Garmin vs. Tom-Tom – Or is it really TomTom vs Nokia?
Wednesday, October 31st, 2007 by adminToday Garmin offered $3.3 billion for Tele Atlas, one of the two players in the mapping field. The other player is Navteq, which is in the process of being purchased for $8.1 billion by Nokia. Garmin and TomTom are the major players in the PND (portable navigation device aka GPS unit) field. TomTom gets its maps from Tele Atlas, Garmin from Navteq.
Last month investors beat up Garmin’s stock when Nokia bid on Navteq. Presumably they were concerned that somehow Garmin might lose their map provider. Today, despite beating income expectations, Garmin’s stock got beaten down again, presumably out of fear that Garmin will be locked in a bidding war with TomTom.
As usual, Mr. Market is missing the boat (as they usually do when it comes to Garmin). They fail to take into account one key factor – Garmin isn’t just a customer for mapping data – it is THE customer for mapping data.
To find out what this means, you actually have to look at two SEC filings, that of Garmin and that of Navteq. The numbers that follow are very, very rough, but should be in the ballpark.
Last quarter Navteq sold maps for 3.9 million PND devices for cars. Based on other information in the report we can actually estimate that the cost of the maps for a single PND is about $35.
Garmin sold somewhere between 2 and 2.5 million PND units last quarter (the exact breakdown was not included in their report), which means they spent about $75 million on maps last quarter. Or in other words, and their current run rate Garmin is spending over $300 million a year on maps. And that number is only going to increase.
