KUHN CAPITAL Saturday, February 24, 2018
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Navteq + Traffic.com = ?


Navteq, the Chicago-based digital mapping juggernaut whose data powers Mapquest.com and many other geo-based applications, bought Traffic.com in November for about $170M.

Thatís more than 60% higher than Traffic.comís marketcap before the deal was announced, and the equivalent of about three times target revenue. Calculating the sale price as a multiple of EBITDA is irrelevant in this case: Traffic.com has consistently lost money over the last three years with only recent sales growth. Sound like a good deal?

Actually, maybe. Traffic.com builds automated facilities for government agencies that monitor real-time traffic movement on major arteries. It can sell the proprietary data generated by these facilities to whomever. Traffic.com information will likely become more valuable as road congestion worsens and as wireless communication proliferates.

Buying Traffic.comís data-gathering network lets Navteq continue to integrate the data into its products and services, and block competitors from doing the same. The risk here is that a cheaper data collection technology emerges that Navteq canít control. One example might be exploiting the GPS units in cell phones, though this approach would probably raise privacy concerns.

Despite Traffic.com's rich price, the marketís reaction seems favorable: Navteq stock is up about 12% since the transaction was announced. But as is typical of many deals where the value of intellectual property dwarfs the targetís physical assets (Traffic.comís balance sheet shows property, plant and equipment worth only $24M), investors wonít know for at least several years if Navteqís management team was brilliant or badly misinformed.

Welcome to the information age.

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