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biz.yahoo.com/ap/071112/garmin_mover....Garmin Up As Analyst Suggests New Bid
Monday November 12, 6:22 pm ET
Analyst Says Garmin Should Make New Tele Atlas Offer and Could Bid $64 Per Share
NEW YORK (AP) -- An American Technology Research analyst said Monday that navigation device maker Garmin Ltd. will make another bid for digital map maker Tele Atlas NV, and could offer more than $60 per share as it tries to wrest the company away from rival TomTom NV.
The two companies are competing for Tele Atlas, one of only two worldwide digital mapping companies. Tele Atlas prefers TomTom's most recent offer of $4.2 billion, or $43.63 per share, but analysts expect Garmin to make a second bid.
The second map maker, Navteq Corp., accepted a buyout offer from Nokia Corp. in October.
Rob Sanderson said Garmin should make another offer. He said the company has more financial flexibility and could offer as much as 44 euros per share, or $63.97 at current exchange rates, without affecting its 2010 profit.
He said TomTom might have trouble bidding more than 42.50 euros, or $61.76 per share, but may be more willing to compromise its earnings.
The loser will have to buy maps from a competitor, while Sanderson said the winner will have better profit margins, can sell map data to companies that make wireless devices, and will be better-protected against competition from in-dash devices.
"Map pricing is likely to begin moving higher as both independent suppliers are taken out, which will mean margin compression to the loser," he said.
Wireless companies that make navigation devices won't want to buy their maps from Nokia, Sanderson said, because they will be competing against it.
While Garmin will be in a better position if it buys Tele Atlas, he wrote, the buyout will eat into the company's earnings in 2008 and 2009. Garmin would also lose discounts from Navteq, as it would buy fewer maps over that time.
Garmin shares fell $3.53, or 4.1 percent, to close at $82.32 Monday. The stock has fallen 23.4 percent since Garmin made its offer for Tele Atlas on Oct. 31.