Garmin's management Seems Confused

I am not sure that Garmin is headed in the right direction.

I wrote an article in August on this site after Garmin hit $100.   I suggested that Garmin seemed cheap and that I thought that the stock might continue higher.  I also suggested that Sirf, then around $22, seemed like a better buy.  Garmin proceeded to go to $125, but and has just fallen back below $100.  Sirf is above $30 today after a stellar earnings report.

I am very convinced that Sirf is a buy and that it still has a helluva run ahead of it.  Provided their patents hold up (always a big if), virtually everybody will need to buy their chips in order to build devices that provide the GPS-like capabilities that everyone is speaking about building.

Recent developments have caused me, and the market, to be a little less certain of Garmin.  It all goes back to September, when Nokia decided to purchase Navteq for $8.1 billion.  Garmin, which relies on Navteq as a partner, went through great pains on CNBC to explain why they didn't view this as a threat.  Then, TeleAtlas, the other major mapping and map-maintaining company, received an offer from Tom Tom.  Tom Tom is a company very similar to Garmin, but more innovative and more focused on the European market.  Earlier this week, Garmin trumphed the Tom Tom bid buy 15%.

The very act of bidding was odd enough, but Garmin didn't do it quietly.  Management has gone out to the media and mounted a campaign to explain that this is a bid that they were forced to make because of Nokia's acquisition on Navteq.  Moreover, Garmin seems eager to make clear that this is a key acquisition for them at this point.  In other words, they are willing to go higher and even much higher.  While there may be a real strategy in taking this posture - they want to drive Tom Tom away as well as other potential bidders (including, by the way, Google, which in my view stands even more to lose in TelAtlas and Navteq are both acquired by other industry participants).  Nevertheless, I can't own Garmin while this is going on.

I also found this article on this topic to be very interesting.

Aron Livrone
Aron Livrone: Aron is a 2008 Wharton MBA with a consulting background prior to moving from Sweden to the US to begin his MBA.

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Comments

  • Jackie London

    November 06, 2007

    Both Garmin and TomTom seem to have decided that this is a matter of life and death. So, I would avoid Garmin here and I am not sure I would go near it if they back away.

  • ChristySchien

    November 07, 2007

    They were clearly blindsided by Nokia's Navteq acquisition. As they realized how the industry dynamics would changing, they changed their reaction. They are now in a no-win situation where they either overpay for TeleAtlas and face years of difficult integration or where they face the wrath of their shareholders for taking the risk of being held hostage to Nokia and TomTom which will become their competitors. I agree that the company has shown great growth and the stock seems very reasonably priced at 100, but it is probably a sell here.

  • Robert James

    November 08, 2007

    They are going to need to go over TomTom's bid this morning. The stock has a lot lower to go down.

  • AronLiv

    November 17, 2007

    They dropped their bid for TeleAtlas this morning so I would retract this article. I sold at $99, avoiding the fall to $82, but am repurchasing at $99 here. See my other articles on Garmin. I think it is fantastic stock and management has proven their worth by dropping this TeleAtlas bid.

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