So now we just kick Garmin to the curb?
Posted
Oct 03 2007, 03:19 PM
by
Matt Koppenheffer
So it looks to me like nobody is really happy about the announcement that cellphone maker Nokia will be acquiring digital map maker Navteq. Nokia's shareholders think that the company is overpaying for Navteq, Navteq shareholders aren't too keen about the company's future upside being cut off, and Garmin shareholders... well, they're downright inconsolable that Garmin didn't get Navteq first.
Garmin shares dropped 10% on the day of the announcement and have shed another 10% since. Ouch.
Now I can commiserate with Nokia and Navteq shareholders. I think the acquisition may prove to have more headaches than synergies for Nokia, while Navteq probably had a really bright future ahead of it as a stand-alone company. But I think Garmin shareholders have probably overreacted.
First of all, Nokia isn't about to cut off Garmin from access to Navteq's maps. If nothing else, there would be antitrust red flags flying everywhere if it did. Besides that, Nokia is going to need the business from Garmin if it has any hope of justifying the $8 billion it spent on Navteq.
As for the sudden fear of cell phones making Garmin devices obsolete, I think that SeekingAlpha author Manoj Bidnurkar hit it on the head when he recently wrote "comparing the mobile phone maps to the Garmin NUVIs is like comparing a Kia to a Lexus." Backing up this theory is the fact that the digital camera market is still alive and well years after cell phones started including a built-in camera as feature.
Many may balk at Garmin shares because of the big run the stock has had over the past year or its relatively high P/E multiple, but I'd suggest taking a deep breath and sitting on your hands for a bit before you use the Navteq deal as a reason to dump Garmin shares and run for the hills.
(Full disclosure: I do not have any financial position in any of the stocks mentioned.)
