Despite “record” revenue in the fourth quarter of 2007, Intel Corp. (INTC) could not live up to analyst expectations, causing its share price to plummet.

Santa Clara, Calif.-based Intel released a disappointing quarterly earnings report Tuesday, causing the shares to open yesterday (Wednesday) over 13% lower from the prior day’s close.

On the surface, Intel’s numbers seem positive.  The chipmaker’s fourth quarter revenue was up 10.5% year-over-year to $10.7 billion.  Net income was $2.3 billion, or 38 cents per share.  But Intel failed to meet analyst sales expectations by $100 million.

“We enter 2008 with the best combination of products, silicon technology and manufacturing leadership in our history,” said Paul Otellini, Intel president and CEO, in the accompanying statement.

That may well be true, but thus far it has been a bumpy few weeks for Intel and it doesn’t look like things are going to improve in the coming months.

The chipmaker’s troubles started early when Bank of America analyst Sumit Dhanda downgraded Intel’s rating, along with several other chip manufacturers, on the first trading day of the New Year.  Although Dhanda said Intel’s “competitive positioning has never looked better to us,” MarketWatch reported, it is unlikely the company will be able to offset the first half of the year, which is considered weak on a seasonal basis.

Intel’s own outlook for the first quarter, included in the quarterly earnings report, was just as bleak.  Revenue for the first three months of the year is expected to drop to just $9.4 billion, below analyst estimates of $10.1 billion.  The release acknowledged the rising cost of consumer credit and a deteriorating economy could be a drag on sales.

“The immediate knee-jerk [reaction] is that there must be something wrong with the PC industry,” Stifel Nicolaus (SF) analyst Cody Acree told Reuters.

Intel shares dropped $2.81 (12.38%) yesterday to close at $19.88.  Intel’s troubles spilled over onto both its chipmaker rivals and its corporate customers as losses spread across the technology sector.  Texas Instruments Inc. (TXN) closed at $29.50, down $0.22 [0.74%] for the day, while Apple Inc. (AAPL) shares lost $9.40 [5.56%] to close at $159.64.

One tech stock to buck the downward trend was Advanced Micro Devices, Inc. (AMD).  Shares gained $0.45 [7.35%] for the day to close at $6.57.

News and Related Story Links:

• Bloomberg:
  Intel’s Revenue Forecast Falls Short; Shares Slump
• MarketWatch:
  Chip stocks tumble as B. of A. cuts several ratings
• Reuters:
  Intel’s disappointing outlook hits tech shares

SanDisk Corp. (SNDK), the world’s No. 1 maker of memory-chips for data storage, is the latest global leader to focus on the Vietnam market, and this week announced plans to start selling its Sansa music player, USB flash drives and mobile phone cards to consumers in the fast-growing Asian country.

SanDisk has teamed up with FPT Corp., a leading Vietnamese distributor of IT and wireless phone products, and Ingram Micro Inc. (IM), the world’s largest wholesale distributor of technology products. Those two companies will distribute SanDisk products in Vietnam.

Gavin Wu, the managing director of SanDisk’s Asia-Pacific business unit, said the current economic growth rate and the expanding infrastructure base make Vietnam an ideal market for SanDisk’s products.

In a nation of 87 million people, SanDisk said there are 23 million wireless phone subscribers and another 17.8 million Internet subscribers – each of which is viewed as a potential customer, according to the company. Underscoring the country’s high-tech potential is Vietnam’s online gaming industry, which is projected to generate $50 million in revenue this year, and $83 million in 2010, the state-run China news agency Xinhua reported recently.

SanDisk will launch a Vietnam marketing campaign later this month, the company’s Wu said.

Back in October, SanDisk reported third-quarter results that beat estimates as it boosted sales outside the United States and sold more chips to mobile-phone makers. By moving into the Vietnam market, SanDisk is clearly trying to sustain that strong rate of profit growth.

Vietnam joined the World Trade Organization (WTO) in January, and is one of the world’s fastest-growing economies. Its Gross Domestic Product (GDP) growth has exceeded 7% in each of the past four years. The Vietnam economy actually grew 8.16% in the first nine months of 2007, its best economic performance in 10 years, that country’s General Statistic Office announced in early October. And now the government is expecting that nation’s economy to advance at an 8.5% for the full year.

Indeed, Vietnam’s growth rate has exceeded that of Thailand, Malaysia, Taiwan, South Korea, and even India.

Deregulation and privatization programs, rising exports [helped along by the white-hot global commodities boom], and rapidly increasing foreign direct investment, have helped fuel the nation’s broad-based and fast-paced economic expansion. Vietnam is attractive to foreign firms because of its inexpensive labor costs and a work force that’s well educated, despite its youth.

Vietnam has become a lightning rod of investment for both global information-technology players and the so-called “global titans” in recent years. As a result, foreign investment jumped by 49% to a record $10.2 billion last year. By the middle portion of this year, investments in projects financed by foreign firms had already eclipsed the $8 billion mark, as major corporate players position themselves for a major push into Vietnam’s growing market. For example:

• The Boeing Co. (BA) recently completed deals to sell 12 of its new Boeing 787 Dreamliner jetliners to both Vietnam Airlines and to a new Vietnamese leasing company as that Asian country’s flagship air carrier moves to end its airliner shortage. Based on published list prices – which are typically subject to deep discounts – the deal is worth $1.9 billion. Vietnam has 46 aircraft, but wants to almost double that to 86 by 2015.
• Last year, chip-giant Intel Corp. (INTC) said it would expand a chip testing-and-packaging plant in Vietnam into a $1 billion venture – triple the size of the original outlay.
• Korean steelmaking giant Posco (PKX) plans to invest $1.13 billion in new steel plants.
• Earlier this year, Taiwan electronics giant Hon Hai Precision Industry Co. Ltd. announced plans to invest $5 billion Vietnam over the next five years. Hon Hai Precision assembles the Mac Mini, the iPod and the iPhone for Apple Inc. (AAPL), PCs for Hewlett-Packard Co. (HPQ), motherboards for Intel, and mobile phones for Nokia Corp. (NOK). Video-game consoles are a $10 billion global market, and Hon Hai is a major player there, too, actually assembling all three of the major gaming systems that are currently slugging it out in the consumer markets around the world: The Microsoft Corp. (MSFT) Xbox 360, the Sony Corp. (SNE) Playstation 3, and the popular but tough-to-find Nintendo Co. Ltd. (NTDOY) Wii. Hon Hai’s market power actually drove Flextronics International Inc., (FLEX) into a deal to buy rival Solectron Corp. (SLR) for $3.6 billion. Flextronics wants the manufacturing and marketing muscle needed to keep pace with its other foreign rivals – particularly Hon Hai.
• Nike Inc. (NKE) is responsible for more than 130,000 Vietnamese jobs.

That interest from major companies worldwide will only continue – and with good reason, experts say. Consider these statistics, which underscore the allure posed by the Vietnam market:

• More than half its population is under 25 years old.
• At 2%, Vietnam’s unemployment rate is among the world’s lowest, trailing only Azerbaijan, Cuba, Iceland, Andorra and Liechtenstein.
• Its labor and production costs are roughly one-third that of China’s, making Vietnam a worthy contestant in the contest for new production sites.
• Its economy was able to shrug off the 1997 "Asian Contagion" financial crisis and averaged 5.5% growth for each of the next two years – while other nations in the region saw their own economies contract.
• And it is now a member of the WTO.

This is no surprise to those who follow Vietnam’s growth. Many analysts predict Vietnam will be the country that emerges after the current wave of emerging economies mature and their growth rates slow down. A big factor in Vietnam’s favor is that its economy is growing soundly, instead of at rates that border on out of control

News and Related Story Links:

• PCWorld.com:
  SanDisk Moves Into Vietnam.

• Reuters:
  SanDisk Results Beat Estimates on Non-U.S. Sales.

• Money Morning Investment Analysis:
  Vietnam Growing at Exceptional Rate… American Investors Looking for Good Entry Point.

• Money Morning News:
  Boeing and Vietnam have the Billion Dollar Deal.

• Money Morning News:
  Vietnam’s GNP Grows 8.16% After First Three Quarters of 2007.

• Money Morning Investment Analysis:
  The World’s Leading Electronics Manufacturer Makes Its Move In Vietnam.

• Ho Chih Minh City Press Release:
  SanDisk Broadens Memory Card Business in Viet Nam.

• Xinhua.net Business News:
  Vietnam to Make Bigger Online Gaming Revenue.

• Money Morning Investment Analysis:
  The Market that will Emerge After the Emerging Markets.

• Web Site:
  Nintendo Wii.

• Web Site:
  Microsoft Xbox.

• Web Site:
  Sony Playstation.

• Money Morning News:
  Boeing and Vietnam have the Billion Dollar Deal.

• Boeing.com Commercial Airplanes Business Unit:
  Boeing 787 Dreamliner.

