Having enhanced its monopoly position in the digital map business, revenue, earning, and outlook – all beat street estimation. Particularly the outlook guidance is conservative for a future positive surprise.
During the 2006Q4 earning report and conference call:
* Among the three sections - dashboard, portable device, and wireless: Dashboard grows steadily even though automobile sales hit bottom.
* Portable devices volume tripled; Made the first All-European map release with Tomtom (taking business from TeleAtlas because of better quality)
* Won wireless business with Verizon
* Solidified its business by selling its navigation software division and purchasing two companies, none of revenue generated by these purchases and the sale of the software business yet to contribute in 2006
* Current model is based on 1 euro = $1.27. Each penny higher euro equals $1.3 (?) million revenue increase
* No price erosion with dashboard sales
* No price erosion with maps for portable devices even though volume sales tripled and PDA price drops.
* Cash position increased $100 million reached $322.5 million despite the two acquisitions
* When twice asked about market share and competitions: We have been in the business for 20 years. The entry barrier is high, and we are very happy with our current position, but we don’t give out that numbers. Future trend? We don’t see significant changes.
On the positive side:
* Huge potential with GPS cellphone
* Increasing sales in Europe with the newly available full-Europe coverage
* Potential revenue in Japan, China, India and South America
* Cheap GPS manufacturers enter the market making GPS price come down rapidly with sales volumne tripling or quadrupling.
* NVT map only makes less than 10% of the total GPS sale price. When GPS – portable, PDA, mobilephone, on-board … – price inevitably drops, map price does not drop proportionally; When a $900 GPS price comes down to $300, the map price might come down only from $80 to $70, but the number of unit sales may triple or even quadruple – NVT is an investment better than GPS makers such as Tomtom and Garmin in that sense.
* Every additional map sale adds 100% profit to the bottom line – almost no additional cost to NVT – again, an investment better than GPS makers such as Tomtom and Garmin.
* Compared to SIRF (the GPS chip vendor), both NVT and SIRF take 90+% market share, but SiRF is under constant pressure of new competitions from GlobalLocate, and many others – large or small chip makers.
Worry:
The lack of competitions – a problem every business wants to have – makes the management less motivated to improve and grow, thus making the stock less exciting. |
