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Mike Dobson of TeleMapics on Local Search and All Things Geospatial

Yowee – TomTom to buy TeleAtlas!

July 23rd, 2007 by MDob

Earlier today, TomTom announced a record breaking quarter. They also announced that they intended to acquire TeleAtlas in what would be a $2.5 billion dollar transaction. The offer was a 32% premium over the then current TeleAtlas Stock price. On the other side of “the pond”, Navteq (the industry leader) saw its stock rise approximately 15%, after the news of the pending acquisition was announced. It is expected that the transaction will close late in 2007.

I had a call from Europe scheduled for 8 AM with a client who wanted to discuss map suppliers in what the Europeans like to call the “Sat-Nav” market. As a final piece of my preparation, I checked the share price of both companies when I saw incredible movement and there was the enormously interesting press release from TomTom. Needless to say, the call was very interesting and unusually spirited.

TomTom’s strategic acquisition of TeleAtlas has all of the intrigue one would want in a mystery novel.

Does TomTom intend to develop an in-car navigation business in addition to its successful PND (Personal Navigation Device Market)?

TomTom was 40% of TeleAtlas’s revenue. Other PND’s were responsible for another large chunk of revenue, while in-car systems accounted for less than 20% of the total. Will TomTom continue to support these revenues lines or, will the cost savings on its map database licenses be so significant that it can jettison some of these businesses after a couple of years, leaving Navteq even better positioned than it is now in terms of market leadership?

If TomTom accrues significant cost savings by acquiring TeleAtlas (reducing licensing fees for its use of map data), will it be able to lower the pricing of its PNDs? Currently, the going rate for a database license from either TeleAtlas or Navteq is in the $20-$25 range. Will this change in market dynamic give Navteq the ability to raise its data licensing price to the PND industry?

Does TomTom see the end of the PND market and the rise of its successor, the mobile Location Based Services market? Is the acquisition of TeleAtlas a strategic move to capture more of the supply chain for what will become an enormous market?

Will TomTom remain interested in supplying maps to online mapping services like Google, Yahoo, MSN and everyone else, or will it abandon the business to Navteq?

What will online mappers reaction be to the acquisition? Will the industry complete its move to using Navteq data or will they attempt to stay with TeleAtlas (if it continues to supply the market).

Will the change in supplier flexibility (most companies like to have at least two suppliers for strategic reasons) spawn new suppliers in the map database market?

Will the near release of the augmented Tiger Files (the TIGER/MAF modernization research) and the potential absence of TeleAtlas as a supplier spur the entry of a new supplier who will use these new, spatially accurate files as the basis for creating a navigable map data base for the U.S?

What will Garmin’s reaction be? Currently TeleAtlas is a minor supplier, but in May the companies announced a deal in which Garmin will use TeleAtlas data in a PND to be distributed in Singapore and Malaysia? Will the potential ability of TomTom to significantly reduce its cost of goods through a reduction in its map licensing revenues and newfound pricing flexibility put Garmin between a rock and a hard place (reducing price at the expense of profit since its map licensing costs will not decrease)?

Don’t look for Navteq to enter the bidding for TeleAtlas (too many insurmountable market dominance issues). But now that the issue has been raised, would Google or some other company feel the need to protect its mapping assets by ensuring access to navigable map databases by acquiring Navteq? Although I had thought this move unlikely to happen, acquisitions of suppliers often produce unique responses. Until now, Google has shown little interest in owning data assets and great interest in owning technologies. Will that change with the TeleAtlas acquisition?

Ah, there are just too many interesting possibilities. But now for the most important question – Will Don Cooke of TeleAtlas finally retire? Nah! He is having too much fun.

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Posted in Data Sources, Geospatial, Google, Mapping, Microsoft, Personal Navigation

One Response

  1. Peter Krasilovsky

    Mike, that’s a great, 1 stop report on TeleAtlas. I feel like just republishing the whole thing!

    Thanks Peter. Republish away!