$700 million gorilla?

Another company in our industry that has tons of potential but little in the way of discernible results got sold for a huge amount yesterday. Hughes Telematics got bought by a public company called Polaris in a deal that values the combined companies at $700 million. Here's the thing: Polaris didn't have any business until doing this deal. They were a so-called "blank cheque" company -- they went public with the promise to build a company and are now using the proceeds of the offering and the stock to buy Hughes. Here's a good story on Forbes website that explains the transaction.

Don't get me wrong, Hughes has some business from the Networkcar business, and has indicated that it has contracts with Chrysler and Mercedes-Benz. A dig into its SEC filings shows them estimating $43 million in revenues this year and doubling up to $86 million in 2009. They are forecasting about 1.8 million installed units in Chrysler and Benz vehicles next year. Here's the real thing: They don't expect to be cash-flow positive until mid-2010 when sales have reached an estimate $250-300 million. That's a quarter-billion dollars before they generate positive cash from operations. Yikes.

Only time will tell if a $700 million valuation is justified. The more relevant question is, "What does this mean to Guidepoint?" Today, not much. We have built our business as a flexible enterprise that sells into multiple channels. The dealer business, which is where we started in 2002, is absolutely an important part of the mix today, but it's not the ONLY part like it was a few years ago. We've expanded into new channels like powersports and fleet, and are working on initiatives to conquer other channels in the coming year. More importantly, we need to keep working on the "little things" like customer service, making dealers happy and creating profit opportunities for everyone in the chain to ensure that some $700 million gorilla doesn't come and squash us in the future.

Expediting Guidepoint

Last week, we hosted our annual expediter conference in Fort Worth with 10 of our distributors from around the country. We spent a couple of days talking about the business, introducing new programs, conducting sales training and unveiling some new POP. The other cool thing that we announced is a new incentive program that should help our expediters drive their sales to car dealers even further. And, of course, we had a great steak at Ruth's Chris on Friday night. Geoff Dixon, our vice president of sales, put together a great program.

Geoff also did something really smart during the program: He stopped talking. Not that he's a gabber or anything, but Geoff (and the rest of us) got out of the way and let the expediters talk among themselves about "what works" in the field. Our veteran expediters shared how they pitch the product to dealers, incentivize F&I people and handle customer issues successfully. They also shared how they use Guidepoint as a unique product that they can open a dealer with, and then expand into other 12-volt and custom accessory products. My personal favorite part of the conference, though, was hearing the "expediter horror stories" about accidentally deployed airbags, screws through the roof of expensive import cars and sunroofs installed on the wrong vehicles. That is why these guys all carry expensive insurance policies.

On the whole, the conference and the way Geoff set it up was a great reminder to all of us that we need to sit back and listen sometimes, rather than feel the need to lead the discussion.

Special thanks to our boys from Boston, Jeff Fuller and Frank Salkovitz of Micorp, and our guy in Northern California, Manny Moncada of Autohaus, for sharing their successes -- and occasional failures -- with the group. Micorp and Autohaus have been selling Guidepoint since day one, and they've built some great relationships and some great brand equity for us. Am already looking forward to next year.

New sales veep, new accountabilities

We recently announced something that's been in place for about 3-4 months. Actually, I should say "someone" -- Rich Zeichner. (That's pronounced "Zike-ner" for those of you who are interested). Anyway, Rich is a senior sales guy who's come onboard to help us take the automotive dealer channel to the next level. He's a former Ford and Visteon sales guy, and he worked with our CEO Rand at Code-Alarm back in the day. Here's a link to the press release we put out this week.

In line with the addition of Rich, we've continued to re-squiggle the org chart. Geoff Dixon is now heading up marketing and member relations, which was one of my accountabilities, and I'm now going to be spending time developing a specialty channel, spending more time on PR and tending to one of our largest B2B customers.

Wrapping NADA

The NADA show is over and it was a pretty worthwhile endeavor, save for the last day when traffic to the booth slowed to a crawl. The Moscone Center was not an ideal place for the show because it was held in three separate buildings and we were no where near the car companies, so that had an impact on the number of dealer principals that wandered by our booth on their way to see Toyota, Ford, GM and others. Still, we had a good number of dealers that wandered by, stopped to look at our booth and then said: "You sell GPS?"

