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Garmin, the NASDAQ-listed company that saw its major map supplier recently purchased, could itself become a takeover target, two sources familiar with the situation said.
Since the announced, planned takeover of its major digital map source, Chicago-based Navteq, by Finland-based Nokia, Garmin’s stock price has retreated significantly, making it more attractive as a takeover target, the sources said.
Garmin’s products and place in the market as the largest US car navigation maker remains strong, also making it attractive to a prospective acquirer, the sources said. However, over time, Garmin could have difficulty going if not part of a bigger company, particularly if it starts getting squeezed on its access to, features of, or the price of, digital maps it utilized in its GPS products, the sources said.
They said Garmin’s recent price slide put its price/sales ratio at around 10, a financial point that could make it attractive to an acquirer.
Garmin has a contractual relationship with Navteq through 2009, but could want to begin preparing now for the period after that, said the sources. The other main supplier of worldwide digital maps, Tele Atlas, is in the process of being purchased by another car navigation maker, TomTom.
Garmin has also increased its attractiveness to a prospective phone-maker purchaser, the sources said, as it would be putting forward software that could turn smart-phones with GPS capability into a GPS device for a one-off fee.
Initially, that software would be available for use in the US and Europe, and then eventually, likely in other places, the sources said. They added these developments could make Gamin particularly attractive to a wireless phone and electronics company such as Germany-based and NYSE-listed Siemens.
Other potentially-interested companies could include, the sources said, companies such as California-based and NASDAQ-listed Qualcomm, and Washington-based and NASDAQ-listed Microsoft.
A source familiar with Microsoft said while that could be considered, and noted that Microsoft had cash-on-hand and the wherewithal to make such an acquisition, it would represent Microsoft’s largest purchase ever, a factor that the source said would make such a moves less likely.
Qualcomm’s rivalry with Nokia has involved legal action between the two. Qualcomm could find Gamin’s unique software GPS-wireless phone application attractive, the sources said.
Gamin’s software application for smart phones is a product that can provide GPS capability to wireless phone using Windows Mobile, Palm and Symbian operating systems, even in areas where wireless phone coverage was lacking.
Garmin has a market capitalization of approximately USD 23.5bn. Its share price was USD 119.40 the day before the Nokia/Navteq deal was announced.
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