• Wikipedia:
  Asian Contagion Financial Crisis of 1997.

Garmin Ltd. (GRMN), the largest U.S. maker of satellite-navigation devices, dropped its $3.4 billion bid for digital-mapmaker Tele Atlas NV (TLATF), handing victory in the strategic bidding battle to European rival TomTom NV.

The strategic reversal by Garmin could put the George Town, Grand Cayman Islands-based company "in play," with such companies as Microsoft Corp. (MSFT) and Google Inc. (GOOG) as two of the likeliest suitors.

Garmin may be forced to sell out because the lack of proprietary-mapmaking technologies is likely to leave it at a competitive disadvantage down the road to such rivals as TomTom and wireless-phone giant Nokia Corp., (NOK).

Garmin will have to keep licensing digital maps and related technologies, which may mean that its technology won’t be as comprehensive or up-to-date as TomTom’s offerings. Indeed, over the long haul, owning Tele Atlas  may provide Tom with a meaningful edge in the navigation-device market, which will rocket 20% to $10 billion this year, reports Canalys, an industry researcher based in the United Kingdom.

"The strategic disadvantage [it] will have will continue as an overhang" to Garmin’s long-term competitiveness, Rich Valera, an analyst with Needham & Co. in New York, told Bloomberg News. Even so, Valera advises investors to hold their Garmin shares.

To create the digital mapping technologies like those of Navteq and Tele Atlas – which encompass 12 million miles of roadway in 200 countries – would require a capital outlay of about $1 billion and would take as long as a decade, Jeff Rath, an analyst with Canaccord Adams, told Bloomberg.

That financial reality means that Garmin probably won’t try to simultaneously build a mapping division. And it also means that TomTom will be better positioned to beat back competitive assaults from the cellular phone sector, and will also generate additional revenue by licensing the mapping technology to other makers of wireless phone manufacturers and wireless-service providers.

"The most critical component to the device is the map," said Blair Swedeen, a principal with the San Francisco-based Partenza Consulting, which works with navigation-service companies. "This is really a move to become more of a service provider and have more ‘value-added’ than just the hardware."

Garmin on Friday withdrew its hostile bid for Tele Atlas after it was able to add another six years to its existing contract with mapmaker Navteq Corp., (NVT). The contract extension with Navteq also has an option for four additional years.

On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.

That announcement seemed to stun Garmin and launch it into action – even though Nokia reassured investors that Navteq would continue to sell to Garmin, even after the buyout. Even so, Garmin went hunting for a mapping firm of its own, and ultimately launched the counterstrike against TomTom, which had already launched its initial $2.8 billion offer for Tele Atlas. Garmin upped the ante with the $3.31 billion bid, prompting TomTom to sweeten its offer to $4.2 billion, or $43.63 per share.

Analysts predicted that Garmin would make a counter-offer of more than $60 a share for Tele Atlas. But some analysts said Garmin faced a major challenge, given that TomTom had already amassed a 28% stake in Tele Atlas – to only about 5% for Garmin. Garmin had the capital to make the high offer, analysts say.

But the acquisition and integration on this deal would have diluted Garmin’s profit until 2010, American Technology Research analyst Rob Sanderson wrote in a Nov. 12 research note. Amsterdam-based TomTom, which already uses Tele Atlas more extensively, will absorb the company more easily, Sanderson wrote.

Nokia, the world’s biggest mobile-phone maker, will add Global Positioning System (GPS) technology to "dozens" of models by the end of next year. The Finland-based Nokia and other cell-phone firms will sell 162 million GPS-equipped phones this year, dwarfing the projected sales of 20 million GPS devices that Garmin and TomTom will sell in aggregate. Four years from now, a total of 444 million wireless phones – about one-third of the total produced – will be GPS-enabled, predicts iSuppli Corp., an El Segundo, Calif.-based industry researcher.

This could all combine to put Garmin at a massive competitive disadvantage, Rath, the Vancouver-based Canaccord Adams analyst, hypothesizes.
"The company that owns that map will have an ability to have a better product,” Rath said. "The company that [loses the bidding battle for Tele Atlas] will be forever in a strategic disadvantage.” Even so, he, too, advised investors to hold their Garmin shares.

Garmin’s shares soared to 97.51 Friday. "There’s [substantial] relief because the bidding had gone to a level that people didn’t like the earnings dilution,” Needham & Co.’s Valera said.

Here is a Timeline of Events involving Garmin, TomTom and Tele Atlas, according to both Money Morning the International Business Times:

• Garmin sues TomTom in federal courts in Texas and Wisconsin, claiming patent infringement.
• Garmin asks British and Dutch courts to invalidate TomTom’s registered designs and patents.
• TomTom counter-sues in Wisconsin, alleging Garmin infringed on its patents bought from California-based Horizon Navigation Inc.
• TomTom requests preliminary injunction against Garmin for reportedly copying one of its designs. Result: Denied.
• TomTom in July bids $2.8 billion for Tele Atlas.
• Nokia on Oct. 1 bids $8.1 billion for Navteq, the digital mapmaker Garmin uses for its digital mapmaking technology.
• Garmin bids $3.31 billion for Tele Atlas, and also takes a 5% stake in the target company.
• TomTom bids $4.2 billion for Tele Atlas, takes 28% stake in the target company.
• Companies settle patent disputes; Garmin weighs second counter-offer. Analysts expect it to go to $60 a share.
• Garmin withdraws from bidding battle for Tele Atlas; inks six-year contract extension of six years, with option for four additional years.

News and Related Story Links:

• Bloomberg News:
  Garmin Withdraws Tele Atlas Bid, Ceding to TomTom.

• Money Morning News Analysis:
  GPS Leader Garmin Weighs Counterstrike in Crucial Battle For Digital Mapmaker Tele Atlas; Settles Patent Dispute With Rival TomTom.

• Money Morning News Analysis:
  TomTom Bangs Out Higher Bid For Mapmaker Tele Atlas.

• Seattle Post-Intelligencer.com:
  Garmin, TomTom Settle Patent Disputes.

• International Business Times:
  Garmin Vs. TomTom: A Timeline of Litigation Over Tele Atlas.

• Money Morning News Analysis:
  Garmin Takes 5% Stake in Tele Atlas, Company it is Pursuing in Hostile Bidding Battle

• Money Morning News:
  Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge

• BusinessWeek:
  Tele Atlas Endorses $4.2B TomTom Bid.

Garmin Ltd. (GRMN) yesterday (Thursday) said it is still reviewing its previously disclosed plans to make a cash offer to acquire digital mapmaker Tele Atlas NV (TLATF), which is also being pursued by Garmin’s European rival, TomTom NV.

TomTom currently has the upper hand. It recently boosted its existing offer or Tele Atlas by 41% to $4.2 billion – and in the process leapfrogged a competing, unsolicited $3.31 billion offer from Garmin, upping the ante in a significant way for the last independent computerized-cartography company.

In related news yesterday, Garmin disclosed that it had settled all intellectual-property litigation with TomTom, which includes lawsuits in Texas, Wisconsin, The Netherlands and the United Kingdom. However, neither company disclosed details of the settlements in question. And they have another battle to settle – this one a battle for control of Tele Atlas, which is based in The Netherlands.

In an interview with The Associated Press, Garmin spokesperson Jessica Myers confirmed the company is still reviewing its potential bid, which was detailed on Oct. 31. She also confirmed that news of a patent-dispute settlement with TomTom is unrelated to its Tele Atlas plans.

Garmin is based in the Grand Cayman Islands, but has its operational headquarters in Olathe, Kan. It makes navigation products that utilize global-positioning-system (GPS) technology for automobiles, boats, aircraft, and for recreational uses such as camping and hiking. It’s the U.S. market leader. TomTom, based in Amsterdam, is the European leader.

Garmin sued TomTom in U.S. District Court in both Texas and Wisconsin, claiming TomTom had infringed on Garmin patents. And Garmin asked courts in the Netherlands and United Kingdom to invalidate both lawsuits, the Seattle Post-Intelligencer reported.

A year ago, Garmin won the first round when a court in The Hague, Netherlands, refused TomTom’s request for a preliminary injunction against Garmin for allegedly copying a European registered design it owned.

On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.

Navteq is the key supplier of the digital maps Garmin’s technology hides behind.
The proposed deal at $78 a share would be Finland-based Nokia’s biggest purchase, and follow Nokia’s acquisition of mobile-advertiser Enpocket.

Initially, analysts viewed the Navteq purchase as a shot-across-the bow of Apple Inc., (AAPL), whose new and much-hyped iPhone comes equipped with mapping and navigation provided by Google Inc. (GOOG). But it also put an immense amount of pressure on Garmin, whose shares were pounded by investors who believed the Nokia-Navteq marriage would hamstring the fast-growing GPS maker.

