Is NVT A Better Investment Than Garmin?
It is a surprise to me that GRMN's Q4 numbers beat all the estimation in a big margin. However, I still worry about the competitions from low cost manufacturers and future margin erosion when GPS price comes down in a big way.
In my opinion, Navteq (NVT) - the digital map data company that supplies maps to every GPS maker as well as Google Maps, Yahoo Maps, Microsoft Maps (Local.live.com, Streets & Trips), MapQuest, Zillows, ...... is a much safer investment with better reward/risk ratio because, beyond all the advantages GRMN already has:
1. No, or very little, price erosion because NVT's digital maps' already low margin and relatively small portion in the price/cost structure of GPS devices;
2. NVT is a monopoly in its business and basically no significant competition to worry about like GRMN, Tomtom, and SiRF (the chip maker) face, and the entry level is very high;
3. When in-dash GPS becomes more ubiquitous and low cost GPS devices - mobile phone, PDA, and many other portable devices inevitably crash the GPS, Navteq map sales volume and profit will be sky-rocketing, and best of all, every additional sale contributes almost 100% to its profit because there is no additional cost for its data and software.
The only problem - Probably due to the lack of competitions, NVT seems to become less exciting with little shorting activity. Of course, execution is everything. |
