Trimble’s Compelling Growth Strategy

On Sunday, October 23, 2004 disaster struck the residents of Niigata Prefecture, a scenic spot in Honshū, the largest island of Japan. Starting shortly before 6 in the evening a series of 15 earthquakes for the next 66 hours rendered more than a million people homeless, and their houses became heaps of rubble.

Even as search and rescue teams swung into action to bring relief to the affected, a different work started on war footing with Paul Yoshitomi of the Disaster Prevention Research Institute at the helm.

Paul and his team fanned out quickly to assess the damage caused by the quake, armed with Trimble® Recon® rugged handheld computers combined with small, lightweight Trimble GPS receivers.

Over the next 5 days, using Trimble’s GPS and GIS technology Paul’s team would untiringly prepare maps, reports and detailed analysis of the damage at Niigata Prefecture, as well as generate fast and accurate damage certificates for residents and business owners.

Mission critical success at Japan’s Niigata Prefecture is but one more feather in Trimble’s cap, a leading positioning technology company. Though GPS technology is its mainstay, Trimble (NASDAQ: TRMB) combines a wide range of positioning technologies including GPS, laser, optical, and inertial technologies with application software, wireless communications, and services to provide complete commercial solutions.

Founded in 1978, TRMB’s formidable portfolio includes over 700 patents and serves as the basis for the broadest positioning offerings in the industry. Over the years it has chosen the path of acquisition to grow. It now has excess of 500 products spread over 4 core market segments – Engineering and Construction, Agriculture, the Mobile and Field Workforce, and Advanced Devices.

Of the 4, TRMB’s Mobile Solutions Division commenced in April 2001 to offer Internet location-based services for the mobile workplace as well as address the emerging market for location-enabled mobile devices.

Its Feb 2007 the acquisition of @Road, Inc. of California, while reinforcing its growth strategy in the Mobile Solutions Division, positions TRMB as a market leader in providing Mobile Resource Management [MRM] solutions.

TRMB’s Jun ’07 quarterly revenue stood at $327.7 million, up 34 percent from that of Q2-2006. Net income improved from $28.5 million to $35 million (+ 23%).

Among the major business segments, the Mobile Solutions’ Q2-07 revenue of $40.9 million showed sizzling Y-o-Y growth of 176% ($14.9 million in Q2-06). The operating income of this segment too has improved to 7.1% of revenue (2.5%).

From the figures it would seem the @Road acquisition is doing good to TRMB’s mobile solutions division. If this is so, TRMB can be expected to do better for the full year for this sector. The recent uptrend in the stock price is perhaps an early indication of that.

GPS and related place and location technologies are experiencing a growth surge at the moment, and what I like about Trimble’s portfolio is its application-specific product line that offers custom solutions for problems in Construction, Agriculture, Mining, Field Support, etc. based on their core location technologies. While the generic consumer mapping and local search / placesmart search segment is searing hot, it is also extremely competitive.

Trimble’s business application focus, I feel, is both compelling and sports high entry barrier, at the same time, carving a nice niche that is outside of the immediate focus of players like Google (GOOG) and Yahoo (YHOO). I like this somewhat off-center strategy, as it enables them to build a differentiated channel and customer base with less competition.