Well Played Garmin. Well Played.

from the check-and-mate dept

Sometimes you just need to stand back and applaud a strategy that works so well. Many people thought that navigation device provider Garmin would be in trouble earlier this year after its main rival TomTom agreed to buy mapping service Tele Atlas and Nokia agreed to buy TeleAtlas’ only real rival Navteq. Potentially, that could have left Garmin without a mapping partner, though it seem difficult to believe that Nokia would cut off Garmin. However, Garmin tried to outbid TomTom for Tele Atlas while also buying up 5% of Tele Atlas’ shares on the open market, leading TomTom to significantly increase its own bid, from the original $2.5 billion offer all the way up to $4.2 billion. People were waiting to see if Garmin would go even higher, but instead, it pulled a nice switcheroo. First, it worked out a settlement with TomTom on various patent lawsuits the two were fighting, and then went in for the kill. Garmin signed a long term deal with Navteq, guaranteeing access to its maps for the next 10 years (6 years, with a 4 year option afterwards) and then dropping its bid for Tele Atlas. In other words, Garmin doesn’t have to worry about being shut out from mapping services for 10 years (at which point other options may be available), it doesn’t have to pay $3.3 billion to buy Tele Atlas, it forced its main competitor TomTom to spend $1.7 billion more than it wanted to. And, oh yeah, it’ll make back a bunch of money when TomTom takes over Tele Atlas, because that 5% stake that Garmin had acquired will get sold at a nice premium in the acquisition. Well played, Garmin. Well played, indeed.

Filed Under: , ,
Companies: garmin, navteq, nokia, teleatlas, tomtom

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Comments on “Well Played Garmin. Well Played.”

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Derek Kerton (profile) says:

Still Rough Road Ahead

Though this was well played by Garmin, they still have that problem of Nokia buying their premier supplier. That in itself is a bit of a pill (they should have bought Navteq two years ago themselves), ‘cuz Nokia is going to be their most formidable competitor.

BTW, Garmin didn’t really ever want TeleAtlas, since Navteq data is way better (I’ve been saying this for years, but now Navteq is a client of my firm so I’d better disclose that), especially for the US market. Garmin devices are entirely built off of Navteq data, so switching to TeleAtlas would have been costly for them. TomTom mainly uses TeleAtlas, so it’s better fit.

I doubt Gar paid Teq for the 6/10 year deal, though. Have you ever heard of a customer paying for the right to continue buying product for the future? Garmin is such a big customer to Navteq that the can currently dictate that kind of contract. Not sure who will have the power in 10 years, though. Nokia will probably be the biggest consumer of Navteq maps by them.

It will be highly unlikely for a new competitor to enter the market of Navteq and TeleAtlas. For those of you who know how they go about getting their data, you understand that it is VERY capital intensive, and has immense up-front starting costs. Plus, the quality of a new entrant cannot compare to the existing players. The only way a new supplier would emerge is if some radical new technology enabled a different way of gathering data. . . which is possible but unlikely in a 6-year time frame.

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