Here's an interesting bit of speculation. Microsoft are apparently looking to buy Garmin, whose shares took a battering recently when Nokia bought Navteq, the mapping company used by Garmin in its GPS devices. After the announcement by Nokia, Garmin's shares plunged by 9%, but they've just risen by 5% on the back of the rumoured sale to Microsoft.

"There is speculation of Microsoft for Garmin," said Greg Palmer, head of equity trading at Pacific Crest Securities. Garmin spokesperson, Ted Gartner, however, said that the company does not comment on possible mergers or acquisitions.

More after the jump.

Garmin certainly appeared vulnerable after Nokia's decision to buy Navteq, as Nokia are moving into the GPS device market with its new GPS phones, and so will increasingly become a strong competitor to Garmin and other GPS device manufacturers.

However, Tom Tom has acted to defend itself by making a bid for another mapping company, TeleAtlas. Garmin, however, has been left on its own, and with a potential competitor having control of the mapping data it uses, its position is best described as vulnerable.

Should Microsoft make a bid for Garmin, though, it will have the strength of a cash rich aggressive parent company behind it, which should certainly secure its future no matter what Nokia decides to do with Navteq.

Microsoft's plans for Garmin

What would Microsoft want with Garmin, though? Microsoft is famous for its Windows and Office software products, as well as its XBox 360 games console, and so at first glance, a GPS device manufacturer would seem the least likely of all companies to fit into Microsoft's portfolio of products.

However, Microsoft is currently engaged in a fierce battle with Google, and one of the fronts of this battle is with mapping - specifically, Google Earth vs Microsoft's Virtual Earth. If Microsoft buys Garmin, you can bet there'll be tight integration with its Virtual Earth product.

As such, Garmin GPS devices would be used as a way of distributing Virtual Earth to millions of users in a bid to overtake Google Earth in terms of popularity. The future of software companies such as Microsoft also lies with advertising, as Google has shown, and location-based advertising services are seen by some as the holy grail - certainly as a new cash cow that could replace Microsoft's reliance on Windows and Office for its revenue.

As such, if Microsoft release Garmin GPS devices that integrate tightly with Virtual Earth and provide location-based advertising, they could generate significant ad revenue at Google's expense.

Seems like the GPS market suddenly got a whole lot more interesting!

[Source: MobileEntertainment]