Newsflash: Dateline Europe
The European Commission green-lighted a merger between GPS maker TomTom and digital-map supplier Tele Atlas this morning. What's more, the EC imposed no conditions on the union, concluding that "the presence of an upstream competitor" -- NAVTEQ
The EC decision, when combined with U.S. regulatory approval granted last year, clears TomTom to proceed with its purchase, leaving only the Nokia
Meanwhile, back in the States
Which is all well and good for TomTom, of course. But as neither TomTom nor Tele Atlas trades on U.S. stock exchanges, I rather suspect you're more interested in what effect this news will have on locally owned and traded Garmin
It's both. On the bad-news side, Garmin must live in a world where at least one, and probably two, of its chief rivals in the GPS device space own their own mapping providers, whereas Garmin must continue buying map data from someone else. It's a tricky situation, but one that Garmin made much easier when it inked a six-year extension on its supply contract with NAVTEQ last year.
On the flip side, look at what TomTom really got this morning: Permission to overpay for Tele Atlas. As I outlined back in December, TomTom will need to come up with $4.2 billion to take out Tele Atlas. Considering its limited resources, TomTom will need to sell more shares (it's already planning to float 8 million new shares) and/or take on debt in order to finance its purchase.
Either action will weigh on TomTom's business for years to come, while cash-rich Garmin remains free to be the more mobile competitor.
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