Exploring Local
Mike Dobson of TeleMapics on Local Search and All Things Geospatial

Garmin to Grab TeleAtlas from TomTom?

October 31st, 2007 by MDob

Well, the other shoe fell today. Garmin announced an unsolicited counter-bid for TeleAtlas. The bid at €24.50 in cash values TeleAtlas at €2.3 billion and will be launched before the scheduled expiry date of TomTom’s offer for TeleAtlas. The bid represents a 15% increase in valuation from TomTom’s original bid for the company. The market expects the bidding to go up to €27 or 28.

Garmin’s intent to acquire TeleAtlas was the major topic of interest during the company’s financial call this morning. Representatives of Garmin were very specific that they have the financial strength and flexibility to acquire TeleAtlas. In other words, they were saying to TomTom that “…we are bigger than you and intend to outbid you for the right to own this company.”

Oh! And Garmin, invoking the now customary the “no-antitrust here” clause, indicated that it would keep TeleAtlas open to all customers by establishing and operating it as an independent subsidiary where Garmin will engage as a customer like all others.

In a rather humorous moment, Garmin indicated that it was making the move to acquire TeleAtlas because “…we feel like it’s the right time for us to exercise leadership both in vertically integrating and being able to define the maps of the future and lead the way in terms of device innovation, which we think will be good for the entire industry.” How do you show leadership months after TomTom made the initial bid for TeleAtlas and after Nokia bid for Navteq? Don’t you just love self-serving comments? Later in the session, however, Garmin gave a clarifying comment indicating that it wanted to provide a vision for the content used in navigation map databases that would differentiate devices using that content,

In a curious admission, Garmin indicated that it was the industry changes that occurred in the last 90 days that caused them to realize that “…now is the right time for them to combine with a mapping supplier.” This gives credence to the belief that previous to the acquisition cycle Garmin had no strategic interest in acquiring a map company. After the TeleAtlas and Navteq acquisition announcements, however, Garmin was punished by the financial markets and experienced a 20% drop in share value – giving it a financial reason to develop a strategic response, which it did today.

The deal is interesting from the point of view that the majority of Garmin’s existing PNDs are supplied with databases from….Navteq. As a consequence of the move to acquire TeleAtlas, Garmin will begin transitioning to the use of TeleAtlas databases. During the Earnings Conference Call, the company downplayed the expense and difficulty of making these changes over the next 12 to 24 months. In effect, they indicated that the change was trivial. Wow, something must have happened in the technology world that I missed!

Garmin also played up the User Generated Content opportunity, claiming that it had 25 million users and that they “…intend to capitalize on this growing community and create real-time content using TeleAtlas maps combined with Garmin’s connected devices as part of the larger mobile device network.” I hope they read my whitepaper on “Local Search Meets Social Search”.

In response to a question on why Garmin did not build the database themselves, they responded that while it was technically possible, that it was an exceedingly difficult task to build maps from scratch. In addition, Garmin continued, “We think is what we call technically possible and there’s certainly new technology that can be brought to bear in doing so, but it’s a proposition that’s got high risk from an execution point of view, and a very long time schedule, and it’s not inexpensive”. Perhaps not, but I think that some people I know could build one for less than €2.3 billion. The time to solution of course, would be another issue.

So – what will others do?

Based on the financial capabilities of TomTom and Garmin, it is likely that Garmin has the power to outbid TomTom. If TomTom looses this opportunity, it will likely yank its business from TeleAtlas and either convert to Navteq or go it alone. Although this diminishes the attractiveness of the deal from Garmin’s point of view, it will not change their determination to win the bid. In fact, they indicated that they had modeled several outcomes including TomTom moving to Navteq and all of the models had outcomes that favored Garmin.

If TomTom cannot outbid Garmin, could someone else? Of course. Microsoft, Yahoo, Google, Qualcomm, Intel and a number of financially able companies could counter-bid for TeleAtlas or for Navteq. The important question, however, is do they have a strategic or financial incentive to do so? In other words, does the bidding action for mapping companies influence the future growth strategies of any of these companies?

Any thoughts? I’m working on some and will share them with you next time.

(And no, I have not forgotten about my need to address User Generated Content – I have been busy with a client who is interested in ……navigation. I will get to the series on UGC soon.)

Thanks,

Mike

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Posted in Garmin, Geospatial, Local Search, Mapping, Microsoft, Navteq, Personal Navigation, TeleAtlas, TomTom


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