Investors were exceptionally disappointed that Garmin didn’t strike first, and didn’t even try to turn the bidding for Navteq into a two-horse race.

Navteq provides digital map information for automobile navigation systems, mobile phones and devices and Web sites. Navteq also owns Traffic.com, an interactive Web site that gives users up-to-the-minute traffic information in their area. Navteq generated revenue of $582 million last year, Nokia said.

The deal won’t be completed until next year. But the agreement was still enough to spook Garmin shareholders: Within days of the announced Nokia-Navteq tie-up, Garmin’s shares – which had reached a new high of $122.78 – had plunged by more than $26 each, and were trading at less than $97.

The shares subsequently rebounded and raced to new highs, reaching a record at $125.68.

Garmin’s shares have been pounded since the TomTom counter bid materialized, and have declined more than $40 each – about 33% – from that record peak.

Analysts have speculated openly that such heavyweights as Microsoft Corp. (MSFT) and Google Inc. (GOOG) may enter the bidding fray – either for the mapmakers, or for the GPS producers themselves.

Nokia has reassured investors that Navteq would continue to sell to Garmin, even after the buyout. Even so, Garmin went out hunting for a mapping firm of its own, and ultimately launched the counterstrike against TomTom, which had already launched its initial $2.8 billion offer for Tele Atlas. Garmin upped the ante with the $3.31 billion bid, prompting TomTom to sweeten its offer to $4.2 billion, or $43.63 per share.

Shares of Garmin jumped earlier this week on speculation it might make a counter-offer of more than $60 a share for Tele Atlas. However, some securities analysts have concluded that Garmin faces an uphill battle, since TomTom already has amassed a 28% stake in Tele Atlas.

Garmin’s shares closed yesterday at $84, down $1.60 a share, or 1.87%.

Here is a Timeline of Events involving Garmin, TomTom and Tele Atlas, according to the International Business Times:

• Garmin sues TomTom in federal courts in Texas and Wisconsin, claiming patent infringement.
• Garmin asks British and Dutch courts to invalidate TomTom’s registered designs and patents.
• TomTom counter-sues in Wisconsin, alleging Garmin infringed on its patents bought from California-based Horizon Navigation Inc.
• TomTom requests preliminary injunction against Garmin for reportedly copying one of its designs. Result: Denied.
• TomTom bids $2.8 billion for Tele Atlas.
• Garmin bids $3.31 billion for Tele Atlas, and also takes a 5% stake in the target company.
• TomTom bids $4.2 billion for Tele Atlas, takes 28% stake in the target company.
• Companies settle patent disputes; Garmin weighs second counter-offer.

News and Related Story Links:

• Money Morning News Analysis:
  TomTom Bangs Out Higher Bid For Mapmaker Tele Atlas.

• Seattle Post-Intelligencer.com:
  Garmin, TomTom Settle Patent Disputes.

• International Business Times:
  Garmin Vs. TomTom: A Timeline of Litigation Over Tele Atlas.

• Money Morning News Analysis:
  Garmin Takes 5% Stake in Tele Atlas, Company it is Pursuing in Hostile Bidding Battle

• Money Morning News:
  Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge

• BusinessWeek:
  Tele Atlas Endorses $4.2B TomTom Bid.

• CNNMoney.com:
  Garmin Continues to Review Tele Atlas Bid; TomTom Settlement Unrelated to Offer.

BHP Billiton Ltd. (BHP), the world’s largest mining company, said it would continue pursuing its takeover of Rio Tinto PLC (RTP) after an undisclosed bid was rejected.

Rio Tinto released a statement saying its board considered the proposal and "concluded that it significantly undervalues Rio Tinto and its prospects."

In a deal that likely put Rio Tinto in play and raised its value all at the same time, news of the offer and its rejection sent Rio’s shares up 23.1% on New York Exchange yesterday (Thursday). Rio’s shares closed at $440.20, up $82.70 each.

Story Continues Below… Enter Your Email Address Below:

BHP’s stock slipped $3.50 a share, or 4.36%, to close at $76.85 yesterday.

"BHP Billiton has again written to Rio Tinto and intends to continue to seek an opportunity to meet and discuss its proposal with Rio Tinto. There can be no assurance that any transaction or offer will result from BHP Billiton’s proposal," read a BHP company statement, which clearly avoided the words "buyout," or "merger," referring to a possible deal as a "combination."

A BHP takeover of Rio Tinto, worth an estimated $159 billion, would likely make for the largest acquisition in history, ahead of AOL’s $124 billion buyout of Time Warner Inc. (TWX). The buyout would also create a company that controls more than a third of the iron-ore market, supplies the most energy coal and copper, and owns mines and oilfields across six continents, Bloomberg News reported.

"If the name of the game at the moment is resources in the ground, then why pussyfoot with junior or medium-size miners when you can go to the top?" Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe LP in London, told Bloomberg. "This deal will happen, it’s just a question of time."

And while BHP mulls another strategy, Rio Tinto said it is exploring options for the sale of its United States coal subsidiary, Wyoming-based Rio Tinto Energy America, the second largest coal producer in the U.S. market, MarketWatch reported.

Rio also said it had acquired 95.82% of the outstanding shares of Alcan Inc. (AL), making it the world’s largest producer of aluminum. Rio’s $38.1 billion bid for Alcan was made in late August. Rio Tinto also dumped $350 million into a 46.65% stake in Ivanhoe Mines Ltd. (IVN), its partner in Mongolia’s Oyu Tolgoi copper-gold project.

BHP’s assets include the massive Olympic Dam ore deposit in South Australia. The deposit also was BHP’s last major purchase, a $7.3 billion buyout of reserve owner Western Mining Corp., in 2005. Australian newspapers estimated the value of the Olympic Dam property, alone, to be worth $1 trillion.

With its potential to provide massive amounts of both hard and soft commodities – from gold to wheat – as well as its forward-moving economy, the Australian marketplace offers a number of investment opportunities. Click here read for a free report about them.  

News and Related Story Links:

• Bloomberg:
  BHP Billiton Offers to Buy Rio; Proposal Rejected

• MarketWatch:
  Rio Tinto says it’ll explore the sale of its U.S. coal unit

• EasyBourse:
  BHP Billiton Still Working Very Hard To Talk To Rio – Source.

• Money Morning:
  Rio Tinto Gets Canadian Clearance, $40 Billion in Loans for Alcan.

• Money Morning:
  Rio Tinto Antes up $350 Million for Ivanhoe’s Mongolia Mining Deal

• Money Morning:
  ‘Trillion-Dollar’ Mine for BHP

• Money Morning Investment Analysis:
  Three Ways to Profit From Australia’s Strong Dollar and Massive Natural Resource Reserves

TomTom NV, Europe’s largest maker of navigation devices used in automobiles, has boosted its bid for digital-mapping company Tele Atlas NV (TLATF) by 41% to $4.2 billion, leapfrogging a competing $3.31 billion offer from Garmin Ltd. (GRMN), and significantly upping the ante in the bidding battle for the last independent computerized-cartography company.

TomTom will pay about $44 a share (30 euros) for Tele Atlas – starting with a 28% stake it will acquire from institutional investors, TomTom said in a statement yesterday (Thursday). Garmin had offered about $36.96 (24.50 euros) a share last week after TomTom bid $31.20 (21.25 euros) on July 23. Garmin also took a 5.02% stake in the Dutch mapmaker – a move intended to give it the tactical high ground, should bidding escalate.
And it likely will, according to a fund manager who holds shares of both TomTom and Tele Atlas.

"This is meant to be a knockout bid,” Michiel Plakman, who oversees about $8.8 billion for Robeco in The Netherlands, told Bloomberg News. "The share price suggests people see a chance for Garmin to top this bid. I also believe they will, simply because they can, given their market cap and cash position.”

Garmin, based in George Town, the Cayman Islands, and the Amsterdam-based TomTom are the two dominant players in the market for navigation devices, which include the satellite-directed global-positioning systems (GPS) motorists are using at an increasing rate. TomTom is the largest maker of automotive navigation devices, while Garmin is larger in the U.S. market, and overall.

Story Continues Below… Enter Your Email Address Below:

Sales of handheld GPS devices also are soaring, as hobbyists, hikers, sportsmen and hunters flock to the market.

But the digital maps that put user-friendly face on the technology are key. And that pits Garmin against TomTom for the 12 million miles of roadways in 200 countries mapped by Tele Atlas, based in Den Bosch, The Netherlands. Tele Atlas, the world’s Number Two producer of digital maps, has been losing money for a decade.

But the events of last month increased the company’s value, many times over.

On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.

Navteq is the key supplier of the digital maps Garmin’s technology hides behind.

