posted 10-25-2006 12:54 AM ET (US)        

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.

posted 12-11-2006 10:51 AM ET (US)            

quote:

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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

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posted 12-12-2006 12:32 AM ET (US)            

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.

posted 12-12-2006 10:58 AM ET (US)            

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.

posted 12-15-2006 06:39 PM ET (US)            

Rich

posted 12-15-2006 08:16 PM ET (US)            

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.

posted 12-15-2006 10:40 PM ET (US)            

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.

posted 12-20-2006 10:04 AM ET (US)            

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.