Navteq Driven By Place and Location Services Growth

| About: NAVTEQ Corp. (NVT)

If you're ever stuck in a big US city in never-ending traffic – which is perfectly commonplace these days – trying to figure out how soon you can reach your client’s office downtown, trust Navteq’s (NYSE: NVT) GPS maps to effortlessly guide you to your destination.

Sounds too simple? The truth is it is. If you have Navteq-on-board navigation system fitted in your car, all you need is to hit the virtual keyboard to find the best possible way to reach your destination, guided all the while by an updated roadmap and voice transmission.

To be honest, Navteq's utility is not only to help you avoid the summer traffic rush on road, but also to locate your destination on laptops (or desktops) should you be using such web-based navigation applications as Google Maps, Yahoo! Maps, Local Live or MapQuest. All of them use Navteq’s data.

How does Navteq do that? Well, its geographic analysts fan out to far-flung areas traveling millions of kilometers collecting data of precise positions of points of interest that are later converged into maps you cannot do without.

With such a utility in its arsenal, there is no surprise that Navteq is considered as having the de facto monopoly of GPS and Location-Based Services [LBS] businesses. It's one and only real competitor is TeleAtlas. So, to be fair, the LBS data business is a duopoly.

GPS technology has very high entry barrier, and being a first-mover, Navteq is involved in collecting detailed data for large metropolitan city areas for many years, thus making it a formidable service provider in its area of business.

Interestingly, GPS receiver chip, the hardware, makes up 70% of the total cost of a GPS device needed to run Navteq's service. But fierce competition among chipmakers and relatively low entry barrier into their technology together have rendered them powerless in the negotiation with GPS gear makers. And these have worked to Navteq’s advantage.

Navteq is uniquely positioned to reap the benefit of its strong position in GPS business. As evidenced in its first quarter result this year (03/07), its return on average equity and net profit margin have both hovered around a handsome 20%.

However, its just-announced second quarter results (06/07) have been singularly impressive (see conference call transcript). The Y-o-Y quarterly revenue has seen an emphatic rise by 49% to $202.3 million, while operating and net income are respectively $54 million and $40.9 million. For the fiscal 2007, Navteq expects revenue of $780 to $795 million, which is about 37% higher than that in the last fiscal year (2006).

Not surprisingly, almost all the street analysts have hung a buy signal on Navteq, which is why the stock has recorded a 52-week high of 65.99 in today's trade. Here’s a prior analysis on the future of Navteq’s market opportunity. Also, International is an entirely underserved growth area that Navteq should get into.

As I have said before, if managed well, this company should have plenty of growth ahead. The Local and PlaceSmart search bonanza is also blowing the wind on Navteq’s sails.