What Happens When You Have Too Much To Spend
Saw this press release this morning:
Trimble has entered into a definitive agreement to acquire @Road, Inc. of Fremont, Calif. The transaction equity value is approximately $496 million. After subtracting @Road’s net cash position of approximately $79 million, the transaction enterprise value is $417 million. The transaction will be accounted for as a purchase. More here:
Trimble has entered into a definitive agreement to acquire @Road, Inc. of Fremont, Calif. The transaction equity value is approximately $496 million. After subtracting @Road’s net cash position of approximately $79 million, the transaction enterprise value is $417 million. The transaction will be accounted for as a purchase.
Trimble is a great technology company. Much of the utility of modern GPS can be traced to contributions from Trimble. I’ll acknowledge that in a heartbeat. But assume for a moment you are not a government official or president of a world-wide licensed surveyor firm … you aren’t, are you? Did you ever try to actually buy anything from Trimble?
Trimble (in this scribe’s opinion of course) is a a firm much like ESRI and Qualcomm … technologically superior to many but so in love with themselves and their technology that they hardly even speak to mere businessmen without advanced degrees.
@Road, by contrast has tried to make a business out of selling small quantities of their (again my opinion, backed up by observation and customer reports) mediocre tracking system to small business. I don’t know how many PhD’s might be employed by @Road but their target market isn’t PhD’s and its not the Fortune 500, either. This should prove interesting as it unfolds. In particular I have no earthly idea what @Road has that could be worth the kind of money Trimble is paying.
When I was an active GPS Tracking dealer I explored carrying the @Road line. Some of the reasons I passed were:
- Antiquated technology. I wrote more about that subject here, back in February, when @Road suffered a severe ‘bump’ in the road.
- Abysmal tracking performance. This merger would be a little like a Mercedes dealer teaming up with a firm selling used Yugos.
- Completely flawed business plan. @Road is essentially an “add on” service to the cellular networks. Has Trimble bothered to consider that all the major cell carriers are offering competitive services for significantly less money that @Road? And since they ‘own the store’ and the service actually costs the carriers nearly nothing there is no real way to compete at that end of the market.
Interesting transaction indeed. No investment expert I, but if I were burdened with Trimble’s capital I think I could find a lot better place to park it.