maker Tom Tom’s (TOM2.AS) pending acquisition of the other maps provider, Tele Atlas. Moreover, if both deals fold, Garmin will not be threatened with two hardware makers controlling the world’s two major sources of mapping data, which would put Garmin in a more comfortable position.
While Rath has no idea whether there’s substance to the rumors, he notes the more interesting fact that the stock prices of both Navteq and Tele Atlas have declined substantially from the offer prices announced by Nokia and Tom Tom. The arbitrage opportunity is now quite substantial if one were to bet in favor of the two deals going through while the market seems to be betting they won’t happen. Navteq is trading at $68.90 today, well below the $78 offer price from Nokia, while Tele Atlas closed today at about 23 Euros per share on the Amsterdam exchange, well below Tom Tom’s 30 Euro offer price. (Though it did close up over 10%, mind you.) Rath calculates the annualized return on those two deals could be 88% in the first case and over 100% in the latter case, assuming the deals actually get done and they close quickly.
So, if you know which way the European Union will go, and you feel like playing against the odds, there’s some serious money to be made here. Garmin shares, meanwhile, are up just under 3% at $61.81, which is not a huge move considering the Nasdaq is up over 3%.
Garmin values its independence too much to be purchased. There would need to be some compelling reason for them to agree to be acquired. It won’t be cash, because Garmin has a bucketload already. More likely is a nuvifone deal with Nokia than any acquisition talks.
I agree with Garmin’s independence. But Big G also has a tendency to make cooperative deals in the market such as the recently renewed Kenwood deal. It would be a good move on Nokia to want to utilize Garmin’s expertise rather than compete directly. But alas, only time will tell.
I don’t get it. If the NOK/NVT deal falls through, GRMN, which has already secured a long-term deal for cheap maps, keeps on trucking into the 2010’s with cheap maps from an independent NVT. NOK will have to secure a similar deal with NVT, as will every other Goog/Yahoo/MSFT/Sprint/Motorla, etc.
What then does NOK have to gain from GRMN? I could maybe see GRMN asking for NOK’s help to distribute and sell the nuvifone, but NOK has already has their own navigation phones, and GRMN already has their own distribution and sales network. What GRMN needs for nuvifone is a lucrative deal with a carrier (a la Apple and the iphone).
I don’t see a deal here. All I see is pain for NOK & NVT if the acquisition doesn’t go through.
I don’t see where Nokia buying Garmin was the rumor. “Garmin may have a deal in the works with Nokia for global positioning system-enabled handheld devices.” “Nokia may turn around and do a deal with Garmin.” Not “for” Garmin.
Nokia will buy Garmin soon for at least $100 a share.
at least one (if not both) of the 2 deals (NOK/NVT and TOM/TELE) will fail, not sure which one
What’s your support for that Benny? If anything, I would think that on May 5 (the expected approval date of the TeleAtlas/TomTom deal, according to one anonymous source quoted by the press) is probably the date that both map makers get approval. If anything, the fact that BOTH are being acquired is GOOD for competition, just as if they were both indepenedent. No reason to approve one and not the other, and no reason to announce them on different dates. Nokia will get the in-depth review order from the EU at the end of this week. But I’ll put my money where my mouth is after April 15th by buying some NVT. A 13% gain in three weeks? I’ll take it.
Speculate all you want about Nokia buying Garmin. This article says nothing, or even hints to nothing in that regard. A rumored deal “with” Nokia “for” product is all that is mentioned.
Here is the problem for GRMN. Apple, Google, Nokia, and everybody and their dog will have phones with GPS accurate to the 1/2 block within the year. Some at no additional cost to the customer. These will be used in cars and portable. No more need for a separate device. GRMN has now entered the wireless market with everyone else. The chances are not good.
Sprint will purchase GRMN at $70/share in two months. This was overheard at dinner the other night in Leawood, KS.
I think Apple will buy Garmin, or is it the other way around? I’m too ditzy for my heels….
I would be very surprised if GARMIN was bought by anyone. GARMIN would hugely limit their sales of the nuvifone if they tie themselves to a carrier. That would be a huge mistake on their part.
Don’t you think Sprint has enough other problems to work out before they start buying up companies?
hey sprint: are you a waiter that you overheard that? nice try. tips are for waiters. any who gives you a so called “tip” is either lying or working with inside information (i.e., illegal).
I believe the deal announced today between GRMN and Samsung perhaps caused the chatter that spawned this article. Another in a long line of nice moves by this brilliantly run company.
Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields.
