It's been a little more than a week since digital mapper Navteq
On Thursday, Feb. 8, after the market close, Navteq did indeed report its numbers for fiscal fourth-quarter and full-year 2006. And if you've been watching the stock's performance since then, you already know: Wall Street was not pleased. What you may not know is why -- and that's what we'll discuss today.
On the surface, there was very little to quibble with over Navteq's Q4 performance. The company "beat earnings" and "beat revenue," right on cue. For the year, this provider of electronic maps to everyone from Ford
Two trends in sales caught my eye in the earnings report. According to Navteq, foreign sales growth caught fire in the fourth quarter, rising 34% year over year, as compared to the 14% foreign sales growth posted in fiscal 2006 overall. In the Americas, however, the opposite came to pass. Fourth-quarter sales were up a mere 17%, slowing significantly from the 25% growth posted over the course of the full year. But honestly, I don't see how these trends could have scared investors into selling. Foreign sales already make up more than 62% of Navteq's sales. The fact that its biggest revenue stream is the one getting bigger, faster, seems to me a plus rather than a minus.
... and troubles
More worrisome is Navteq's prediction that it will average 100 million diluted shares next year. That suggests annual dilution of 4.5%, breaking the 3% ceiling I like to see. Moreover, the firm's suggestion that expensing these options will cost it $18 million in profits under GAAP means that out of every $8 in profits this firm earns, it skims off a buck and hands it to corporate insiders. As an outside investor, that would worry me very much. Maybe even enough to sell an otherwise fine business.
What were we hoping to see out of Navteq? Here's a hint -- significant options dilution wasn't on the wish list. See the complete forecast in "Foolish Forecast: Unfolding Navteq."