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Garmin Hits Trouble Spot

Garmin's options may have been further reduced by the fact that building its own maps database is an expensive option.

"It is an exceedingly difficult task to build the maps from scratch," said Cliff Pemble, chief operating officer of Garmin. "It's what we call technically possible, and there's certainly new technology that can be brought to bear in doing so, but it's a proposition that's got high risk from an execution point of view, and a very long time schedule."

Even if Garmin ultimately beats out TomTom for Tele Atlas, analysts are worried about the ease of integrating such a merger.

Garmin has relied on Navteq more than Tele Atlas to supply the mapping data. TomTom is culturally closer to Tele Atlas, says Sutherland.

Garmin has tried to play down the transition and has said that if it is successful in its bid for Tele Atlas, it anticipates over the next 12 to 24 months it can wind down its relationship with Navteq and move some products to Tele Atlas.

That's the dilemma for Garmin: win the battle for Tele Atlas and deal with perhaps years of integration challenges, or lose out to TomTom and face investors' wrath as the company's position in the market erodes.
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