Mitac Acquires Magellan

On December 15 privately-owned Magellan announced having agreed to sell its RoadMate, Maestro and Triton PND and Outdoor GPS consumer product divisions to Taiwan-based MiTAC International with the transaction expected to close in January 2009. The acquisition relates to all Magellan’s assets such as the brand, software, IP, staff, customers, and the channel network. The agreed price is capped at $96 million, a lot less compared to the $170 million Shah Partners paid in 2006, though that did include the survey product line, which is not part of the current deal. Mitac acquired Navman for $16 million in 2007.  

 

The news about the Mitac-Magellan and Vodafone-Wayfinder deals is an omen for more consolidation activity to come in 2009. The purchase of Magellan does make sense as it will give Mitac a better chance to become a strong 3^rd PND vendor behind market leaders TomTom and Garmin which are increasingly dominating the PND market with a combined market share of more than 70%. Mitac already announced it would miss its target of selling 8 million PNDs in 2008. However, the acquisition of Magellan will now make it possible to meet the 2009 target of 10 million PNDs.

 

Mitac buys a still strong, though declining, US PND brand, more than anything else. Though Magellan’s market share is decreasing rapidly, owning the brand is an important asset for Mitac in a consumer navigation market increasingly relying on Consumer Electronics branding and distribution presence. With Magellan recently largely having withdrawn its brand from the European market, the main opportunity will be to reposition and strengthen the Magellan brand in the US compared to TomTom, Garmin and even Navigon towards a clearer, more authentic and unique proposition for the end user.

 

However, the biggest challenge for Mitac will be to manage three brands, positioning its international Mio brand next to the more regional brands Navman and Magellan. In the US it is not clear how the Magellan and the recently rebranded Mio Moov brands will coexist.  It would be logical to use the Magellan brand for PNDs and the Mio brand for GPS handhelds and smartphones. At the same time the Magellan Outdoor GPS brand retains its global appeal.

 

Another intriguing aspect of Mitac’s acquisition is the possible consequences on its connected PND strategy in the US, which is currently based on partnerships with Qualcomm and Microsoft. While both Mio and Magellan announced connected PNDs earlier in 2008, none of these have made it to the market yet, at least not in the US.   

 

The acquisition of Magellan’s outdoor Triton GPS line also provides an interesting opportunity for Mitac, especially as it is already active in the GPS-handheld space. However, it will be far from easy to challenge Garmin’s overwhelmingly dominant position in the outdoor and fitness markets.