SiRF Technology (SIRF) got hit hard Wednesday after a nice little run the last few days. According to this unconfirmed story in TheStreet.com, Apple (AAPL) will be releasing a GPS capable 3g iPhone early next year using a competitors GPS chip.
The GPS chips will be provided by Global Locate which was recently acquired by Broadcom (BRCM). The GPS chip made by Global Locate is an ‘Assisted’ GPS or A-GPS chip that uses a combination of satellite and cellular signals. This results in a better performance indoors and places where there is no direct view to the satellite. Assisted GPS chips are ideal for mobile phones. Nokia (NOK) is already on board with Assisted GPS technology.
Here’s a little explanation of A-GPS via ExtremeTech:
It can take 30 seconds to do a “cold start” and figure out where you are—because the low-power satellites transmit data at just a few bits per second. So SiRF has also developed assisted GPS (A-GPS), primarily for cell phones. With an assisted GPS-enabled cell phone, two things happen when you request a fix. First, SiRF’s GPS hardware fires up and starts hunting down satellites. At the same time, the phone makes a quick connection to a special server run by your cell provider, which quickly delivers rudimentary location information—”You’re in New York, not LA.” Combine those together and an A-GPS-enabled phone can get a fix in under a second.
As you can see Global Locate is not the only outfit with this technology, but either way, an iPhone win is pretty significant. Even if this rumor turns out to be true, I don’t see how this is all that bad for SiRF except on the PR side. Right now, GPS based phones are at a very early stage. The awesome Apple marketing machine will only help the overall mobile GPS market and will help it grow at a faster rate. If iPhone has built in GPS so will it competitors and SiRF will have it’s fair share of wins along with Global Locate (Broadcom).
SiRF is already providing Motorola, is being used by Research in Motion’s (RIMM) Blackberry 8800, and there is possibility of gaining Sony Ericcson as client. Apparently, Sony Ericcson stopped using Global Locate/Broadcom.
There is no question the competition has increased several folds for SiRF but there is a huge opportunity out there in the mobile GPS market.
Last week, both Deutsche Bank and Oppenheimer came out with positive comments and a ‘Buy’ rating with respective price targets of $30 and $28. With SiRF still near its lows it’s sitting nicely in that low-risk/high-reward category.
Disclosure: I am long SiRF