Garmin certainly needs greater control over its mapping software database, and purchasing Tele Atlas would help the company. But with its counteroffer, Garmin may have raised the stakes too much, said Mike Ippoliti, research director for telematics and automotive for ABI Research.
"The key question now is what exactly will owning Tele Atlas solve for Garmin and is it part of a forward-looking strategy or just a reactionary move?" said Ippoliti.
Buying Tele Atlas would help Garmin offer better local search, 3D-mapping and real-time traffic flow data, said Kevin Rauckman, chief financial officer of Garmin.
"Garmin's vision for the digital map of the future includes expanded coverage and improved map quality," Rauckman told analysts on a conference call. "Garmin has attracted a large installed base of over 25 million users, and we intend to capitalize on this growing community and create real-time content using Tele Atlas maps combined with Garmin's connected devices as part of a larger mobile device network."Meanwhile, Garmin disclosed that it has been steadily building up a stake in Tele Atlas and is expected to soon have a 5% position in the company. Garmin said in its third-quarter report that net income rose to $193.5 million, up from $122.97 million a year ago. Excluding the effect of foreign currency changes, the company reported earnings of 89 cents a share, up from 50 cents in the same quarter of 2006. Analysts polled by Thomson Financial were expecting earnings of 81 cents a share.