Sunnyvale, California-based Trimble believes the addition of @Road to its own MRM operation will give it a market share of around 20% and a good base to capitalize on soaring demand for a technology which it believes has only achieve 10% market penetration.
The cash and shares deal reflects the growing convergence between GPS technology and that of wireless communications that was illustrated in October when handset market leader Nokia Corp signed a cross-licensing deal with Trimble that gave it access to the company’s 700 patents in positioning systems.
Along with news of the deal, Trimble released bullish projections which forecast revenue will rise by 23% from an expected $926m to $931m in 2006 to a range of $1.14bn to $1.17bn in 2007 and @Road is expected to contribute between $85m to $85m, assuming a February completion of the transaction.
Trimble said that @Road had developed domain expertise and a field service management capability for a variety of industries, including transportation, distribution, telecommunications, cable, field service, utilities, facilities management and public works. It said this complemented its existing domain expertise in construction supply, direct store delivery, public safety and utilities.
The company quoted researchers Frost and Sullivan and forecasts that the MRM segment would grow from $1.2bn in 2006 to $2.6bn by 2010. Competition in an immature market comes from a wide variety of operators and Trimble estimated its biggest rivals ranged from Qualcomm Inc, with its OmniTRACS fleet management system to Sprint Nextel in the area of mobile devices. Trimble sees its strength as an ability to offer a complete range of MRM systems, covering field force management, field service management and field asset management.
@Road also gives Trimble a strong base in Europe as a result of its $54.7m acquisition in 2005 of BR Group Plc spin-out Vidus Ltd, which operates in the UK, Germany, Hungary, Italy, France and Spain.
Trimble has been nurturing its own MRM operation, which finally broke into profitability in 2005, and has been making money for the last four quarters. By contrast, @Road’s aggressive expansion push has led to a loss in recent quarters though in 2005 net income trebled to $27.5m on revenue 23.4% higher at $92.8m.
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It says that it will save money by using @Road’s software infrastructure that can support a large increase in subscribers with minimal additional investment and aims to make $10m in cost savings through duplications in operations.
Trimble CEO Steven Berglund said the anticipated growth rates for MRM made the combination an attractive addition to its portfolio. It reinforces our other successful investments within TMS and represents a major step in building leadership in MRM, he said.
@Road investors are offered $7.50 a share, $5 in cash and the remainder a combination of shares and cash. The transaction is expected to be dilutive to earnings in 2007, accretive to earnings before exceptional items in 2008, and meaningfully accretive by 2009. After subtracting @Road’s net cash of $79m, Trimble says the enterprise value of the deal falls to $417m.
