Tags: GPS, Microsoft

Microsoft Eyeing GPS-Maker Garmin, Analyst Reports

By , Money Morning •

From Staff Reports

Shares of Garmin Ltd. (GRMN), the biggest U.S. maker of portable navigation devices, jumped by nearly 4.6% yesterday (Monday) on speculation that it is a buyout target of Microsoft Corp. (MSFT) - and after an analyst boosted his rating on the stock.

Garmin's shares closed yesterday at $108.46, a jump of 4.58%, or $4.75 per share. Though the shares have rebounded after being savaged last week, they remain $14.32 per share, or nearly 12%, below their 52-week high of $122.78.

"There's speculation of Microsoft [being on the prowl] for Garmin,'' Greg Palmer, head of equity trading at Pacific Crest Securities Inc. in Portland, Oregon, told Bloomberg News.

Stating that Garmin doesn't comment on market speculation, spokesman Ted Gartner said the company would have no comment. Microsoft officials could not be reached for comment.

Garmin makes portable Global Positioning System (GPS) devices, including some models that retail for roughly $100, and which are used by hikers, travelers and hobbyists. The low-cost nature of the devices has even touched off a new global game called "geocaching," which is a combination treasure hunt, auto rally, high-tech exploration opportunity. Garmin is the market leader in all those categories, and in the production of automobile GPS systems, which has made it a Wall Street darling.

But Garmin shares fell by as much as 9.6% on Oct. 2 after American Technology Research analyst Rob Sanderson said the George Town, Grand Cayman-based company was "vulnerable" to competition from Nokia Corp. (NOK), the world's biggest mobile-phone company. Nokia agreed Oct. 1 to buy Navteq Corp. (NVT) for $8.1 billion to gain digital maps of 69 countries and compete with TomTom NV in the market for navigation devices. Analysts said the deal left Garmin at a huge competitive disadvantage. Within days, however, Garmin had unveiled a $99 software package that turned "smart phones" into low-level navigation devices.

Sanderson yesterday actually took the step of upgrading Garmin to "neutral'' from "sell,'' writing in a note to investors that competition from Nokia is unlikely to hurt Garmin through 2008.

Indeed, he even said that the stock is potentially attractive now, after dropping 19% in the three days following Nokia's announcement. Sanderson also wrote that Garmin may exceed analyst estimates when it reports third-quarter results on Oct. 31.

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