NGPS-interesting article here
<<Mention the name NovAtel to an Albertan and there?s a chance you?ll be sucker punched. Back in 1993, the government-backed cell phone manufacturer collapsed?and provincial taxpayers were stuck with a $566-million bill. But Doug Reid, a global positioning systems (GPS) specialist, thought NovAtel had the potential to be a lot more than just a money pit. He knew that it owned top-notch global positioning technology. That?s why he quit his job at Leica Inc. in 1995 to become head of NovAtel?s global positioning group. Now he?s the Calgary-based company?s president and CEO and things have never looked better.
NovAtel Inc. (Nasdaq: NGPS) is the world?s fourth-largest supplier of GPS. Instead of catering to the crowded consumer market, where more than a score of competitors fight to sell cheap car navigation systems, handheld recreational devices, cell phone locators and so-called asset trackers that plot the whereabouts of trucks and trains, NovAtel targets the high-end, high-margin aviation and surveying market.
Judging by estimates prepared by the US GPS Industry Council, NovAtel is in the right business. Over the next three years, the aviation market is expected to grow from US$300 million to US$710 million. But NovAtel?s real selling point is its technology. "It?s absolutely among the very best," says G‚rard Lachapelle, head of the department of geomatics engineering at the University of Calgary. "It?s not five times better than the second best, but it?s absolutely outstanding."
It?s so good that, since 1996, the US Federal Aviation Administration has awarded NovAtel a series of contracts to supply it with GPS base stations that will direct air traffic across the US. To date, the company has collected about $24 million from the sale of 200-odd stations to the US. But even more impressive is the fact that tiny NovAtel beat out industry giants Trimble Navigation Ltd. (Nasdaq: TRMB) and Magellan Corp., a subsidiary of Orbital Sciences Corp. (NYSE: ORB), for the job. And the company just keeps on winning contracts. Aviation authorities in Japan and Europe are also buying NovAtel base stations, which sell for $100,000 a pop.
When Reid joined NovAtel, the company?s GPS business had been reduced to selling circuit boards to other companies that used them as the heart of their own GPS products. Reid quickly moved NovAtel into end-user products and the aviation market. By 1998, this change in direction proved successful enough that Canadian Marconi Co. (TSE: CMW), since renamed BAE Systems Canada Inc., paid $68.5 million for 58% of the company. (Last November, Marconi?s parent, General Electric Co. PLC, merged with British Aerospace PLC to create BAE Systems, the world?s second-largest defence contractor.)
Now, in addition to the aviation market, Reid says his company is developing systems for use in unmanned vehicles and mapping applications. According to Reid, there?s a growing demand for guidance systems in military reconnaissance vehicles and for machine controls in construction vehicles, mining equipment and other robotic applications. Industry research suggests that the value of these markets could reach a whopping US$2 billion by 2003. "We are expanding up the food chain, looking for niches that are profitable and require our technology," says Reid.
The only thing that was missing from this recipe was an efficient means to sell its product. So this past August, NovAtel hooked up with Tokyo-based Sokkia Inc., the world?s top distributor of surveying, measuring and mapping equipment, and created a company called Point Inc., which will develop products to be sold through Sokkia.
With all this good news, you?d figure that NovAtel?s stock would be flying high. But at recent levels, the company is trading only at about half its 1997 IPO price of US$7.50. NovAtel isn?t alone in suffering a share-price slump. A number of companies in the young GPS industry posted losses last year as heavy R&D spending, combined with intense competition, eroded profit margins. But a wave of consolidation, including BAE?s purchase of NovAtel and Magellan?s acquisition of Ashtech Inc., has reduced competition in the high-end GPS market.
Albertans still shudder at the sound of NovAtel?s name, but Reid points out that the company has a wonderful reputation everywhere else in the world. "We have less competition now but our competitors are bigger," Reid says. "And although we?re small, there are phenomenal growth opportunities.">>
canadianbusiness.com.
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