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  NAVMAN--The Rot Is Setting In

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Author Topic:   NAVMAN--The Rot Is Setting In
jimh posted 10-25-2006 12:54 AM ET (US)   Profile for jimh   Send Email to jimh  
According to an article (which unfortunately is no longer available on-line) which appeared on-line at an Australian website, marine electronics manufacturer NAVMAN is in a tailspin of lost personnel, as key executives depart the company while its sale by corporate owner Brunswick is still pending.

Citing a significant change in corporate strategy following the departure of CEO George Buckley from Brunswick, NAVMAN's founder Peter Maire said "Brunswick had gone from being a company with a technology strategy to one that decided technology wasn't on."

According to Maire, former chief executive Stephen Newman and second in charge Jim Doyle recently left NAVMAN because "they both got sick of the bureaucracy and the lack of forward movement."

Current Brunswick CEO Dustan McCoy is characterized as having adopted a "back to basics approach" and is believed to be behind the decision to sell NAVMAN.

Mr. Maire said the decision to sell NAVMAN was "bitterly disappointing for myself and the [NAVMAN] management team." He also observed, "The rot sets in quickly and in technology, it sets in very quickly."

NAVMAN is part of Brunswick New Technologies (BNT) group, which has been offered for-sale since April of 2006 in a move characterized by Brunswick as "streamlining the company." A private equity firm in Europe is believed to be on the verge of purchasing BNT.

NAVMAN had just burst onto the North American marine electronics market a few years ago. They have many outstanding products.

During Mr. Buckley's tenure as CEO, the price of Brunswick stock doubled and the company introduced its very innovative and high-tech VERADO outboard propulsion system. Mr. Buckley's background was in Engineering. He holds a Ph.D. in engineering from the University of Huddersfield, U.K. He also holds a B.Sc. in electrical and electronic engineering and an honorary D.Sc. in engineering from the University of Huddersfield. Mr. McCoy, the current Brunswick CEO, is a Kentucky lawyer who rose to the CEO position after joining Brunswick as its General Counsel in 1999.

Peter posted 12-11-2006 10:51 AM ET (US)     Profile for Peter  Send Email to Peter     
The rot is now to the tune of $70 to $95 million. See the press release reproduced below.

quote:
LAKE FOREST, Ill., Dec. 11 /PRNewswire-FirstCall/ -- Brunswick Corporation (NYSE: BC - News) today announced that it is facing increasingly challenging market conditions in the highly competitive portable navigation device (PND) segment, which is affecting the operating performance of its Brunswick New Technologies (BNT) unit and Brunswick's ability to dispose of BNT at or above book value. In April 2006, Brunswick announced its intent to sell BNT, which includes fleet management, marine electronics and PND products sold under the Navman, Northstar and MX Marine brands.

"BNT is an amalgamation of electronics businesses primarily based on GPS technologies," explained Dustan E. McCoy, Brunswick chairman and chief executive officer. "As we announced earlier this year, we no longer view ownership of BNT as a strategic imperative and choose to free up resources to more intently focus on our core business segments -- marine, fitness, bowling and billiards -- and long-term strategic objectives."
Increased competition and pricing pressures in the PND market segment are adversely affecting the operating results of BNT's PND business in the important fourth quarter holiday selling season. Based on the performance of this operation and very recent discussions with potential buyers, the company has concluded that proceeds from the sale of BNT will be less than its book value. These conditions will result in a non-cash asset impairment charge estimated in the range of $70 million to $95 million in the fourth quarter, primarily driven by the PND business.

"Over the past two months, we have experienced a significant change in the market dynamics for PND products, primarily in Europe where Navman holds the number-three market share position," McCoy continued. "While we've said all year that the market is becoming increasingly competitive, in November alone we witnessed an even greater level of price discounting, which has adversely affected our PND business unit."
"Nevertheless, we are continuing with the sales process for the PND business as well as the marine electronics and fleet management units, the latter two of which continue to perform at or above expected levels," McCoy said.

