Garmin and TomTom Vie for TeleAtlas

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"They can both go higher, and they can both afford it," says David Niederman of Pacific Crest Securities in Portland, Ore.

Some investors aren't so sure. Garmin's stock has dropped 17%, to $100.01, in the two days since it made the offer public.

Competing with Nav-Ready Phones

Should Garmin win, it will likely use the acquisition to build a raft of new products. Rauckman says, "We have a vision for much-improved mapping data. We want to make it even better with 3D mapping as that becomes available." Rauckman also suggests Garmin plans to compete with Nokia and other cell-phone makers on the wireless front. "As the market becomes more mobile, we'd like to add pedestrian-friendly content into the mapping and add some local searching capabilities."

The takeover craze in navigation data suppliers is likely to reach beyond map-data providers. Companies such as TeleNav and Networks In Motion, both relatively small, could become the next takeover targets. Both supply wireless carriers including Sprint (S), Verizon Wireless, T-Mobile (DT), and AT&T (T) with subscription-based navigation services that work with several wireless phones. Research firm iSuppli estimates that by 2011 some 440 million wireless handsets, or nearly one-third of those used worldwide, will be navigation-ready, representing a quadrupling of the number of nav-ready handsets in use in 2006.

And navigation is turning out to be the breakout data application wireless carriers have been looking for. A recent study by Nielsen Mobile, a San Francisco research firm, found that 13 million U.S. consumers have downloaded a navigation application to their phones. Moreover, of the $118 million in revenue generated from downloaded wireless applications, more than half came from navigation and location-based services.

The upshot for PND makers like Garmin and TomTom is that they have to embrace the ever-more-sophisticated wireless phone or risk a slowdown in sales of dedicated navigation devices. "They're going to have to adapt, either by making their own phones or owning the companies that supply the wireless carriers," says Sam Altman, CEO of Loopt, a Mountain View (Calif.) company that sells location-based software to wireless carriers. "Once you get good navigation on a device like an iPhone, do you really need a PND in your car?"

Hesseldahl is a reporter for BusinessWeek.com .