The proposed deal at $78 a share would be Finland-based Nokia’s biggest purchase, and followed Nokia’s acquisition of mobile-advertiser Enpocket. Initially, analysts viewed the Navteq purchase as a shot-across-the bow of Apple Inc., (AAPL), whose new and much-hyped iPhone comes equipped with mapping and navigation provided by Google Inc. (GOOG). But it also put an immense amount of pressure on Garmin, whose shares were pounded by investors who believed the Nokia-Navteq marriage would hamstring the fast-growing GPS maker. Investors were exceptionally disappointed that Garmin didn’t strike first, and didn’t even try to turn the bidding for Navteq into a two-horse race.

Navteq provides digital map information for automobile navigation systems, mobile phones and devices and Web sites. Navteq also owns Traffic.com, an interactive Web site that gives users up-to-the-minute traffic information in their area. Navteq generated revenue of $582 million last year, Nokia said.

"Location-based services are one of the cornerstones of Nokia’s Internet services strategy. The acquisition of NAVTEQ is another step toward Nokia becoming a leading player in this space," Olli-Pekka Kallasvuo, Nokia’s president and chief executive, said when the deal was announced.
"By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market. We also look forward to maintaining and enhancing the services and support provided to Navteq’s existing and future customers."

The deal won’t be completed until next year. But the agreement was enough to spook Garmin shareholders: Within days of the announced Nokia-Navteq tie-up, Garmin’s shares – which had reached a new high of $122.78 – had plunged by more than $26 each, and were trading at less than $97.

The shares subsequently rebounded and raced to new highs, reaching a record at $125.68.

Garmin’s shares have been pounded since the TomTom counter bid materialized, and have declined $40 each – or 32% – from that record peak. The shares skidded $3.67 each, or 4.11%, yesterday to close at $85.68.

Analysts have speculated openly that such heavyweights as Microsoft Corp. (MSFT) and Google Inc. (GOOG) may enter the bidding fray – either for the mapmakers, or for the GPS producers themselves.

Nokia has reassured investors that Navteq would continue to sell to Garmin, even after the buyout. Even so, Garmin went out hunting for a mapping firm of its own, and ultimately launched the counterstrike against TomTom for Tele Atlas.

In a telephone interview with Bloomberg yesterday, TomTom CEO Harold Goddijn said he spoke with Tele Atlas CEO Alain De Taeye. De Taeye was pleased by the boosted bid and said there was "no reason to assume" Tele Atlas will withdraw its support for TomTom’s bid, Goddijn said.
In a statement, Tele Atlas said it would review TomTom’s new bid and "inform the market on further steps as soon as reasonably possible.”
As for Garmin? In a telephone interview, spokesman Ted Gartner told a reporter that the industry leader is reviewing the offer – as well as "possible responses," declining to elaborate further.

News and Related Story Links:

• Money Morning:
  Garmin Takes 5% Stake in Tele Atlas, Company it is Pursuing in Hostile Bidding Battle

• Money Morning:
  Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge

• BusinessWeek:
  Tele Atlas Endorses $4.2B TomTom Bid.

By Karim Rahemtulla
Guest Columnist

After spending the last 29 hours on various airplanes and stuck inside airports, I finally made it to Mumbai, India. It’s an ardous trip from the States, but well worth it. Now that we’ve had several days to meet with Indian officials and businesses, here are some snapshots of opportunities and a few words of caution…

The Bombay Exchange

Let me tell you, it’s hot here. And I’m not talking about the weather. The Bombay Stock Exchange recently hit a new all-time high, approaching the 19,000 level. That’s almost double where it was this time last year.

Great news, you say. Well, yes and no. Although the country and stock market is flourishing right now, the rapid growth is scaring many investors.

Moreover, the Bombay Exchange is a fairly illiquid market. My good friend and Quantum Fund manager, Ajit Dayal, tells me he will only look at companies that trade at least $1 million in share value per day for a year ($1 million in value, not 1 million shares).  Otherwise he considers them a liquidity trap. With 7,000 stocks trading on the Bombay exchange, you wouldn’t think that would be much problem. But you might be surprised. Guess how many fit his criteria?

Just 284. Yes, there is money to be made from India. But with odds as low as that, I’m holding tight on any recommendations. The market just can’t handle it right now. On the next correction, I’ll recommend buying, but not at these levels.

The Lagging Infrastructure

India is a dynamic country. The place is teeming with life and energy. Foreign funds are pumping money into India at a record pace, and certainly an economic miracle is happening here.

But the country is also exploding at the seams. The roads are a mess. The power grid is a mess. Everything is a mess.

I noticed it as soon as I set off for my hotel.  The Taj Mahal Hotel in Mumbai is a fabulous place, but despite being just 15 miles from the airport, it took an hour-and-a-half to get there.

The thing is, city officials have talked about finding a new route to the airport for ages. They’ve talked about a bridge over the bay. Some say this will be an 8-lane monster, making the journey just 20 minutes. I say: "You said the same thing 25 years ago. I don’t care if it’s 8 lanes or 12 lanes… for heaven’s sake, just build it!"

Investing in infrastructure is by far the easiest play in India. The problem is that very few Indian shares trade as ADRs, which means you either have to invest in a fund, or directly in the market in India, which is not easy, due to restrictions for foreigners.

However, if you are determined to take advantage of the opportunities in infrastructure, and are willing to take the short-term risks of being in a toppy market, then the play here is Larson and Toubro Ltd., a medium-sized company that is involved in every level of infrastructure and construction in India. It is publicly traded on the Bombay Exchange.

30% Growth In "Tech Town"

Upon arriving at the Satyam Computer Infoway (SAY) campus, there was only one reaction: Absolutely spectacular. The place is a sprawling oasis for its 18,000 workers. Like a modern company town, many Satyam employees live on-site, enjoying a fantastic lifestyle that clearly helps them with productivity.

For some time now, the IT giant has racked up revenues and earnings growth in excess of 30% per year. And there doesn’t seem to be much blocking its path to further growth. Except one trend…

The Party-Crashing Rupee

You would think that a strong Rupee would bode well for India, since it could draw more investment into the country.

Granted, while hefty capital inflows to India are certainly helping the country’s growth, some of that is offset when the Rupee is strong against the U.S. dollar – as it is now (along with just about every other currency, it seems).

That’s not a good trend for companies like Satyam or fellow technology powerhouse Infosys Technologies Ltd. (INFY), India’s second-largest software firm.

While Infosys did report an 18.4% jump in net profits – reaching $280 million – in the last quarter, the fact that it does most of its business (more than 60%) with American companies, or companies in dollar-based economies, means that over the long-term, it doesn’t want to see this trend continue.

That’s because with each day the dollar weakens, Indian firms like Satyam and Infosys have to offset the loss. And there are a number of ways it can do so:

1. Be more productive.
2. Use dollar hedges.
3. Raise prices.

Right now, Satyam is doing all three, while Infosys says it is "proactively hedging our currency exposures to mitigate this impact."

Right now, the impact of a U.S. dollar/Rupee ratio of 38 or higher should not have a huge impact. But should the Rupee rise another 10% or so (to the mid 30s), there will be pain all around. That will be the opportunity to buy both these companies, which have excellent futures.

So what does the Indian government and central bank make of this?

Policymakers To Get Proactive

Simply put, they’re quite concerned about Rupee appreciation. But they have a history of active currency management, which leads me to believe that the current Indian pickle may be a short-term trend – 12-18 months at most before the Rupee will be back over 40-to-1.

We met with representatives of the state and federal government and the bottom line is that policy makers have little choice. They need to export goods and services in order to stay competitive with countries like Malaysia, South Africa and even Egypt and Slovenia – all up-and-coming countries in the same IT sector that is crucial to India’s growth.

Real Estate and Banking

The real estate sector is booming with development occurring everywhere. Most of the new properties are located in the suburbs of Mumbai and Delhi – away from the masses and the traffic. But these suburban panaceas are not very practical for those working in the cities, and are mostly inhabited by those who don’t need to conduct business in town. [As I mentioned, the 15-mile drive from the airport to city center takes an hour and half on a good day. And the suburbs are all located past the airport].

Banks stocks have, by far, been the stellar performers in India. They are lending money left and right. The most aggressive bank is ICIC Bank Ltd. (IBN) – but it is also the riskiest in terms of the quality of assets.

A better alternative is HDFC Bank Ltd. (HDB), which has much more stringent criteria and a much more conservative lending philosophy. This would be the bank to buy during any dips in the market. Both trade as American Depository Receipts (ADRs) in New York, but neither is cheap at current prices.

Karim Rahemtulla is also the Investment Director and Founder of the Xcelerated Profits Reports and is also the editor of the Smart Profits Report, a free e-letter, which you log onto at www.smartprofitsreport.com.

