Arun,
While we are waiting for the arrival of lucrative markets, your Boutique analysis strikes a nerve. We have been operating under the assumption that the high-end supplier in a new field has the advantage over the commodity-end supplier, since it should be easier to get economies of scale on high quality than to make significant qualitative improvements to commodity-level items. That means that the Trimbles of the world should be able to race down to the mass market, value-added, high-enough profit areas before the Garmins can race upward. I think this is generally true.
Of course, it presupposes management that can reach economies of scale and identify these large markets. To date, Trimble seems in position in car navigation (although it is a few years off) and telecommunications timing. To our continuing frustration, Trimble seems basically AWOL in the AVL markets. In other areas, as you mentioned, Trimble designs for specific customers at high investment costs. This raises a few questions:
(1) Are there markets out there right now that Trimble can race to? Or are we awaiting the winner of the race for a better chip?
(2) Does the boutique approach yield some benefits down the road in customers being "locked in" to Trimble products? Are all these custom applications building an expertise base in TRMB that will be applicable to future custom designs (i.e., an "off the rack" solution)?
(3) If you are right about the high investment, high margin approach, does that explain why Trimble -- already personnel intensive per sale -- is reluctant to open new offices in distant parts of the world?
(4) If the missing link is manufacturing capacity, which seems to be a reasonable conclusion, does this imply a future buyout . . . given that TRMB seems reluctant to hire on outsiders with this specialty? |
