First, some companies were dropped from our analysis (see our 2005 report). Two were dropped because they were sold to private investors. Intergraph was sold to private investors and was de-listed from the NASDAQ stock exchange. Thales sold the division that marketed GPS equipment, which was renamed Magellan Navigation, to private investors. We added a category for LBS-focused companies, including those offering location servers for mobile applications. Among those not included in the analysis this year are Oracle, IBM, SAP and Microsoft. While their portion of the location technology market might be large, it is hard to determine whether it would contribute to their stock prices (the effect would likely be quite small).
Geospatial Solution Companies
Autodesk, after remarkable performances in 2004 and 2005, ended down 6% for the year. It serves as an indicator for the rollercoaster year 2006 was for the location technology companies. After a 15% gain in 2005, the stock dove 20% last January, rebounded in April, suffered another dive in July, and was then rebounding toward year's end (see Chart 2). In November, the company reported a record third quarter revenue (PDF) of $457 million, a 21% year over year gain. Individual sectors of the company's software business seem to be showing robust results with new seats of AutoCAD up 24% during the quarter.
MapInfo ended its fiscal year last October by reporting a 14% gain over the prior year, but investors were less than impressed and the stock barely budged, gaining only 3% during 2006. During the first quarter for fiscal year 2007 profits rose nine cents per share and the stock was buoyed by a positive outlook from Mark Cattini, MapInfo president and CEO. "We believe that market awareness and demand for location intelligence solutions continues to grow," said Cattini. The stock is up about 10% in 2007 so far.
@Road, a provider of mobile resource management solutions suffered a 21% drop in 2005, and then rebounded tremendously in 2006 by rising 40%. Clearly, the return on investment (ROI) demonstrated by deploying mobile phone-based navigation systems to drivers is a message that is "ringing" true with companies moving parts and people. This message is also getting the attention of the wireless carriers, as @Road was named by Cingular Wireless as the "Business Alliance Channel Solution Provider of the Year." @Road will not be on the charts next year but rather will be reported in some form in Trimble's results, as acquisition approval was granted on February 16th.
Location Determination Companies
Stock prices for Trimble and Garmin zoomed 43% and 70% respectively in 2006 (see Chart 3). If an investor had put $1,000 into purchasing shares of each company, that investment would have yielded $1,130 for a 56.6% total return. Throughout the year, Trimble showed steady gains. The company is clearly placing its bet on the mobile resource management (MRM) market with acquisitions of Spacient Technologies and @Road within a three week period last November. And why not? MRM offers a clear ROI realized through savings in gasoline, more efficient driver time and lower vehicle maintenance costs.
Meanwhile, Garmin is a stock market darling. After the Christmas buying season of 2005 and having posted only a modest 13% gain during the prior 12 months, the portable navigation device (PND) market took off. Volume seemed to make up for falling prices as the company capitalized on a device that provides both safety benefits as well as savings on fuel expenses. The company split its stock 2 for 1 during last summer and recently announced that its fiscal 2006 revenue popped 73% to $1.77 billion. The company introduced more than 70 new products during the year.
One company experienced an unexpected mood swing. SiRF, the leading manufacturer of GPS chips, while showing strong early year growth, tumbled badly before showing signs of recovery late in the year. The stock drifted to a 14% loss for the year, perhaps based on negative publicity from a patent infringement lawsuit and the loss of TomTom's business for GPS chips, both with Global Locate. A strong report of fourth quarter earnings and a backlog leading Q1 fiscal 2007 sales sent SiRF stock up over $5 a share on January 30th.
Geospatial Data Companies
This was a mostly disappointing year for companies that supply geospatial data to the industry. Despite growth in the PND market, both Tele Atlas and NAVTEQ were affected by the slowdown in the automotive industry and the market for on-board navigation devices (see Chart 4).
NAVTEQ posted record fourth quarter results on February 9th of $180.7 million, 54% more than the previous year. For the full year, the company realized $581.6 million in revenue, growing 17% over the prior year. Judson Green, president and CEO, reviewed the year: "We continued to grow our geographic footprint, rolled out important technology enhancements, and announced two important acquisitions [The Map Network and Traffic.com] that will expand our portfolio of content. While 2006 was a challenging year, we believe that our many accomplishments have positioned us well for continued success in the years ahead." For the year, NAVTEQ's stock was down 20%; it showed some recovery from its lows by year's end. If the demand for on-board, real-time traffic data is realized, the company's acquisition of Traffic.com will seem prescient.