I will say that most dealers now "get" the difference between GPS navigation and GPS stolen vehicle recovery. I can only think of one dealer who asked me, "where's the screen?" In fact, most asked the question: "How does your price compare to Lojack?" (The answer, of course, is: "Price is beside the point...let's talk about the important thing: Your dealer profit and your customers' vehicle security -- both will be better with Guidepoint than with Lojack.")

At any rate, we secured lots of interest from dealers and distributors in markets where we do business and many where we don't have a strong presence yet. Based on the response at the show, that situation will begin to change in the next few months.

Subprime...coming into its prime?

One of the things we're noticing out here at NADA is the rise in dealers interested in finding a unit that can help them with their subprime business...that is, cars sold to people with poor credit. There seems to be an increase in the subprime end of the business for car dealers right now, and one of the biggest catalysts seems to be the collapse of the subprime loans in the housing business. "A lot of middle and lower-middle class people have had their credit damaged by the subprime mortage mess," one dealer told me, "and those people still have to have a car to get to work."

The result is that some people who would have traditionally qualified for traditional loans are now falling into the subprime -- or "nonprime" as it's sometimes called -- category. They're buying used cars and paying higher interest rates, and the dealers are all looking for devices that can help them track and monitor the vehicle if there is a default. Of course, you can't just slap a GPS device in the car and start tracking your customers' whereabouts. Along with the privacy issues, there are also disclosure requirements (ie, you have to tell them it's in the car) and fair lending concerns (e.g., do you put a device on every car you sell or just the ones with reaaally bad credit). For the companies that can navigate those tricky obstacles, though, this will be an emerging opportunity.

It's all about the relationships

One of our best dealership customers stopped by the booth today, a gentleman by the name of Ernie Boch, Jr. He operates several dealerships in England, including Boch Toyota and Boch Honda. The latter was recently named the #1 volume Honda dealership in North America, a fact that we acknowledged with an ad in Automotive News.

I'd only met Ernie once before, at NADA in New Orleans a few years ago, and my meeting with him yesterday left me with the same impression: He's a good guy. He was very gracious about Guidepoint and very complimentary of our expediter in Massachusetts (Micorp) that provides product, installation and service to his Boch dealerships. Actually, he complimented Frank, who works for Micorp and "handles" all things related to Boch for Guidepoint. In my humble estimation, it's cool that a guy like Ernie Boch, who owns dealership and auto-related businesses valued at more than $1 billion, not only knows who Frank is, but that he makes it happen and that he's a good guy (he is!) That's the thing about car dealers -- unlike a lot of companies and industries, car dealers still "get" that business is about relationships, and that it's important to get to know the people you do business with. We're having many good reminders of that out here in San Francisco.

2008 NADA Show

Time to get blogging again. Guidepoint is exhibiting at the NADA Show, which is being held in San Francisco this year. We're at Booth #2649W in the Moscone West Hall.

Gathering string

There's a mention of Guidepoint in today's Detroit Free Press. It's related to the annual Michigan Growth Capital Symposium, held by the University of Michigan each year. We presented at the Symposium a few years back, and that's where we met Plymouth Venture Partners, an Ann Arbor firm that ended up investing in the Company. The PVP deal then introduced us to Mike O'Brien, a serial entrepreneur from Detroit who sits on our board and is involved in several other businesses including Saxon Motorcycles. Well, Mike has since introduced us to some of his business partners in the motorcycle and powersports channel, and we've adapted our technology for that market. This spring, we intend to roll out Guidepoint for Motorcycles (and ATVs, snowmobiles, etc.) with the help of the folks Mike introduced us to.

