Magellan Navigation, Inc. today announced it has entered into a definitive agreement to sell the Magellan consumer products division to MiTAC International Corp. Closing of the transaction is anticipated in January of 2009. Magellan consumer products include RoadMate and Maestro series portable car navigation systems, and the Magellan Triton outdoor handheld GPS devices.

Financial terms have not been disclosed; however, we can be sure that it is far lower than the staggering $170 million paid by Shah Capital for the full entity in 2006. Indeed, Magellan was known for having financial difficulties since it fired a large part of its personnel as well as its CEO in the recent months (read our previous article here). Almost two years after buying Navman consumer business for $16 million, MiTAC is taking over Magellan.

Despite its difficulties, Magellan is still having a large retail presence in the United States making it the third brand for Personal Navigation Devices. This acquisition is likely to mean the end of Mio (another brand from MiTAC) as a brand in the United States where the company has been struggling to establish a strong presence, lacking the product differentiation and the marketing dollars of the leaders.

A challenge for MiTAC
However, this acquisition will be an important challenge for MiTAC. First, its past acquisition of Navman did not prove to be a real success, especially on markets where both Mio and Navman were present. Eighteen months after this acquisition the market share of Mio was far to amount to the addition of the two brands’ market shares at the time of the merger. Therefore MiTAC’s management will have to better handle the transition than what it did in the past.

Second, despite its maintained shelves space in the United States, Magellan brand has been strongly hurt due to a lack of customer support and the little innovation offered by the company in the PND space.

Will MiTAC do better than Shah Capital to straighten up Magellan? The future will tell…