Garmin Stock Falls Again As Investors React to Nokia Deal

Oct 03, 05:19 AM

Current Headlines: By David Hayes, The Kansas City Star, Mo.

Oct. 3--Shares of Garmin Ltd. continued to drop Tuesday as fallout continued from Nokia's purchase of the Olathe company's map provider.

Garmin shares fell $7.13, closing at $100.10, their lowest closing price since late August. Trading was heavy. Almost 20 million shares changed hands -- six times the average daily sales volume.

Garmin shares have lost almost 17 percent of their value since Nokia announced its plans early Monday to purchase Chicago-based Navteq Corp. for $8.1 billion. Navteq is Garmin's primary digital map provider.

Garmin officials contend that the deal will not affect its business with Navteq. Garmin is one of the mapmaking company's largest clients, accounting for 20 percent of its annual sales.

"We continue to evaluate all of our strategic options," said Kevin Rauckman, Garmin's chief financial officer. "We're considering the different alternatives available to us."

Garmin is the largest manufacturer of mobile navigation gear in the U.S. The company and Netherlands-based TomTom are closely matched in the battle for bragging rights as the world's largest GPS manufacturer.

Digital maps such as those developed by Navteq are one of the largest expenses in developing Global Positioning System devices and are key to the quality of those devices.

Olli-Pekka Kallasvuo, Nokia's chief executive, said the deal with Navteq would not affect mapping customers. Navteq will be operated independently, he said.

"We also look forward to maintaining and enhancing the services and support provided to Navteq's existing and future customers," Kallasvuo said.

Those words didn't comfort Wall Street.

Tom Sanderson, an analyst for American Technology Research, on Tuesday reiterated an earlier "sell" recommendation for Garmin.

Sanderson said Nokia, the world's largest mobile handset manufacturer, apparently plans to enter the navigation market aggressively.

"We see Garmin's strategic positions as more vulnerable than one day ago," he wrote in a research note.

Analysts for Deutsche Bank, while remaining positive on Garmin, said the navigation company should bid on either Navteq or a second mapmaking company, Tele Atlas.

TomTom in July announced a tentative deal to buy Tele Atlas.

"While they do not need to make a move (on Navteq or Tele Atlas), we believe it would send a strong signal if they did, and we would expect (Garmin) shares to rise on a reasonable bid," Deutsche said in a report.

Deutsche Bank analyst Jonathan Goldberg said the Nokia deal should have no short-term affect on Garmin.

"Garmin has multiyear contracts with (Navteq) and should still be able to obtain a supply of maps," Goldberg wrote. "In the case of Tele Atlas, even after being acquired it continues to supply data to numerous vendors. Any attempt by either vendor to cut off map data would likely result in antitrust or legal scrutiny."

The speculation, however, was viewed as the spark that led TomTom on Tuesday to formalize its $2.8 billion bid for Tele Atlas, the No. 2 mapmaker.

Analysts said Tele Atlas shareholders might be wondering whether the TomTom bid was too low compared with Nokia's bid for Navteq.

Despite the drop in the past two days, Garmin shares are up almost 80 percent for the year and 112.5 percent for the past 12 months.

To reach David Hayes, call 816-234-4904 or send e-mail to dhayes@kcstar.com.

-----

To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.

Copyright (c) 2007, The Kansas City Star, Mo.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NASDAQ-NMS:GRMN, NYSE:NOK, NYSE:NVT, Euronext:38705, NYSE:DB, Euronext:23394,