JF: Mike, what precipitated the merger discussions with Tele Atlas (TA)?
MG: Tele Atlas approached GDT to find out whether there would be any interest from a GDT perspective or a GDT shareholder perspective to do a transaction to combine the two companies, and I think our shareholders, while nobody was out looking to shop GDT, everybody has their price, and we said we would be interested having conversations.Although we were not actively looking to be sold, we were comfortable with our strategies and our plan as they were unfolding, but as we got more involved in more conversations with Tele Atlas, it became pretty clear that Tele Atlas was prepared to make a compelling offer to our shareholders and the decision was to go ahead and accept that offer.
JF: Back up if you would for me just a moment, who the shareholders
were in GDT.Was the R.L.Polk Company still actively involved?
MG: Absolutely, the Polk family; the family, not the corporation. In June 2000, we actually did a tax-free spin-off of GDT to the shareholders of the corporation.So, in June of 2000, GDT was no longer owned by the corporate entity Polk, but rather the shareholders of Polk because it was "dividended" out to the shareholders.Practically speaking, what that means is that the Polk family still controlled GDT, just like they control the Polk Corporation.But it was not a corporate ownership, but rather a whole bunch of individual shareholders.
JF: Any other shareholders besides Polk?
MG: Minor.Practically speaking, the Polk family controls GDT.
JF: Was this tender offer from Tele Atlas made from its international
headquarters or from its North American operations?
MG: It actually originated this time around through the North American people.It was really George Fink, the chief operating officer of the whole company, but really focused on the U.S.side...little discussions took place in terms of the merging of the two North American operations of the company.And the discussions and the activities all took place primarily through the U.S.-based personnel as opposed to GDT talking or negotiating with people in Europe for the most part.George was really the primary point person in terms of this offer.
JF: But as it stands right now, you will be taking over as managing director for the whole North American operations?
MG: Yes, that's correct.The announcement and intent is that I will be the chief operating office or the managing director of the North American operations for Tele Atlas when the transaction is consummated.
JF: What will George Fink's role be in the new entity?
MG: George's role will be the president and chief operating office for the global enterprise.And primarily, he will have the managing director of Europe and the managing director of North America, myself, reporting to him.And he will be the president and chief operating officer of the global Tele Atlas operation.
JF: In terms of focusing the North America operations, there seems
to be a war going on in the streets; you're down to two primary players
in the digital street network market, you and NAVTEQ.What is the focus
of the combined operations? Will it be LBS, Telematics, GIS, or all three?
MG: I think it will be without question all three.I think what we bring to the table from a merger standpoint is GDT's focus and ability in the GIS and geographics marketplace, along with some of the inroads we've made in the nav (navigation/telematics) marketplace with DENSO as a partner and we layer on top of that Tele Atlas' reasonable strength over in the navigation marketplace in Europe; their recent win with Pioneer in US, and their personal nav activities with people like TOM TOM and Navman, and you start getting a pretty solid; a very solid competitor across the markets of telematics, navigation, and the GIS marketplace, which is really one of the primary premises behind the transaction.
JF: Are there any "cash cows" in this business? They all seem
a bit tentative in their growth prospects.
MG: No.I don't think there are a lot of "cash cows" in this business.Probably the most mature market, as you know, is the GIS side, but I'm not sure...I wouldn't characterize the GIS side of the business as a "cash cow."
JF: It seems like the market is too competitive and I don't frankly
know how you guys make money because there is so much downward pressure
on the price of digital street data.
MG: And I think that is one of the reasons why you want to come together and get as much economy of scale as you can.
JF: As far of the LBS market is concerned, is it still "pie in
the sky" or is there active movement among the telecommunication companies
to engage location technology providers?
MG: I think we're starting to see some active movement.Certainly there is not a lot of revenue changing hands in that arena yet, but I think you're starting to see people come together with more and more concrete pilot's that you're going to see in the marketplace in the next few months, but "pie-in-the-sky," yes, I would still call it very much on the leading edge; trying to figure out what the right business model is to make money in the LBS wireless marketplace.But I do believe in this go around, in terms of the telcos and wireless, I think they're getting more serious about it, but certainly not a lot of money changing hands yet.
JF: In telematics, NAVTEQ seems to have a dominant position there,
your deal with DENSO notwithstanding.What are going to be the competitive
factors for the combined company that are going to win more of that business?
MG: I think a couple of those things.Number one, the ability to offer a alternative worldwide player, which is what a Tele Atlas/GDT will offer people.I think Tele Atlas has some reasonable strength in the European players.They won the Pioneer business, which is a pretty major play for Tele Atlas side, and you combine the GDT/DENSO relationship with the Tele Atlas/Pioneer relationship, you start to get an alternative player from a competitive standpoint.I think the blending of GDT's business model, which has a very heavy compilation focus, together with some of Tele Atlas' historical navigation strengths, particularly over on the European side, and additive with Pioneer, you starts putting some good plays out there against a NAVTEQ competitor in the US and Worldwide.
