Dealtalk: M&A options in navigation market narrowing rapidly
AMSTERDAM/HELSINKI (Reuters) - In the digital mapping and navigation sector, options for would-be buyers are rapidly narrowing, fueled by a growing appetite for location-based services.
Hotly contested by the likes of Microsoft (MSFT.O), Apple (AAPL.O), Google (GOOG.O) and Motorola MOT.N, the sector has already been radically reshaped in recent months with the acquisitions of players such as Poly9, Quicksee and Aloqa GmbH.
With Dutch group AND (ANDP.AS) reported last week to be in exploratory talks with potential buyers, there are a dwindling number of takeover options and remaining players such as Navizon and GloPos are looking ever more open to possible bids, bankers say.
"This technology has become essential in every aspect of the mobile business," said Cyril Houri, Chief Executive at privately held positioning technology firm Navizon.
An industry source noted: "The big technology companies don't want to depend on contracts with map makers. They want the maps."
Location-based services have become increasingly popular with users as it enables them to locate the nearest banking cash machine or the whereabouts of a friend using a mobile phone, as well as personalized weather services or location-based games.
Many smaller players in the navigation industry are looking for a buyer after Google and Nokia (NOK1V.HE) stormed the sector with free offerings in the past 12 months.
The success of location-based mobile services from the two, and from smaller vendors like Foursquare, has started to attract technology industry heavyweights, including Microsoft, looking at companies whose data or technology would enable cheaper or faster positioning, industry sources and analysts say.
Having seen a first wave of consolidation in 2007 when Nokia and TomTom (TOM2.AS) splashed more than $10 billion on the two largest digital mapping firms, Navteq and Tele Atlas, focus is now shifting to the left-overs.
A company source told Reuters last week Dutch digital mapping company AND International Publishers (ANDP.AS) was in exploratory talks with potential buyers, which could lead to a deal within a year.
Buying AND, which has a market capitalization of only $22 million, would help Google or Microsoft build their own maps as the companies don't want to lower their dependency on licensing contracts.
"Google puts pressure on companies like Microsoft," said Canalys analyst Tim Shepherd. "I would not be surprised if Google is looking at it (AND)," he said, adding that some big handset vendors are also likely to look into buying AND.
Handset vendors have so far left phone maps and navigation mostly to Nokia and Google, but this week Taiwan's HTC (2498.TW) introduced its mapping offer, seen as a strong rival to offerings from its bigger competitors.
Jeff Mize, sales chief at top mapping firm Navteq, said only a few map makers will survive independently. "It's a big, big investment. At a minimum hundreds of millions and to maintain it and to add additional content (it will cost) billions.
"It would have to be a pretty large company with tremendous commitment to location. You would need to have the size, the global reach, the financial stability and financial investment capability that not many companies have."
Licensors looking to strengthen their positioning play are also the most likely buyers of positioning technology firm Navizon, whose founder told Reuters some buyers had approached the company and thought a sale would be logical.
Closely-held Navizon builds and manages database of celltowers and wifi networks, which enables rough, but quick positioning.
In a similar position is Dubai-headquartered GloPos, whose algorithm enables more accurate positioning even indoors. "The fastest way to reach the company's target of getting the technology to a wide number of cellphones globally would be to sell the technology to a major player in the ICT industry," said GloPos CEO Mikael Vainio.
In an industry struggling with weaker demand due to the rising popularity of GPS-equipped smartphones, personal navigation devices (PND) makers are left weighing their options, including strategic alliances and buyouts.
Some smaller PND makers are due to be sold or die, industry sources and analysts said, while bigger firms like TomTom and Garmin (GRMN.O) are expanding their business beyond PND devices.
"There's bound to be further consolidation in the market. There's still far too many vendors," Canalys' Shepherd said.
TomTom's Chief Executive Harold Goddijn said innovation is getting more expensive as the industry matures. "You have to work harder for less gain, which is not good if you don't have the scale or the financial resources. Pressure is quite high."
MiTAC (8122.TWO), the world's No.3 vendor of navigation devices after TomTom and Garmin, said it is in talks on co-operation or alliances with rivals and other GPS services firms as it seeks a new growth engine.
"The market is consolidating," said Egon Minar, chief of Navigon, Europe's third-largest navigations device maker. "In the end there will be four big players.
(Editing by David Holmes)