Will they Make Up their Mind Already?

First traders were upset that Garmin may be left standing without a chair when Nokia made an offer to Navteq and the stock sold off more than 10% earlier this month. Now, while reporting great earnings, they announced an offer for Tele Atlas that is 15% more than Tom Tom's proposed price and the stock sells off again. Which do they want? They can't have it both ways (well, I guess the big money certainly can, but it is illogical).

Do they want a merger or not? It seems they want a merger, but they don't want to pay too much for it. Investors are afraid that a bidding war between Tom Tom and GRMN may result in a bad deal in which the winner pays too much and the loser is with out a chair.

I am firmly in the camp that Garmin doesn't need this deal, but I am also OK if the Tele Atlas deal goes through. GRMN will get the map data regardless of what happens. They have a long term agreement with Navteq that gives them access to their content for the number of years necessary for GRMN to build it's own content (estimated by some as a $700 million effort).

Last time I checked, $700 million was less than $3.3 billion, but I guess that is the mark-up you must pay to have the data now. Some say that having the content in-house will allow for better integration with Garmin's software, giving them a leg up in what is starting to become a cut throat marketplace. That is why I am OK with the deal.

The bid for Tele Atlas also doesn't give Tom Tom a free pass. GRMN has a little more available muscle than Tom Tom, so Tom Tom will really have to stretch to make a better offer. As far as I see it, GRMN wins with the deal (as it stands) and also wins by making Tom Tom pay up (if they lose due to a counter offer).

So what to do now? The stock took a beating today, but Garmin reported earnings of $193.5 million, or 88 cents per share, compared with $123 million, or 56 cents per share, a year ago. This was above the analyst estimate of $0.81 EPS. They also raised 2008 guidance. Investors should be dancing in the streets. Instead they are worried beyond belief.

I nibbled today (a very small nibble) and bought a few January calls (when the stock was trading around $110 this morning), but then quickly decided to wait for the Fed announcement and then wait for a bottom before buying more. This sell off may last a couple of days and there is no point being a hero and catching the knife. I expect investors to get comfortable with the deal over the next week and the outlook for GRMN is still very strong.

It reminds me of the story of the young bull and the old bull. Let's find a bottom and then, well, you know how the story with those bulls end....