Sunday, September 16, 2007

GPS Enabled Cell Phones: Find Friends/Businesses on Map, Emergency 911, and opportunity for SIRF, GOOG and others

GPS Chips inside Cell Phones: New Applications and How to Profit.

1. Find Friends on Map

Want to find friends and family on the map? It's easy.

There is a well funded startup called Loopt which does just that. Using selected cell phones with GPS (Global Positioning System) capability, mostly from Boost Mobile, Sprint, and Nextel, Loopt can let you find friends and family on a map (with their approval), for a subscription fee.

This Mobile Networking Application is just the beginning of location based services which take advantage of GPS chips inside a cell phone. This service allows users to be able to interact with other users based on geographical location.

2. Let Emergency 911 Responders Find People

Another important mobile application of the GPS chip in a cell phone is Emergency 911 service. With GPS chips inside cell phones, now, Emergency 911 Responders can easily find the location of the person who needs help. This will save many lives!

Aside from companies who setup the E911 system, companies which provide GPS chips to cell phones, such as Sirf Technology (SIRF), who makes the GPS chips, will benefit, as well as companies such as Navteq (NVT) who provide digital maps, which are especially useful to GPS location based service applications.

3. Connect Business to Mobile Users

Another important application of GPS chips on cell phones involves connecting users to businesses and advertisers. With the original Navigation Device (non-cell phone) from companies such as Garmin (GRMN) or Tom-Tom (TOM2.AS), one could use the device to search for a local business such as a restaurant, hotel, or gas station, even if that business is a few miles away from a major freeway. Businesses that have their information embedded in these Navigation Devices will see increased business and revenue. Any company that profits from having businesses pay to be included in the Navigation Device Search function also would benefit.

Now if this Portable Navigation Device would be extended to GPS enabled cell phones, this market would explode. Now, if a GPS enabled cell phone could somehow connect to a central information center to help connect mobile users to particular business, that would allow companies who provide local business information to mobile users to profit.

A company such as Google (GOOG) would profit. They already have Google Local Search, Google Maps, Internet Search, and mapping services. If a mobile user could interact with Google, Google would read the mobile cell phones GPS location, and connect the mobile user with businesses near that area.

Profit from GPS Chips on a Cell Phone

The GPS Chip on a Cell Phone is still in its infancy. Sirf Technologies (SIRF), previously cited some problems as a wireless customer was slow to ramp up to their GPS chip in a cell phone. Sirf (SIRF) has recently bounced back as Motorola, the #2 cell phone maker, will be using Sirf's GPS chips in their cell phones.

Sirf currently has a 90% share in the GPS chip market for Personal Navigation Devices. However, Bank of America analyst Sumit Dhanda says that Sirf's market share could go down to 70% share thanks to competition from STMicroelectronics (STM), Taiwan's MediaTek, and Broadcom (BRCM), which recently bought private company Global Locate for less than $200 Million.

Analysts have also said that GPS customers such as Garmin (GRMN) are looking for "dual-source key inputs."

While there is pressure on Sirf's market share, Sirf is still the dominant leader, and will continue to produce the best chips.

Current Valuation is still very reasonable. Sirf (SIRF) has a forward PE of 16.37, five year estimated growth of 26.62%, for a very cheap Price Earnings to Growth (PEG) ratio of 0.61, which is very cheap (PEG less than 1 is very cheap).

Compare this with Broadcom (BRCM) which has a forward PE of 25.36, 5 year growth rate of 22.37%, for a PEG of 1.13.

The company has virtually no debt, is cash rich ($4 cash per share for a $20 stock), and belongs to a very rapidly growing segment.

Sirf (SIRF) has shown recent momentum, and still remains a long term buy as its performance has lagged other Location Based Service companies such as Garmin (GRMN) and Navteq (NVT).

Location Based Service Companies

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