JF: The GIS market has really changed over the last five years
for sure.Like you say, it is a mature market.Is it still a growth market;
is there incremental growth?
MG: Yes.If you take a look at people like a MapInfo, an ESRI, a Group 1, even an ADVO, quite frankly, I think their businesses are still growing, certainly not at a 20/30/40 percent growth rate but you're seeing nice single digit growth rates in these companies.Certainly, while it is a maturing side of the business or market we are certainly seeing growth in our royalties and revenue streams from that core GIS marketplace.I think another thing that's happening in that marketplace is you're starting to see a little bit more of the "buy vs.make" scenario among the utilities and even some of the government players.So, I still think there is some nice growth in that marketplace, though not the meteoric growth that people talk about, or think about, or hope to see in the telematics, nav, or LBS marketplaces.
JF: Do you now see some of the local governments coming to you
to begin their base map compilation?
MG: Interestingly enough, not so much the local governments, but the regional and/or state marketplaces, we've seen some pretty good traction in working with and playing in to the state government marketplace, and being that interface point between local marketplace and the state government, and utilizing a common mapping infrastructure for a communication infrastructure for all their planning and their systems...So, not so much the local, but at the state and regional level, yes.
JF: Do you feel like you have to change your business model at
all, because of all of what you just said? Do you still view the combined
Tele Atlas/GDT company as just a street centerline data company or something
MG: I think there is a very nice business to continue be had in terms of the street centerline business and ancillary data, in terms of boundary information, customized analytical data that goes along with that, and the infrastructure to be able to put in additional dynamic content on top of that map such as Tele Atlas does from a traffic standpoint, such as enhanced and increasing POI (points of interest) type information to serve off into those marketplaces.So, I still think there is a great, great marketplace for that core street geography layered on top of it your analytical boundaries that you need to have for your various marketplaces such as insurance and telco.And then layer on top of that your dynamic content of things like traffic, weather, POI, and those types of things and I think it is a good business model where money can be made.
JF: Yes, that's the answer I was hoping to get from you because
it seems like while the POI data has the potential for the most growth,
it is the dynamic real-time data, like traffic and weather, where there
is the most potential for a company like yours to try to make strategic
relationships with companies that provide that, or as another potential
MG: Exactly, and I think that's another piece of that dynamic content side that made an awful lot of sense for a GDT and TA to come together, because, TA has gotten a lot more experience and activities in that dynamic content then GDT has historically.
JF: After the merger, is it the intent to bring much of the production
facilities up to Lebanon (New Hampshire) or will they stay in Menlo Park
MG: After the merger, the intent is to migrate toward a GDT build-maintenance and processing strategy rather than a Tele Atlas-Menlo Park strategy; in fact, Tele Atlas has begun unraveling and unwinding that activity Menlo Park already.
JF: Will there be any kind of presence in Menlo Park?
MG: For a long period of time, certainly for the foreseeable future, there will be a presence in Menlo Park and probably forever, there will be at least a sales and marketing and technical support facility forever. And certainly, for a period of time, a year or two years, there will be some sort of presence out there as we learn how to pull all this stuff together.It is not going to be where the transaction closes, and you flip the switch and the door closes in Menlo Park; that's not the game plan at all.
JF: Any anticipated date that you all hope things will come together?
MG: Well it all hinges on the DOJ (Department of Justice) approval of the transaction, which we hope to have sometime in the next few weeks. Assuming that occurs, we are hoping to have a closing of the transaction sometime in the July timeframe.
JF: Just on another topic.Because Microsoft is now in this game
and offering a very cheap product where data looks very cheap, is there
a threat there or an opportunity?
MG: Certainly, from our experience, and we're one of the players that have worked with Microsoft, we have typically seen that that is "additive" to the market, rather than replacing in the market.We have typically found, at least the customers we go for, in terms of our enterprise and Fortune 500-type customers, I don't think there is anyone who has stopped licensing GDT data because they went off and took a MapPoint solution.I think they tend to use MapPoint for some of their applications and utilization of a GIS platform, and they are still licensing GDT for other types of applications. In addition, I think the Microsoft platform has opened up the marketplace for a lot of people who would have never purchased GDT data anyway.So, we've certainly seen that play as an additive play rather than a substitution play.I think we probably would have liked to see the number grow faster. You're right, it is a very low price point.The model that everybody had in mind is that you make it up by numbers of users.And I'm not sure the hundreds of millions of users have actually materialized for those price points.But certainly I haven't seen or it hasn't felt to me as a substitution market that we need to be concerned about.
JF: Mike, that's all the questions I have and thanks so much for taking the time to speak with me.