Forward-Looking Statements - Deleted

About Brunswick - Deleted



jimh posted 12-12-2006 12:32 AM ET (US)     Profile for jimh  Send Email to jimh     
The decision to sell off Brunswick New Technologies by Brunswick is an interesting change in strategy. It is the sort of thing that might be the subject of a case study in a business school some day. There has been a clear shift in the corporate plan. To see the difference, compare these quotations with the corporate message above:

Statements made in June 2004 when the purchase of NAVMAN was completed:

By Brunswick Chairman and Chief Executive Officer George W. Buckley:

"We are extremely pleased to have completed this transaction. It has always been our intent to acquire the remaining stock of Navman as we are fervent believers in the company's abilities and potential. This belief has been reinforced during the past year as Navman's strong performance has given us an indication of what Brunswick and Navman can do together."

By T.J. Chung, president of Brunswick New Technologies, a unit of Brunswick that is comprised of Navman and several other companies:

"Navman is the core of Brunswick New Technologies, and among the fastest growing units within Brunswick. Indeed, Navman is the backbone for BNT and an integral player for Brunswick primarily in three arenas -- enhancing our overall marine electronics capabilities, augmenting our efforts at advancing integration of boat electronics, and offering opportunities for growth in non-marine applications such as the GPS, land navigation and fleet management markets."

Vertical Integration

The strategy in acquiring NAVMAN and other electronic companies was part of Brunswick's overall plan of vertical integration of manufacturing. In a vertically integrated manufacturing process, the same company manufactures all the components of the final product itself. Brunswick was going to make the boats, make the motors that power them, and make all the accessory electronics that are installed on them.

One problem with assembling a large and complex vertically integrated manufacturing process is the need to become very skilled and efficient at producing a very wide variety of products. Becoming a world-class manufacturer of so many different types of products may be asking too much for any one company to achieve or sustain.

In particular, modern consumer electronic devices are an incredibly competitive marketplace. Product cycles are measured in months, and price pressure is enormous. Electronic devices are continually getting better, faster, smaller, and cheaper. The competition may have been too much for the historical culture of a company like Brunswick, which has traditionally competed in areas where product development proceeded at a much slower pace. After all, exactly how many innovations have their been in billiard tables or bowling alleys in the last fifty years?

Portable navigation devices (or GPS receivers) have undergone a fantastic period of innovation and change. Ten years ago a nice GPS receiver cost about $500 and was a large instrument. Now a GPS receiver costs less than $5 and is about 1/100-th the size. Every cellular telephone sold in the United States has a GPS receiver built into it. And most of these are given away for no charge as part of a service agreement.

Consumer electronics is a very fast moving industry. You must have a steady stream of new and innovative products--your competitors will--or you'll be out of business in a hurry. Recent product announcements from Brunswick New Technologies have been slow in coming to market. The NAVMAN 8120 chart plotter is now just becoming available, although it was announced ten months ago. And the SmartCraft VESSEL VIEW has still not materialized, although introduced ten months ago. A lag of ten months between a product announcement and a product shipping is a very long time in the consumer eletronics business. The comments from NAVMAN founder (see above) seem to reveal a certain frustration in this regard.

The decision to sell could also be based on an assessment that the real potential for a company like NAVMAN and its other BNT cousins lies more in consumer electronics than in marine electronics. Perhaps Brunswick thought they could obtain a premium price for BNT as an mass-market consumer electronics company ready to burst onto the mainstream electronics market.

Whatever the precise reason, I am still very fond of NAVMAN. I have always considered their marine electronics to be very good values, with excellent features for their price. I hope they survive this transition and they are bought by an investor who will return them to their prior successful operation.

I wonder if Bain Capital might be interested?

WT posted 12-12-2006 12:52 AM ET (US)     Profile for WT  Send Email to WT     
Why buy Navman when you can choose from Garmin, Furuno, Lowrance and Raymarine?

WT

Peter posted 12-12-2006 10:58 AM ET (US)     Profile for Peter  Send Email to Peter     
It must be extremely difficult to find a buyer for this business. The market is saturated with marine and consumer GPS and instrumentation makers. It's unlikely that there would be many strategic buyers like a Garmin or Raymarine interested unless its got some very unique technology or valuable intellectual property that they don't have. What is left is a private equity buyer who ultimately would want to flip the business to a strategic in 5 to 7 years (or in much less time in this area). The prospects for the NAVMAN brand remaining in business don't seem that encouraging to me. I'm not sure whether the same is true for the NORTHSTAR brand but I doubt much money is being spent developing new products and if so the brand will suffer.

I really like my NAVMAN F3100 fuel computer. I know some day I will need to get some replacement fuel transducers as they do wear out and am a bit concerned that I won't be able to get replacements.

