2010-2011 Review of Publicly Traded Location Technology Stocks

By Joe Francica

Ed. note: This is a two-year review of publicly traded stocks that impact the geospatial technology sector. This is a long-range view of what’s been going on in the business of location. Disclosure: I hold positions in ORCL, IMP and NOK and recently disposed of positions in GRMN and TSYS.

“Do you want to go faster? Do you want to go really fast? Then hold tight!”

When I was a teenager, I used to go on a whirling, spinning, roller-coaster-type ride called “The Himalaya” located at one of the piers at the Jersey Shore (yes, THAT Jersey Shore). The DJ who played rock music while we went spinning in circles used to ask that question as if he wasn’t sure why we paid money to be there in the first place. It was a tease, of course, as we screamed to “go faster!”

The stock market over the last two years has teased us onto a similar roller-coaster ride, providing all the excitement and consternation of the amusement park kind. Except it hasn’t been nearly as much fun. What looked like a solid foundation for the geospatial technology stocks at the end of 2009 has turned into quicksand. For companies focused on geospatial and those in the mainstream information technology (IT) sector, the results have been disconcerting with few exceptions. As Figure 1 demonstrates, the majority of stocks that showed some promise in 2010 reversed course in 2011, with a few landing at almost the same position in which they ended in 2009. Others simply continued the slide that began two years ago.

Yet, all the prognostications for the general technology sector heading into 2012 are guardedly bullish. Financial analysts, aka the “talking heads” at CNBC and others, are calling for strong performances for bellwether stocks like Cisco, IBM and Apple. But, with a huge question mark in Europe and a build-up of lactic acid for the sprinting tiger in China, you’d be wise to hold on tight for what could be another wild ride in 2012.

Changes From the 2009 Report

The changes to the report this year include the elimination of InfoSpace from this analysis, as it is focusing less on delivering location-based solutions. Added to the report this year is the European Aeronautic Defence and Space Company N.V., or EADS, which is the parent company of Astrium Services, which acquired Spot Image in 2008. EADS will be included in the Earth Observation sector, which has been renamed from the more verbose title of Satellite and Remotely Sensed Data Providers. Thales Group, a multidisciplinary, multinational corporation, has also been added because of its extensive portfolio of geospatial products and services. It more closely matches the products and services with Hexagon and other large geospatial technology companies. Descartes Systems and ClickSoftware were deleted from the report as their market capitalizations (less than $500 million) and niche solutions, which only peripherally integrated location technology, did not match those of the other companies in the Geospatial Technology Company group.
 

 Figure 1

Two-year Returns

Figure 1 shows the stock price returns for each company in this analysis for 2010 and 2011. As each company is reviewed below, numbers in parentheses refer to the two-year stock price performance, with the call symbol in block parentheses. Only four companies ended the two-year period with positive returns.

Stock Sectors

Earth Observation (Refer to Figure 2)

Data fuels geospatial technology. Companies in this sector provide remotely sensed imagery that supports the base mapping and location intelligence applications that are foundational to GIS. Earth observation data are resurgent in geospatial because of better availability (e.g. “cloud”) and more differentiated products (e.g. higher spatial and spectral resolution) for analysis.

 Figure 2

Geospatial Technology (Refer to Figure 3)

Companies in this sector supply a broad range of hardware and software to the global engineering and government markets for geospatial products. Most of these companies, while diversified, provided a close approximation of the overall health of the geospatial technology market.

 Figure 3

LBS and Mobile Device Manufacturers (Refer to Figure 4)

It’s difficult to characterize the location-based services (LBS) marketplace with only five companies. Because of the numerous startups, spinoffs, acquisitions, failures and all the other gyrations of an emerging technology, it’s nearly impossible to say that these are the bellwethers that indicate growth or maturation. But it’s the best we have for publicly traded stocks so use the information based on that caveat. Still, these are very important companies to watch as mobile LBS market grows.

 Figure 4

Enterprise IT (Refer to Figure 5)

The companies in this sector have made significant investments in geospatial technology and yet it comprises just a small segment of their business. However, because each has dipped its big toe into our space, they are important to inspect as location-based information becomes increasingly integrated into mainstream information technology applications. Each can location-enable many applications in its arsenal of software solutions. Not included in this section are companies like IBM, Google and SAP. Each has partnered with other companies in this report to supply them with technology or data and hence represent a layer “once removed” from the geospatial ecosystem.

 Figure 1

Conclusions

This report remains incomplete in defining the overall health of the geospatial marketplace because of the absence of private companies like Esri and Bentley Systems. So, based on the information above, is there a conclusion to be drawn from these stock prices over a two-year period? Taken as a group, the growth prospects and the market risk are vulnerable to economic factors especially because geospatial technology products are used for infrastructure projects. Companies like Autodesk, Hexagon, Thales, Trimble and others depend on a growing global economy. Geographically, North America appears stagnant, Europe’s in trouble, Brazil’s growth has slowed, and China has tapped on the breaks. However, innovations in indoor positioning, real-time traffic and the fitness sector will drive LBS. Integration of location technology with mainstream enterprise IT, such as business intelligence, and analyzing unstructured, location-based “big data” from social media and volunteered sources will have a profound impact on delivering location intelligent decisions. The quick stride we’ve seen over the past few years has certainly fallen off pace, but the interest in using location-based information has not abated.