News and Related Story Links:

• Money Morning:
  Why India Is Losing the Race with China – and What It Can Do to Gain Ground

• Money Morning:
  India Gains Importance as an Economic and Political Epicenter

• Money Morning:
  India Stock Soars with Reliance and Tata Steel Out in Front

• Money Morning:
  India’s Outsourcing Capacities are Evolving and Shrinking at the Same Time

• Money Morning:
  Posco Gears Up to Build India’s Biggest Blast Furnace

• Money Morning:
  India’s Richest Realtor Lobbies For a Rate Decrease Despite Strong Growth

Garmin Ltd. (GRMN), the navigation device maker that’s locked in a bidding battle for digital mapmaker Tele Atlas NV (TLATF), has taken a 5.02% stake in that Dutch company, according to filings with the Dutch stock markets regulator AFM.

AFM is The Netherlands’ version of the U.S. Securities and Exchange Commission. Under Dutch law, shareholders are obliged to report an investment stake in another company if it rises above, or falls below, the 5% level – and in any multiples of 5% thereafter. A spokeswoman for the AFM said that companies are permitted to purchase shares in another company even if they are planning a takeover big.

“The moment that they are planning a bid, that’s when companies need to issue a press release, as Garmin has done,” the spokeswoman told Reuters.

The George Town, Cayman Islands-based company said Wednesday that soaring sales sent its third-quarter profits rocketing 57% – easily eclipsing Wall Street forecasts. But the company’s shares plunged $13.08 each – or nearly 11%  – in regular trading after Garmin said it was taking on nemesis TomTom NV in a bidding war for Tele Atlas, and announced it had launched a $3.31 billion hostile bid to do so.

Tele Atlas said Thursday that its board of directors had reviewed the Garmin bid, found it superior to the earlier offer, and gave lead suitor TomTom five days to match Garmin’s bid.

"If TomTom chooses not to match that superior proposal within the five business day period, Tele Atlas intends to terminate the TomTom agreement," which has been in place since July, Tele Atlas said.
But Tele Atlas also stressed that it needs a binding agreement from Garmin, before its board of directors can recommend acceptance of Garmin’s offer.

On Friday, the Garmin regulatory filing revealed that it has already taken the position of better tan 5% in Tele Atlas.

Garmin’s Stellar Quarterly Results

For the three months ending Sept. 29, Garmin said it earned $193.5 million, or 88 cents per share, compared with $123 million, or 56 cents per share, a year ago. After factoring out the effects of exchange rates, earnings per share were 89 cents, a jump of 78% from earnings per share of 50 cents for the comparable quarter last year. The results handily exceeded the consensus estimate of 82 cents per share, according to an analyst survey conducted by Thomson Financial.

Quarterly revenue jumped to $728.7 million, up 79% from the revenue of $408 million for the same three months last year – again easily eclipsing the Wall Street forecast of $683.2 million.

Garmin Chairman and Chief Executive Min Kao told analysts that he expected increased marketing and a strong lineup of new devices to help fuel growth through the remainder of the year, although he said profit margins would likely suffer.

"We expect pricing and market compression to intensify during this holiday season," Kao said.

Sales of navigation devices used in cars and trucks more than doubled, reaching $519 million, while sales in Garmin’s aviation segment rose 27% to reach $74 million. Sales in the outdoor and fitness segment totaled $88 million, rising 24%, while revenue in the marine segment cruised ahead by 17%, reaching $48 million.

Sales in North America soared 71%, reaching $454 million, while revenue in Europe advanced a sizzling 89%, reaching $227 million. Asia, a promising-but-still-new market, contributed sales of $48 million, more than double the comparable quarter last year.

Garmin said its accelerating performance in Europe was helped by the fact that it recently bought its distributors in France and Germany, which has helped it grab market share in both markets. Now it’s hoping to replicate that business model – and generate similar successes – in Denmark, Italy and Spain, and is now buying out distributors in all three nations.

The company boosted its earnings guidance for the year, telling investors it was looking for revenue of more than $2.9 billion and profits in excess of $3.40 a share. It was only last quarter that Garmin was predicting revenue of more than $2.8 billion and profits of more than $3.15 per share.

Currently, the consensus Wall Street estimate for this year is for Garmin to earn $3.42 a share on revenue of $2.9 billion.

Garmin makes several types of highly rated navigation devices, including portable Global Positioning System (GPS) units. Several received No. 1 ratings from such publications as Consumer Reports.
Some of those GPS devices retail for as little as $100, and 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 combined treasure hunt, auto rally and 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. That’s one reason the stock more than doubled in recent months, reaching a high of $125.68 in late October. Garmin’s shares ended the regular trading day Friday at $98.44, down $1.57 (1.57%) each.

Garmin’s shares have traded between $44.53 and $125.68 in the past year.

Citing Garmin’s strong financial performance, JMP Securities (JMP) Senior Analyst Ingrid Ebeling on Thursday reiterated her "market outperform" rating on Garmin’s shares, and raised her target price from $100 to $140 per share.

However, Davenport Equity Research on Friday said it had downgraded Garmin from “Neutral” to “Reduce/Sell.” Davenport said that it is concerned with the long-term growth rates of personal navigation devices, mainly due to emerging devices such as Apple Inc., (AAPL) iPhone and the potential of Google Inc.’s (GOOG) rumored wireless phone service.

The Nokia Juggernaut

This most-recent share-price plunge isn’t the first that Garmin shareholders have had to, well, navigate in recent months.

On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.

The proposed deal at $78 a share would be Finland-based Nokia’s biggest purchase, and followed Nokia’s acquisition of mobile-advertiser Enpocket. Initially, analysts viewed the Navteq purchase as a shot-across-the bow of Apple Inc., (AAPL), whose new and much-hyped iPhone comes equipped with mapping and navigation provided by Google Inc. (GOOG). But it also put an immense amount of pressure on Garmin, whose shares were pounded by investors who believed the Nokia-Navteq marriage would hamstring the fast-growing GPS maker. Investors were exceptionally disappointed that Garmin didn’t strike first, and didn’t even try to turn the bidding for Navteq into a two-horse race.

Navteq provides digital map information for automobile navigation systems, mobile phones and devices and Web sites, and Garmin is a major customer. Navteq also owns Traffic.com, an interactive Web site that gives users up-to-the-minute traffic information in their area. Navteq generated revenue of $582 million last year, Nokia said.

"Location-based services are one of the cornerstones of Nokia’s Internet services strategy. The acquisition of NAVTEQ is another step toward Nokia becoming a leading player in this space," Olli-Pekka Kallasvuo, Nokia’s president and chief executive, said when the deal was announced. "By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market. We also look forward to maintaining and enhancing the services and support provided to Navteq’s existing and future customers."

The deal won’t be completed until next year. But the agreement was enough to spook Garmin shareholders: Within days of the announced Nokia-Navteq tie-up, Garmin’s shares – which had reached a new high of $122.78 – had plunged by more than $26 each, and were trading at less than $97.

The investor trepidation was palpable – and also understandable. Nokia was already a powerhouse, and recent statistics show that it is only getting stronger. The 111.7 million phone handsets it shipped between July and October were part of a strong global mobile phone market, industry analysts say. The gain was greater than the increases from the other four top suppliers combined, and lifted Nokia’s market share to 39.5% in the third quarter, from 37.9% in the second.

In other words, by the end of the third quarter, Nokia accounted for nearly four out of every 10 wireless phone assets worldwide. Nokia unit sales had grown 10.8% from the second quarter to the third, while the global mobile phone market in general grew 6.4% – a healthy advance, but nowhere near the growth rate of the market leader.

"Nokia is capitalizing on the increasing popularity of multimedia- and business-oriented applications for mobile phones," iSuppli analyst Tina Teng said in a report released last week. "The company’s shipments of convergence mobile phones that integrate multimedia and smart-phone features grew by 53.8% in the third quarter of 2007 compared to the same period in 2006."

Nokia’s third-quarter operating margin was also more than double that of its rivals – an exceptionally healthy 22.2% for Nokia, versus a 10.5% average for the Top 5 handset suppliers.
Garmin executives knew their company couldn’t afford to stand pat.

Mapping Out a Digital Deal

Industry observers have been predicting a bidding battle for Tele Atlas ever since Nokia appeared to lock up Navteq – the only other major digital mapping company with operations worldwide. On the conference call with analysts, Kao, the Garmin CEO, conceded that the competitive pressures basically made the company’s leaders feel as if they had to launch a bid for Tele Atlas.

"Historically, Garmin believed that an independent, competitive map duopoly served the industry well," Kao said. "However, in the absence of this independent and competitive method of operating, Garmin must exercise its obligation to provide market leadership."

It also had to exercise its obligation to protect its shareholders.

As the company’s quarterly financial report shows, Garmin is a growth-and-profit machine. To maintain that position of industry leadership, however, Garmin has to evolve. And that means looking for additional growth opportunities.

Garmin says the acquisition of Tele Atlas will help it expand into such new markets as cars and trucks, and "enterprise," where global positioning systems are used by firms involved in logistics, package-delivery, and shipping. Utilities are increasingly relying on both GPS and digital-mapping technologies to control costs and provide better service.

