Cobra Intends To Strike In Vehicle GPS Systems
The road ahead for Cobra Electronics (COBR) is crowded with rivals selling similar car navigation products.
But the Chicago-based company hopes to drive ahead by being one of the first to offer real-time traffic data on its devices.
Cobra is best known for its radar devices used to detect the radar guns cops use to catch speeders. The firm also makes two-way family radios and citizens band radios. Three years ago, it moved into the navigation device market, with products for cars and boats.
“It was a natural for us,” said Cobra CEO Jim Bazet. “We’re about dashboards, whether it’s in a boat, a car or a truck. So consumers are already familiar with us.”
Navigation products using the Global Positioning System are a small part of the company’s sales, but one with potential for fast growth.
Cobra’s third-quarter sales rose 8.1% to $33.5 million, mostly on the strength of its two-way radios. It earned 29 cents a share, up 263% from a year earlier.
Cobra’s recent earnings got a boost from lower operating costs, a tax credit and proceeds from an executive life insurance policy.
Cobra faces much larger rivals in portable navigation. Garmin (GRMN) and Thales Navigation’s Magellan brand control about 75% of the market. Other rivals include Pioneer Electronics (PIO) and TomTom.
Priced As Low As $799
“The market is big enough for all of us,” Bazet said. “We’re going to win through competitive pricing, hitting the masses and coming out with our innovation.”
Cobra’s premier product is its Nav One 4500, the first fully integrated portable navigation unit featuring real-time traffic. The maker’s suggested retail price is $1,099, but it sells online for as little as $799. The product recently earned an Innovations Award from the International Consumer Electronics Show.
The device comes with a free three-month subscription for the traffic service, which afterward costs $60 a year. The service provides up-to-the-minute traffic information in 48 major metropolitan areas, with re-routing options.
Cobra’s Nav One 4500 mobile GPS navigation system features 7.6 million “points of interest,” such as restaurants and lodging. It has a 5-inch color touch screen and is ready to go right out of the box.
The product is available from Circuit City (CC) and other stores. Cobra is working to expand its retail distribution. Wal-Mart (WMT) plans to test the product in some stores soon.
For years, Cobra was a “sleeper company” making products in three no-growth categories where they dominated, said Steve Denault, an analyst with Northland Securities. “This new category for them is triple the size of all their legacy categories combined and growing at a nice clip.” He rates the stock outperform, or the equivalent of buy.
Market May Double In 2 Years
The market for portable navigation devices is expected to double by the end of 2007, when sales could hit $1.5 billion, Denault says.
“GPS navigation is a white-hot category within consumer electronics this year,” he said.
Portable navigation devices appeal to people who want to use them in different cars, including rental cars while on business trips or vacations. These devices differ from GPS devices used by hikers.
“For a company as small as Cobra, carving out a sliver of that category means big business,” Denault said. Cobra’s sales over the last four quarters totaled $130 million. “I would never suggest that they’re going to unseat Garmin or Magellan, but it’s possible for them to carve out 5% to 10% market share.”
Cobra hopes to make a name for itself in the portable navi space by making innovative products that are “drop-dead simple to use,” said Dave Marsh, Cobra’s director of mobile navigation.
Cobra rushed to get a device with real-time traffic data to the market in September before its rivals because that feature had the highest level of interest from consumers.
“Once you have traffic (data), you now add a daily use for this new device,” Marsh said.