It's been a great lesson -- and reminder -- of how business often works for entrepreneurial companies. You go out and meet people and learn somethings, then play off those relationships and knowledge to build new relationships and knowledge and so on. It's not unlike what my editors in the newspaper business used to call "gathering string." For you younger folks, it's kind of like how you used to surf the Web before Google. You would find a link and then follow that another site, and so forth. Honestly, Google's ruthless efficiency killed the whole notion of surfing the Web and the serendipity that comes with it, but that's another topic.

GPS foils Portland-area carjacking

Here's a brief newspaper story and a TV clip about a vehicle we recovered after a woman had been carjacked at knifepoint in Vancouver, Washington, which is located near Portland. The 22-year old victim called 911 and told them she had a Guidepoint in her car. Police notified us and we tracked the vehicle, which was recovered in approximately 40 minutes. The suspect was also arrested and brought into custody. Our success rate continues to hold at more than 99%, which compares pretty favorably to our prime competitor, Lojack, which uses an older technology and only works in markets where the vehicles are equipped with their tracking equipment. It's great to hear a member of law enforcement say that we were "incredibly helpful" in recovering the car, as the Vancouver PD spokeperson says in the TV clip. (NOTE: Sorry about the YouTube clip, but you have to go the 3:40 mark in the video to see the story about the GPS recovery).

Mapping Updates

The development team, lead by our erstwhile whiz kid Tom Gafford, has made some changes to our mapping system that offer some cool benefits for users. The actual, physical maps we purchase from Maptuit are the same, but the interface is new and that's allowed us to offer some new functionality. A few sample functions: you can roll the cursor over different parts of the map and it will calculate how far that cursor point is from the vehicle. That's kind of handy when you're trying to estimate distances for directions or a quick trip. (Actually, I used it this morning to see how far my morning run was since my car is parked in front of the house).

Anyway, they also added a function so users can now just highlight an area of the map and it will automatically zoom in to that area. Best of all, they add the availability of much larger maps that take up nearly the whole screen. That's helpful for guys (like me) who need to wear dimestore glasses to read street names.

To be sure, the changes are incremental, but when you preach continuous improvement, everything is (or at least ought to be). And customers notice. Within a few hours of the new mapping going live, a customer called in and said: "I was tracking my car, and I noticed the dot on the map changed from blue to red. Does that mean something is wrong with my system?" The answer: No. We just decided to change the dot color. Thanks for paying attention!

We're all in sales.

We're looking for a sales manager to lead our inside sales efforts. The job is posted on Monster, but also on the Guidepoint website. At the moment, we have a four-person team that handles activation calls and upgrades, but the reality is that everyone at Guidepoint is accountable for sales. All of our CSRs do upgrade selling, handle customer renewals and look for opportunities to drive revenue. It's a cultural thing that comes from our CEO, Rand, who's a born peddler (albeit one who's an electronics whiz and serial entrepreneur). At any rate, if you know of anyone who's looking to work 60-70 hours per week, training, teaching and motivating, please have them contact me at brian@guidepointsystems.com.

New flash movies

We've posted two new flash movies that our design guy, Nate, produced to highlight what Guidepoint does. One is flashy and speedy, with a techno soundtrack that we hope will appeal to the younger crowd. (Given that Nate is young and flashy himself, he's a better judge of that than me). The other is a slower paced spot that has a loping soundtrack that suggests Napoleon Dynamite. (As the middle-aged guy, I kind of like this one.) Both can be accessed on our consumer site (lower right hand corner).

New finance guy

Today is the first day of the rest of Joe Moeller's life. Joe is our new CFO, though he's no stranger to the company. He served for many years as Guidepoint's CPA and a consultant. Today, he begins as our internal finance guy, which should help us improve our finance and administration capabilities exponentially. Best of all, he's got a wicked sense of humor and a way with words. From an accountant no less. He can be reached at joe@guidepointsystems.com

Missing person no more

Got to personally help out on a recovery this morning that was a bit out of the ordinary. Initially, we thought it was a stolen vehicle, but the dispatch officer told me that it was actually a missing person report and that the person who had taken the car was thought to be at risk of harming himself. We worked with the Napa, Calif. police on a vehicle that was missing and were able to give them very detailed information on the vehicle's location: parked in the street in front of a house, two houses from the corner. They dispatched an officer and found the vehicle with the driver sleeping in it.

