Shares of navigational device manufacturer Garmin sank 14.6% before closing down 10.2% at $107.23 Monday on news that digital map maker Navteq is to be bought by Nokia for $8.1 billion, or $78/share (full story). Prior to the announcement, the market had speculated that Garmin might purchase Navteq, its main map supplier. Speculation intensified when TomTom, a Dutch competitor of Garmin's, announced in July that it is buying map supplier Tele Atlas for €1.8 billion ($2.6 billion). Though Navteq shares closed down 2% at $76.45, call options to buy the company's shares at $80 by mid-January were active, suggesting investors believe a counteroffer is possible. "[S]ome are speculating that, in order to preserve its existing relationship, there is now a chance that Garmin might make a higher bid for Navteq," said Frederic Ruffy of Optionetics. CIBC World market analyst Yair Reiner said the Nokia-Navteq deal "could have profound implications for the navigation and wireless markets" because it could make Nokia a leader in the fast-growing navigation business and limit Garmin's influence over Navteq's design decisions. The transaction "validates this market segment and...means that the combination of TomTom and Tele Atlas is maybe a takeover target in itself," said Fortis analyst Felix Oberdorfer. Google, which is rumored to be designing a phone, could be a suitor, according to an unnamed industry executive quoted by Reuters. "If Google turns out to be a Nokia competitor in six months, it could be a worry for Google (not to have the same access to digital maps)," he said.
Sources: Reuters I, II
Commentary: Nokia to Buy Navteq • Garmin Looks Great, But… • Garmin, Navteq: Two Navigation Stocks to Consider
Stocks/ETFs to watch: NVT, GRMN, NOK, GOOG. ETFs: FVI, PTE, DSC
Earnings call transcripts: Navteq Q2 2007, Garmin Q2 2007, Nokia Q2 2007, Google Q2 2007
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