Many factors have come into play in the last six to eight months, affecting GNSS company stock prices, earnings, and shareholder value. Acquisitions and mergers over a two-year period have reshaped the playing field, as current GPS/LBS players seek to expand their offerings and major new players hunt a piece of the action. To be sure, the pure-play PND consumer market is down due to economic factors and limited disposable income; this affects the chip sector as well. Surveying sales have slowed due to housing slump in the U.S. and abroad. Precision agriculture use of GNSS products seems to hold steady, thanks to the widescale upswing of biofuel production. Fleet tracking is enjoying a come-back as GPS navigation and routing are clearly viewed as must-haves to economize on transportation fuel costs.
The main pillars of the mass-market industry pillars are personal navigation devices (PNDs), GNSS chips, and maps. Many of the public companies like Trimble Navigation, Garmin, and Magellan output multiple product lines that span several different segments. Private companies such as Magellan are not reported on in this outlook.
Personal, Vehicle Nav/Track. Looking at the PND sector from a public company perspective and spanning a 24-month timeframe (Figure 1), we see competitors’ performance tightly entwined, but over the last six months a divergence in the way they managed current economic trends. The largest PND and auto/truck navigation manufacturers, which include Garmin, TomTom, Trimble, and LoJack, indicates that while once everyone was on the same page, now they struggle to maintain balance in turbulent times. Over this two-year period, the high point was definitely the 2007 holiday season.
FIGURE 1 PND and auto-tracking stocks over 24 months
All enjoyed robust sales with the exception of LoJack, which began a downhill slide in November. The company is coming under increased pressure as sales of new cars continue to slide; although tracking and vehicle recovery is an important sales feature, car manufacturers have been slow in the providing the current standard of personal navigation capabilities. Trimble, which purchased @Road in February 2007, has a division which supports on-road navigation features and provides customers with several different tracking/navigation options.
This sector will remain somewhat uncertain for the time being, although analysts and researchers predict record high sales in the next five years. The manufacturers themselves indicate they are looking for other areas to move their technology towards as a way of waiting out the current economic conditions.
Chips and Semiconductors. The PND craze is one of several factors helping fuel the need for GNSS chips. This segment has been very active, although much of the news has been related to mergers and acquisitions, and SiRF falling from the sky in a scene reminiscent of Icarus flapping his wings and losing his feathers until he fell into the sea (Figure 2). Global Locate, U-Nav, and others have been picked off by larger semiconductor firms and have been absorbed into their mainstream in attempts to secure pieces of the GPS/LBS and mobile phone sectors. With the exception of SiRF, most have held steady, although showing some downtrending.
FIGURE 2 GNSS chip makers over 24 months
The good news is that it looks like the changes made at SiRF, including exit of the CEO, has made a positive impact on the stock. Newly released developments by Nemerix may again heat up the competition and create a new generation of products that could enliven product offerings in the PND sector, thus providing a healthy boost back into the chip sector.
Mapping. There is a definite reason why Nokia and TomTom both wanted to purchase the largest map providers, Navteq and Tele Atlas. It’s like owning the only chicken in the village that lays eggs. Contrary to what others say, they will come to your table to buy the eggs.
The mapping sector resembles the PND charts in that you can see both competitors staying pretty close to each other through June 2006, when the buy-out offers began to arrive (Figure 3). Although profitability was still low prior to the offers, the companies immediately rose in share value with offers on the table, and have held steady to higher of the limit of the share price offer.
FIGURE 3 The mapping sector over the past 24 months
Both Navteq and Tele Atlas basically hit towards their high in October 2007 as a result of record licensing of maps that fed into the consumer PND Christmas frenzy. TomTom on June 2 announced that Tele Atlas shareholders had tendered 97.48 percent of their stock to complete the buyout offer. With Nokia and its buyout of Navteq coming up next, a segment of the industry will go private, with the controls turned over not to the map makers but the hardware device manufacturers. This does not bode well for the industry at large.
I am glad to say the state of the industry is still stable, and can look towards continued growth along the most popular segments. Although some consolidation is taking place, that’s typical in an industry that has recently experienced rapid growth. The economic conditions are dragging everyone through the mud for a bit, but the industry continues to build on its ever-rising adoption rates and has the muscle and flexibility to expand towards dozens of different event horizons and applications. It’s the way we have always worked in this field: one day at a time.