Mother and child reunion

Just got a nice email forwarded from a customer whose wife and one-year old we helped. He wrote:

"After my experience today I wanted to follow up and thank you and your staff for the very quick support today and a HUGE job well done. I have been in technology for the past 15 years and every once in a while you come in contact with something in high technology that can truly help you in life or even save a life. Over a year and a half ago I had one of your Guidepoint Systems installed in my vehicle while my wife was pregnant for simply the piece of mind of being able to us get out of a jamb if we locked our keys in the car or to have the ability of getting our car back if ever stolen. I never thought it would be to save my daughters life.

Today, I was golfing and got a frantic call from my wife stating she was calling from a pay phone because she locked her keys and phone in the car along with my 13 month old daughter. She remembered we had a Guidepoint but asked was so full of panic all she could think of was calling me. I then called your 877 line and got [response center specialist] Greg D. on the phone after a very short wait period. In seconds my wife had my little girl back in her arms.

Anything could have happened today. Just wanted to send a quick note to thank you for your efforts and having a great support staff and reliable equipment that obviously was able to save a life (or at the very least a Mom’s sanity).

In business, it's easy to become somewhat cynical, especially when you're in the fish bowl everyday and you're always pushing to sell more. So it's great to get a feel-good for helping someone out. One of the things we always say is that "Guidepoint is not a tech company -- it's a service company." Situations like this are a great reminders of that philosophy.

Guidepoint in the News

We've been getting some ink of late, in part because we're a "success story" in Southeast Michigan. Unfortunately, that puts us in rare company these days. The Michigan economy's travails have been well documented in the local and national media, and everyone knows that the Big Three are struggling. Our CEO, Rand, has been telling people: "We need to stop calling it the Motor City!" In his view, that moniker just carries too much baggage and aligns us -- emotionally, financially, psychologically -- with an industry that is struggling to survive.

Rand is a classic entrepreneur: restless, edgy and driven. Guidepoint is his 13th company and, he freely admits, not all of his endeavors have ended up making money. "About half have done well and made money for investors," he says. "The other half...not so much."

Anyway, here are two stories about Guidepoint and Rand. One is from the Oakland Business Review and the other from an online publication called MetroMode Media.

Buy-here-pay-here product

There are an awful lot of GPS vendors out there that focus on the used-car dealer channel, also known as the "buy-here-pay-here" channel. I'm not sure I really get the value proposition because they sell a unit and then every time the dealer "pings" the unit, they charge them for a hit -- usually 50 cents or $1. The dealers use the GPS location if they need to repossess the car, which I get, but that amount of airtime alone isn't enough to make the business model work. We're all like cell phone companies, so we effectively sell data and, in our case, services. For this buy here pay here business, unless the dealers are tracking the vehicle regularly, it doesn't really make it that worthwhile as a business endeavor. That's not to say there aren't other worthy business applications for this market, but it's not as simple as selling a black box and some pings.

New website

We've done something of a minor overhaul of the consumer website to make it more navigable and better showcase our core business: stolen vehicle recovery. Some key changes:

• Dealer Login is now located at the top of the page for quick access
• We are including stolen vehicle recovery stories on the homepage
• Easier navigation will help consumers and dealers use the tools online
• Dealers will be able to use the improved features as a selling tool.

As always, your feedback and comments are appreciated. Email us at marketing@guidepointsystems.com.

Blogging Guidepoint

Does Guidepoint really need a space of it's own in the blogosphere? That's not even a rhetorical question, because I'm not sure the answer is yes. But we'll do it anyway, because having a blog will give us the opportunity to communicate more frequently and strategically with the people who matter most to us: employees, customers, vendors and investors.

We're a growth company, and that means near constant change. The intent, then, of this blog is to communicate more of those changes and the "stuff" that's going on more regularly. We'll start today, but will probably not be posting regularly until we hit July. Feedback is welcome via posting comments -- you can be as brutal as you want, but keep it clean, okay -- or via email at brian@guidepointsystems.com.