$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.