My belief is that Brunswick bit off way more than it could chew with the Navman and Northstar acquisitions.

bluewaterpirate posted 12-15-2006 01:01 PM ET (US)     Profile for bluewaterpirate  Send Email to bluewaterpirate     
Here's part of the answer ...... look familiar?

http://www.starmarinedepot.com/smd/images/prodimages/northstar/NS1112_L. jpg

rtk posted 12-15-2006 06:39 PM ET (US)     Profile for rtk  Send Email to rtk     
Looks identical to my NAVMAN 6600.

Rich


an86carrera posted 12-15-2006 08:16 PM ET (US)     Profile for an86carrera  Send Email to an86carrera     
I never thought of buying other manufacturers of complete assemblies you put together with your product to make a package vertical integration. I call that a monopoly.

To me vertical integration is bring raw materials in the door and shipping product out the other. Like bringing plastic resin and molding it into parts, then bringing in metal stock and stamping into your needed shape, assembling the two into your product.

Otherwise your just buying down the price on the products that make a complete package for the consumer.

Could be wrong on the definition though.

Len

jimh posted 12-15-2006 10:20 PM ET (US)     Profile for jimh  Send Email to jimh     
There is a separate discussion for the topic of the co-mingling of the NAVMAN and NORTHSTAR brands.
jimh posted 12-15-2006 10:40 PM ET (US)     Profile for jimh  Send Email to jimh     
For one definition of "vertical integration", see:

http://en.wikipedia.org/wiki/Vertical_integration

Does this definition fit with the Brunswick model of how to operate in the recreational marine business?

"Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers."

This seems to fit precisely with the Brunswick structure.

Mercury makes a motor. They sell it to Boston Whaler. Brunswick owns both the upstream supplier and the downstream buyer.

Northstar makes a GPS. They sell it to Boston Whaler.

Next, Boston Whaler makes a boat and sells it to MarineMax. Brunswick owns some of MarineMax, I believe.

pglein posted 12-19-2006 06:44 PM ET (US)     Profile for pglein  Send Email to pglein     
Navman has NEVER been a serious player in the industry. Their best chance was with Brunswick making a large cash investment into new cutting edge technology and then mandating it's installation on all their boats, just like they did with Mercury. Unfortunately, that either didn't happen or didn't work. Navman, it seems, is headed the way of 8-tracks, Enron, and the Dodo.
jimh posted 12-19-2006 09:57 PM ET (US)     Profile for jimh  Send Email to jimh     
I disagree. In the old days of NAVMAN, the b.b.c (or before Brunswick corporate) era, I liked their products. I still like them.
jimh posted 12-20-2006 10:04 AM ET (US)     Profile for jimh  Send Email to jimh     
Another aspect to corporate ownership and vertical integration such as occurred with Navman and Brunswick is the risk of a backlash in the marketplace. Prior to takeover by Brunswick, Navman was an independently owned marine electronics company, and other boat builders or boat dealers could purchase their products for use on their boats without the notion that they were contributing to the success of a direct competitor in the boat building business. Once Navman was taken into the Brunswick corporate structure, there was an obvious conflict created. An independent boat builder who was competing with Brunswick in the boat building market would tend to become reluctant to use Navman products because it would be a direct benefit to their competitor.

To draw an analogy from the automobile market, it would be the same sort of situation if AC DELCO radios were being marketed to other automobile manufacturers. It is not reasonable to expect Ford or Toyota to buy AC Delco radios to install in their vehicles, because AC Delco is part of General Motors, and GM cars are direct competitors.

Once you take a brand like Navman in-house, it seems almost automatic that you will lose some sales to existing customers based on a conflict in another market segment, in this case boat building.

bigjohn1 posted 12-20-2006 04:44 PM ET (US)     Profile for bigjohn1    
FWIW, I recently had the sonar section of my TF6600 NAVMAN go out. The unit is 21 months old (out of warranty) and I sent it to BNT Marine in Sudbury, MA for repair. The sonar section was replaced as well as the front screen (the anti-glare stuff was damaged due to the way I had cleaned it).
All repairs were done free of charge with total turn-around time being about 45 days. Considering approximately 30 of those days were mailing time between Guam and Massachusetts, I'd say my Navman/BNT experience was positive. What a shame, I will miss that.

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