Online mapping services – such as MapQuest.com – are big users of digital mapping technology. And new types of ventures – such as real estate’s Zillow.com – are emerging all the time.
These types of “location-based services” accounted for 51% of the content revenue reaped by wireless phone firms in the second quarter, meaning that GPS-enabled handsets that are capable of providing navigation-related services are catching on with consumers and commercial customers, according to Information Week.

According to researcher Telephia, roughly 13 million U.S. customers used their mobile phones to download mobile or navigation-related applications in the second quarter. But while the LBS applications represented 51% of revenue, they weren’t 51% of downloads. The reason: LBS apps are actually pricier than other applications, averaging a hefty $9.23 per download, according to published reports. That compares with an average range of $3.82 to $5.41 per download for weather applications, sports, wallpapers, or photographs.

While 7% to 13% of mobile-phone users have downloaded such content as games, wallpaper and ringtones, only about 5% have downloaded LBS-based navigation services, Telephia research found.
That so many people are willing to pay nearly $10 for a get-me-from-here-to-there type application is telling, Information Week reported.

“With consumer awareness increasing, there is enormous potential for even greater LBS growth, especially since Telephia research indicates that there are approximately 130 million GPS-capable handsets in the US alone, and growing," said Doug Antone, president and CEO of Networks In Motion.

As popular as LBS services are, based on those numbers it looks like the wireless operators need to convince more people to download and use mobile content. So it follows that the battle for Tele Atlas figures to be a fierce one, and for two key reasons:

• First, Tele Atlas is the last independent global map provider – save for Navteq, which experts believe Nokia has essentially locked up.
• And, second, the makers of GPS devices and related navigation systems have come to realize that it is crucial to have control of the digital mapping technology their products are designed around.

That pits TomTom against Garmin.

Known for its clever TV commercials and catchy name, TomTom is Europe’s largest maker of navigation devices, but the Cayman Islands-based Garmin has a bigger U.S. market share and is larger, overall. Tele Atlas had agreed to be bought by the Amsterdam-based TomTom for $2.6 billion, about 15% less than the $3.31 billion Garmin is planning to offer.

Garmin – which says it already has secured financing commitments for the deal – will officially launch its offer by Dec. 4, the day TomTom’s offer for Tele Atlas is scheduled to expire, Reuters reported.
Ironically, it was TomTom that touched off the consolidation cycle in the high-growth digital mapping sector back in July, when it said it would buy Tele Atlas for $30.63 per share. Tele Atlas had already publicly backed the TomTom bid, but yesterday said it was reviewing Garmin’s higher bid of $35.31. Indeed, that review is basically a given, since Tele Atlas has a fiduciary responsibility to its shareholders to get the best possible deal if it decides to sell out.

And a spokesman for TomTom told The Associated Press that The Netherlands company was also studying Garmin’s higher bid, and said his firm would have a reply "in the near future" – whether that took "several hours or several days." The spokesman declined to answer the how TomTom will address the hard choice it now faces: It can either risk losing Tele Atlas by standing pat, or can raise its bid – if its executives feel they have the financial ability to do so.

TomTom shares plunged 19% in Amsterdam at the prospect, while the U.S.-listed Tele Atlas shares rose $5.45 each, or 15.91%, to close at $39.70 – a sign that investors are speculating the bidding will go higher before the final deal is reached.

Tele Atlas’ shares have traded above TomTom’s offer price since early October, when Nokia made its bid for Navteq, as investors speculated Garmin – or another player, such as Google Inc. (GOOG), Microsoft Corp. (MSFT) or Motorola Inc. (MOT) – might enter the bidding war, or that TomTom would at least have to sweeten its offer.

Interestingly, Microsoft has been even been mentioned as a possible suitor for all of Garmin.

David Niederman, a senior analyst with Pacific Crest Securities, said it was impossible to say whether TomTom will launch a higher bid. TomTom has the financial capacity to boost its bid. As the largest single customer of Tele Atlas, it is probably a better strategic fit. Conversely, Garmin relies heavily on Navteq maps and technology, and in an ideal world would have preferred a merger with its own partner. But the Nokia-Navteq agreement makes that all but impossible.

Garmin’s market capitalization is four times greater than that of TomTom, and it has the financial resources to outbid the Dutch company in an all-out bidding war if it were determined to do so, Niederman told The AP.

"Tele Atlas operates at a loss," he said. "There’s a question of the ‘winner’s curse’ here. No one wants to win regardless of price, and TomTom could just walk away."

When asked to justify the financial logic for the deal, Kao, the Garmin CEO, said that owning a mapmaker will allow for much better integration of the digital maps with the products that display them – a strategic argument that Nokia and TomTom executives have made previously.

What remains unspoken, however, are the fears about having to buy maps from a rival who now controls both the products and the technology. And that fear is clearly playing a major role, whether the companies concede the point or not. Both Nokia and TomTom have given assurances that – once they win their respective takeover battles – they would continue to sell maps and related products to anyone that wishes to buy them; Garmin voiced similar assurances yesterday.

During the conference call with analysts, Kevin Rauckman, Garmin’s chief financial officer, acknowledged that the bidding by TomTom and Nokia sped up his company’s decision to pursue Tele Atlas.
"Given the significant changes that have just taken place recently in the industry in the last 90 days…we just really believe that now is the right time for us to combine with a mapping supplier," Rauckman told analysts.

Garmin had actually looked at what it would take to develop its own mapping database – but ultimately decided the venture would be far too expensive, Rauckman conceded to analysts.

The Analysts Weigh In

Felix Oberdorfer, an analyst at Fortis Bank, told MarketWatch that it is "quite speculative" to predict who will end up with Tele Atlas. Even so, he believes that the deal is essential for TomTom, while it’s more of a defensive maneuver for Garmin.

In a separate interview with MarketWatch, Yair Reiner, an analyst with CIBC, said that – should TomTom view a tie-up with Tele Atlas as "a matter of life and death," and be willing to stretch its financial resources to the limit to acquire it – Garmin might actually be forced to pay more than $57.86 a share to actually win the bidding battle. That represents a 64% premium over its current offer of $35.31.

Should Garmin lose that bidding battle for Tele Atlas, its Price/Earnings  (P/E) ratio would collapse to a range of 15 to 20 times 2008 earnings, Reiner warned. However, should Garmin emerge victorious, with Tele Atlas "under its wing," Garmin’s shares would easily trade at 30 to 35 times 2008 earnings. But if a third party such as Google or Microsoft were to enter the fray, and walk away with Tele Atlas, Garmin’s P/E multiple would still contract, but by a smaller percentage, given that these other potential suitors are not direct competitors, Reiner said during the interview.

News and Related Story Links:

• Forbes.com:
  Garmin Takes 5.02% Stake in Tele Atlas – AFM.

• CNNMoney.com:
  Garmin Takes 5.02% Stake in Tele Atlas.

• Information Week:
  Wireless Operators Raking in Your Cash with [Location-Based Services] Apps.

• Information Week:
  Mapmaker, Mapmaker, Make Me a Map  (And Please Entertain My Takeover Bid).

• Information Week:
  Navteq Deal Pushes Nokia’s Services Drive Into Overdrive.

• Money Morning Investment Investing Research Report:
  Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge.

• TMC.net:
  Garmin GPS Receivers.

• San Jose Mercury News:
  Garmin Offers $3.3 Billion for Netherlands’ Tele Atlas, Besting TomTom’s Bid.

• Reuters:
  Garmin Outbids for Tele Atlas After TomTom Offer.

• MarketWatch.com:
  Tele Atlas Says TomTom Needs to Match Garmin Bid.

• Newratings.com:
  Garmin [rated] "Outperform," Target Price Raised.

• Business Week:
  S&P Picks and Pans: Corning, Clorox, Garmin, RealNetworks.

• iSuppli Market Research Report:
  Nokia Mobile-Phone Shipments Rise by 10.9 Million Units in Q3.

• Bloomberg News:
  Garmin Climbs on Speculation Microsoft Will Buy It.

• Forbes.com:
  GPS Maker Garmin’s 3Q Profit Rises.

• Money Morning News:
  Microsoft Eyeing GPS-Maker Garmin, Analyst Reports.

• Money Morning News:
  Garmin Shares Rebound After Analyst Says Fears of Nokia-Navteq Are Overblown.

• Information Week:
  Nokia Ups Its Global Handset Share to Near 40%.

• Information Week:
  Nokia Targets Multimedia Fans With N81 (Smart Phone) Device.

• Money Morning News:
  Nokia buys mobile advertiser Enpocket, T-Mobile buys SunCom.

• Money Morning News:
  Savaged Garmin Battles Back With Cell Phone Navigation Software.

• Money Morning News:
  Nokia Announces $8.1 Billion Acquisition of Navteq.