Tele Atlas' share price mirrored NAVTEQ's, posting a 30% decline in share price for the year. In a statement (pdf) in late 2006, the company informed investors that it expected the European market for PND devices to expand 80% to 20 million units during 2006. Tele Atlas' penetration into the North American automotive PND market had been lower. In 2006, the company acquired PPWK GeoInvent, a Warsaw, Poland-based company that has developed a mobile mapping system using a series of still and movie cameras attached to a mobile van that captures a detailed, 360-degree digital view of a road.
ORBIMAGE Holdings, doing business as GeoEye, posted the strongest gain of any company in our survey, boasting a 77% increase in share price. The company appears on track to launch GeoEye-1, a high resolution imaging satellite that is expected to capture panchromatic images at .41 meters and 1.65 meters in a multispectral mode in mid-2007. Its IKONOS and OrbView satellites remain its primary data capture platforms. The interest in satellite imagery has captured the attention of the mass media and bodes well for a better understanding and mass integration of space-derived images in a variety of mobile and Web-based solutions.
Location-based Services Companies
InfoSpace, Openwave, and Telecommunications Systems Inc. offer location-based solutions to the mobile and wireless market (see Chart 5). InfoSpace provides a mobile concierge product called InfoSpace Find It! which the company claims "is the first all-in-one GPS-enabled mobile local search application." The company is emerging from a restructuring effort and posted a 9% gain in revenues for fiscal 2006 to $371.7 million, reflecting a $31.8 million increase over the full year 2005. This caused a net loss of $12.7 million for the year which included restructuring charges of $62.3 million. The stock declined 21% for the year.
Openwave offers components to help carriers build location-based applications and support provisioning and billing systems. It was not a good year for Openwave, whose share value plummeted 47%. Its second quarter, ending December 31st, showed that its sales bookings were on the rise, but quarterly revenue was down $20 million compared with the same quarter last year. Openwave will try to capitalize on the growth in personalizing the mobile user's experience, which would include an understanding of the user's demographic composition. Investors pummeled Openwave's stock through the middle of last year, though it has risen steadily since.
Telecommunications Systems Inc. has developed a location server for mobile applications but focuses more on text messaging services. Verizon Wireless is a huge client. Despite continuing losses from operations during its fiscal year, the stock staged a 41% gain for the year. At 3GSM in early February of this year, the company rolled out its Xypoint Secure User Plane for Location (SUPL) Server, which, according to the company, "conforms to the standard for Internet Protocol (IP)-based Assisted Global Positioning System (A-GPS) location as defined by the Open Mobile Alliance." The SUPL will be targeting the navigation, fleet tracking and mobile marketing applications.
Because I own stock in some of the companies mentioned above, I've watched with more than an editor's perspective on the market. I'm bullish. But for now, I'll keep a skeptical eye on the situation. Microsoft and Google are launching a broadside attack on geospatial solutions providers. The mass appeal of general purpose programming languages like XML and enterprise architectures such as service-oriented architecture (SOA) makes it possible to develop niche geospatial applications by the many, not just the few. The LBS solutions are seeking a market. There are good reasons to adopt them in industries like mobile resource management, but it will take better education at the executive level to make these executives invest in location technology and forsake the need of other priorities. Some companies do not believe that location-based information is valuable. For example, Apple Computer failed to integrate location-aware hardware in its new iPhones.
I see investment money flowing into the data and content companies as a supporting base of activity to launch applications. These companies hold the key. NAVTEQ, Tele Atlas and GeoEye all stand to benefit from an increased awareness of geospatial data. The navigation market is poised to jump in 2007, and watch the PND market continue to grow. Both Garmin and SiRF also stand to benefit while Trimble has placed a stake in the ground in the MRM marketplace and will try to build on its strengths.
In general, my money is on the entire market to continue to grow. It's just hitting its stride.