TECHNOLOGY TRADER: A Loss Of Direction by Bill Alpert
Highlighted companies: SiRF Technology (SIRF), Garmin (GRMN)
Summary: GPS chipmaker SiRF took a dive in trading last week after a Jeffries analyst found that SiRF has lost its near monopoly over supplying the two dominant GPS makers worldwide, Garmin and TomTom. TomTom will use another chipmaker, Global Locate, for the next generation of its biggest selling unit, to be unveiled at CES next month. But with this market growing 50% annually, even amidst falling unit prices, SiRF bulls have a good case ongoing. Cellular operators will soon begin integrating location-based services that will require GPS chips, which should boost SiRF revenues. But Alpert notes that should the analyst's claim prove correct, "Wall Street might not be willing to pay 34-times earnings for a chipmaker that's lost a de facto monopoly in its market." Should Global Locate become larger, the GPS chip market may become price-competitive a la Intel/AMD -- and there goes the justification for SIRF's high multiple.
Related: SiRF Technology Holdings Experiences Wipeout, SiRFs Up, Dude - The GPS Wave Is Just Starting To Roll In, SiRF Technology Aims to Beat Back Competition in Wireless GPS Chips, GPS Player SIRF Has Lost Its Way • Garmin Q3 2006 Earnings Call Transcript