• Information Week:
  Garmin’s New Device Turns Smart Phones into GPS Devices.

• Wikipedia:
  Geocaching.

• Geocaching.com:
  The Official Global GPS Geocaching Cache Hunt Site.

• Garmin:
  Geocaching Garmin Style.

• JMP Securities:
  Senior Analyst Ingrid Ebeling.

The seesaw ride continues for shareholders of navigation-device heavyweight Garmin Ltd., (GRMN).

The George Town, Cayman Islands-based company yesterday (Wednesday) announced that soaring sales sent its third-quarter profits rocketing 57% – easily eclipsing Wall Street forecasts. But the company’s shares plunged $13.08 each – or nearly 11%  – in regular trading after Garmin said it was taking on nemesis TomTom NV in a bidding battle for digital mapmaker Tele Atlas NV (TLATF), and announced it had launched a $3.31 billion hostile bid to do so.

Tele Atlas said today (Thursday) that its board of directors had reviewed the Garmin bid, found it superior to the earlier offer, and gave lead suitor TomTom five days to match Garmin’s bid.

"If TomTom chooses not to match that superior proposal within the five business day period, Tele Atlas intends to terminate the TomTom agreement," which has been in place since July, Tele Atlas said.

But Tele Atlas also stressed that it needs a binding agreement from Garmin, before its board of directors can recommend acceptance of Garmin’s offer.

Story Continues Below… Enter Your Email Address Below:

Garmin’s Stellar Quarterly Results

For the three months ending Sept. 29, Garmin said it earned $193.5 million, or 88 cents per share, compared with $123 million, or 56 cents per share, a year ago. After factoring out the effects of exchange rates, earnings per share were 89 cents, a jump of 78% from earnings per share of 50 cents for the comparable quarter last year. The results handily exceeded the consensus estimate of 82 cents per share, according to an analyst survey conducted by Thomson Financial.

Quarterly revenue jumped to $728.7 million, up 79% from the revenue of $408 million for the same three months last year – again easily eclipsing the Wall Street forecast of $683.2 million.

Garmin Chairman and Chief Executive Min Kao told analysts that he expected increased marketing and a strong lineup of new devices to help fuel growth through the remainder of the year, although he said profit margins would likely suffer.

"We expect pricing and market compression to intensify during this holiday season," Kao said.

Sales of navigation devices used in cars and trucks more than doubled, reaching $519 million, while sales in Garmin’s aviation segment rose 27% to reach $74 million. Sales in the outdoor and fitness segment totaled $88 million, rising 24%, while revenue in the marine segment cruised ahead by 17%, reaching $48 million.

Sales in North America soared 71%, reaching $454 million, while revenue in Europe advanced a sizzling 89%, reaching $227 million. Asia, a promising-but-still-new market, contributed sales of $48 million, more than double the comparable quarter last year.

Garmin said its accelerating performance in Europe was helped by the fact that it recently bought its distributors in France and Germany, which has helped it grab market share in both markets. Now it’s hoping to replicate that business model – and generate similar successes – in Denmark, Italy and Spain, and is now buying out distributors in all three nations.

The company boosted its earnings guidance for the year, telling investors it was looking for revenue of more than $2.9 billion and profits in excess of $3.40 a share. It was only last quarter that Garmin was predicting revenue of more than $2.8 billion and profits of more than $3.15 per share.

Currently, the consensus Wall Street estimate for this year is for Garmin to earn $3.42 a share on revenue of $2.9 billion.

Garmin makes several types of highly rated navigation devices, including portable Global Positioning System (GPS) units. Several received No. 1 ratings from such publications as Consumer Reports.

Some of those GPS devices retail for as little as $100, and 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 combined treasure hunt, auto rally and 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. That’s one reason the stock more than doubled in recent months, reaching a high of $125.68 in late October. Garmin’s shares ended the regular trading day yesterday (Wednesday) at $107.40, down $13.08, or 10.86%.

They rebounded a bit in after-hours trading yesterday, climbing $1.08 each, or 1.01%, to reach $108.48. Shares have traded between $44.53 and $125.68 in the past year.

Citing Garmin’s strong financial performance, JMP Securities (JMP) Senior Analyst Ingrid Ebeling today (Thursday) reiterated the firm’s "market outperform" rating on Garmin’s shares and raised her target price from $100 to $140 per share.

The Nokia Juggernaut

Yesterday’s share-price plunge isn’t the first that Garmin shareholders have had to, well, navigate in recent months.

On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.

The proposed deal at $78 a share would be Finland-based Nokia’s biggest purchase, and followed Nokia’s acquisition of mobile-advertiser Enpocket. Initially, analysts viewed the Navteq purchase as a shot-across-the bow of Apple Inc., (AAPL), whose new and much-hyped iPhone comes equipped with mapping and navigation provided by Google Inc. (GOOG). But it also put an immense amount of pressure on Garmin, whose shares were pounded by investors who believed the Nokia-Navteq marriage would hamstring the fast-growing GPS maker. Investors were exceptionally disappointed that Garmin didn’t strike first, and didn’t even try to turn the bidding for Navteq into a two-horse race.

Navteq provides digital map information for automobile navigation systems, mobile phones and devices and Web sites, and Garmin is a major customer. Navteq also owns Traffic.com, an interactive Web site that gives users up-to-the-minute traffic information in their area. Navteq generated revenue of $582 million last year, Nokia said.

"Location-based services are one of the cornerstones of Nokia’s Internet services strategy. The acquisition of NAVTEQ is another step toward Nokia becoming a leading player in this space," Olli-Pekka Kallasvuo, Nokia’s president and chief executive, said when the deal was announced. "By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market. We also look forward to maintaining and enhancing the services and support provided to Navteq’s existing and future customers."

The deal won’t be completed until next year. But the agreement was enough to spook Garmin shareholders: Within days of the announced Nokia-Navteq tie-up, Garmin’s shares – which had reached a new high of $122.78 – had plunged by more than $26 each, and were trading at less than $97.

The investor trepidation was palpable – and also understandable. Nokia was already a powerhouse, and recent statistics show that it is only getting stronger. The 111.7 million phone handsets it shipped between July and October were part of a strong global mobile phone market, industry analysts say. The gain was greater than the increases from the other four top suppliers combined, and lifted Nokia’s market share to 39.5% in the third quarter, from 37.9% in the second.

Story Continues Below… Enter Your Email Address Below:

In other words, by the end of the third quarter, Nokia accounted for nearly four out of every 10 wireless phone assets worldwide. Nokia unit sales had grown 10.8% from the second quarter to the third, while the global mobile phone market in general grew 6.4% – a healthy advance, but nowhere near the growth rate of the market leader.

"Nokia is capitalizing on the increasing popularity of multimedia- and business-oriented applications for mobile phones," iSuppli analyst Tina Teng said in a report released this week. "The company’s shipments of convergence mobile phones that integrate multimedia and smart-phone features grew by 53.8% in the third quarter of 2007 compared to the same period in 2006."

Nokia’s third-quarter operating margin was also more than double that of its rivals – an exceptionally healthy 22.2% for Nokia, versus a 10.5% average for the Top 5 handset suppliers.

Garmin executives knew their company couldn’t afford to stand pat.

Mapping Out a Digital Deal

Industry observers have been predicting a bidding battle for Tele Atlas ever since Nokia appeared to lock up Navteq – the only other major digital mapping company with operations worldwide. On the conference call with analysts, Kao, the Garmin CEO, conceded that the competitive pressures basically made the company’s leaders feel as if they had to launch a bid for Tele Atlas.

"Historically, Garmin believed that an independent, competitive map duopoly served the industry well," Kao said. "However, in the absence of this independent and competitive method of operating, Garmin must exercise its obligation to provide market leadership."
It also had to exercise its obligation to protect its shareholders.

As the company’s quarterly financial report shows, Garmin is a growth-and-profit machine. To maintain that position of industry leadership, however, Garmin has to evolve. And that means looking for additional growth opportunities.

Garmin says the acquisition of Tele Atlas will help it expand into such new markets as cars and trucks, and "enterprise," where global positioning systems are used by firms involved in logistics, package-delivery, and shipping. Utilities are increasingly relying on both GPS and digital-mapping technologies to control costs and provide better service.

Online mapping services – such as MapQuest.com – are big users of digital mapping technology. And new types of ventures – such as real estate’s Zillow.com – are emerging all the time.

So it follows that the battle for Tele Atlas figures to be a fierce one, and for two key reasons:

• First, Tele Atlas is the last independent global map provider – save for Navteq, which experts believe Nokia has essentially locked up.
• And, second, the makers of GPS devices and related navigation systems have come to realize that it is crucial to have control of the digital mapping technology their products are designed around.

That pits TomTom against Garmin.

Known for its clever TV commercials and catchy name, TomTom is Europe’s largest maker of navigation devices, but the Cayman Islands-based Garmin has a bigger U.S. market share and is larger, overall. Tele Atlas had agreed to be bought by the Amsterdam-based TomTom for $2.6 billion, about 15% less than the $3.31 billion Garmin is planning to offer.

Garmin – which says it already has secured financing commitments for the deal – will officially launch its offer by Dec. 4, the day TomTom’s offer for Tele Atlas is scheduled to expire, Reuters reported.

Ironically, it was TomTom that touched off the consolidation cycle in the high-growth digital mapping sector back in July, when it said it would buy Tele Atlas for $30.63 per share. Tele Atlas had already publicly backed the TomTom bid, but yesterday said it was reviewing Garmin’s higher bid of $35.31. Indeed, that review is basically a given, since Tele Atlas has a fiduciary responsibility to its shareholders to get the best possible deal if it decides to sell out.

And a spokesman for TomTom told The Associated Press that The Netherlands company was also studying Garmin’s higher bid, and said his firm would have a reply "in the near future" – whether that took "several hours or several days." The spokesman declined to answer the how TomTom will address the hard choice it now faces: It can either risk losing Tele Atlas by standing pat, or can raise its bid – if its executives feel they have the financial ability to do so.

TomTom shares plunged 19% in Amsterdam at the prospect, while the U.S.-listed Tele Atlas shares rose $5.45 each, or 15.91%, to close at $39.70 – a sign that investors are speculating the bidding will go higher before the final deal is reached.

Tele Atlas’ shares have traded above TomTom’s offer price since early October, when Nokia made its bid for Navteq, as investors speculated Garmin – or another player, such as Google Inc. (GOOG), Microsoft Corp. (MSFT) or Motorola Inc. (MOT) – might enter the bidding war, or that TomTom would at least have to sweeten its offer.

Interestingly, Microsoft has been even been mentioned as a possible suitor for all of Garmin.

David Niederman, a senior analyst with Pacific Crest Securities, said it was impossible to say whether TomTom will launch a higher bid. TomTom has the financial capacity to boost its bid. As the largest single customer of Tele Atlas, it is probably a better strategic fit. Conversely, Garmin relies heavily on Navteq maps and technology, and in an ideal world would have preferred a merger with its own partner. But the Nokia-Navteq agreement makes that all but impossible.

Garmin’s market capitalization is four times greater than that of TomTom, and it has the financial resources to outbid the Dutch company in an all-out bidding war if it were determined to do so, Niederman told The AP.

"Tele Atlas operates at a loss," he said. "There’s a question of the ‘winner’s curse’ here. No one wants to win regardless of price, and TomTom could just walk away."

When asked to justify the financial logic for the deal, Kao, the Garmin CEO, said that owning a mapmaker will allow for much better integration of the digital maps with the products that display them – a strategic argument that Nokia and TomTom executives have made previously.

What remains unspoken, however, are the fears about having to buy maps from a rival who now controls both the products and the technology. And that fear is clearly playing a major role, whether the companies concede the point or not. Both Nokia and TomTom have given assurances that – once they win their respective takeover battles – they would continue to sell maps and related products to anyone that wishes to buy them; Garmin voiced similar assurances yesterday.

During the conference call with analysts, Kevin Rauckman, Garmin’s chief financial officer, acknowledged that the bidding by TomTom and Nokia sped up his company’s decision to pursue Tele Atlas.

"Given the significant changes that have just taken place recently in the industry in the last 90 days…we just really believe that now is the right time for us to combine with a mapping supplier," Rauckman told analysts.

Garmin had actually looked at what it would take to develop its own mapping database – but ultimately decided the venture would be far too expensive, Rauckman conceded to analysts.

The Analysts Weigh In
Felix Oberdorfer, an analyst at Fortis Bank, told MarketWatch that it is "quite speculative" to predict who will end up with Tele Atlas. Even so, he believes that the deal is essential for TomTom, while it’s more of a defensive maneuver for Garmin.

In a separate interview with MarketWatch, Yair Reiner, an analyst with CIBC, said that – should TomTom view a tie-up with Tele Atlas as "a matter of life and death," and be willing to stretch its financial resources to the limit to acquire it – Garmin might actually be forced to pay more than $57.86 a share to actually win the bidding battle. That represents a 64% premium over its current offer of $35.31.

Should Garmin lose that bidding battle for Tele Atlas, its Price/Earnings  (P/E) ratio would collapse to a range of 15 to 20 times 2008 earnings, Reiner warned. However, should Garmin emerge victorious, with Tele Atlas "under its wing," Garmin’s shares would easily trade at 30 to 35 times 2008 earnings. But if a third party such as Google or Microsoft were to enter the fray, and walk away with Tele Atlas, Garmin’s P/E multiple would still contract, but by a smaller percentage, given that these other potential suitors are not direct competitors, Reiner said during the interview.

Garmin stock dropped $7.39 or 6.88% Thursday.

News and Related Story Links:

• San Jose Mercury News:
  Garmin Offers $3.3 Billion for Netherlands’ Tele Atlas, Besting TomTom’s Bid.

• Reuters:
  Garmin Outbids for Tele Atlas After TomTom Offer.

• MarketWatch.com:
  Tele Atlas Says TomTom Needs to Match Garmin Bid.

• Newratings.com:
  Garmin [rated] "Outperform," Target Price Raised.

• Business Week:
  S&P Picks and Pans: Corning, Clorox, Garmin, RealNetworks.

• iSuppli Market Research Report:
  Nokia Mobile-Phone Shipments Rise by 10.9 Million Units in Q3.

• Bloomberg News:
  Garmin Climbs on Speculation Microsoft Will Buy It.

• Forbes.com:
  GPS Maker Garmin’s 3Q Profit Rises.

• Money Morning News:
  Microsoft Eyeing GPS-Maker Garmin, Analyst Reports.

• Money Morning News:
  Garmin Shares Rebound After Analyst Says Fears of Nokia-Navteq Are Overblown.

• Information Week:
  Nokia Ups Its Global Handset Share to Near 40%.

• Information Week:
  Nokia Targets Multimedia Fans With N81 (Smart Phone) Device.

• Money Morning News:
  Nokia buys mobile advertiser Enpocket, T-Mobile buys SunCom.

• Money Morning News:
  Savaged Garmin Battles Back With Cell Phone Navigation Software.

• Money Morning News:
  Nokia Announces $8.1 Billion Acquisition of Navteq.

• Information Week:
  Garmin’s New Device Turns Smart Phones into GPS Devices.

• Wikipedia:
  Geocaching.

• Geocaching.com:
  The Official Global GPS Geocaching Cache Hunt Site.

• Garmin:
  Geocaching Garmin Style.

• JMP Securities:
  Senior Analyst Ingrid Ebeling.

Enter Your Email Address Below:

Acer Inc. has passed the Lenovo Group Ltd. (LNVGY) to become the world’s No. 3 personal computer vendor with its purchase of Gateway Inc., and now it’s going after U.S. PC giant Dell Inc. (DELL).

That will leave U.S. high-tech giant Hewlett-Packard Corp. in the No. 1 position.

Acer leapfrogged Lenovo with its (HPQ) third largest PC vendor with its purchase of Gateway Inc. Next year, Acer could grab up to 12% of the global PC market share, which will put Dell right in its gunsights, said J.T. Wang, the chairman of Acer, in comments made during the country’s third quarter investors’ conference in Taipei, Taiwan,  over the same quarter a year ago, said the Gartner Group, a leading market researcher. Acer accounted for about 8.1% of the world’s PC shipments during the quarter, a major jump from its 5.9 %  market share at this time a year ago.

The market share figures do not include Gateway, which Acer bought for $710 million a week ago.

Dell’s unit shipments grew 3.5 %t during the quarter, but it still saw its market share fall from 15.9% to 14.4%.
Hewlett-Packard kept its title of the No. 1 maker of PCs with 18.8% of the market, actually growing from 16.1%. Lenovo, the No. 4 player, rose to 8% from 7.5% a year earlier.

Wang said the Acer believes it “can maintain strong growth momentum through 2008.” Acer forecasts it will still grow by a double-digit figure next year, which is faster than the global PC industry. Executives also said the fourth quarter of this year looks to be a good quarter, with no indication of a decrease in demand for PCs.

 In the fourth quarter, Acer will also start adding Gateway shipments to its figures, which will add to its market share. Gateway sold only 865,000 PCs in the U.S. market, its biggest, which is down from 1.01 million the year before, Gartner said.

News and Related Story Links:

• Money Morning News Analysis:
  Who’s Gaining Ground in the Global PC Wars?

• Bloomberg News:
  Lenovo to Sell Laptops to U.S. Consumers From January.

• AFP News:
  Lenovo Aims at Europe, With or Without Packard Bell.

• The Wall Street Journal:
  Dell to Sell PCs in Brazil, Mexico Through Wal-Mart Stores.