Good day, ladies and gentlemen. Thank you for standing by and welcome to the NAVTEQ Corporation fourth quarter 2005 earnings conference call. My name is Carlo and I'll be your coordinator for today's presentation. Operator Instructions I would now like to turn the presentation over to your host for today's conference, Tom Fox, Director of Investor Relations. Please proceed, sir.

Good afternoon, everyone. This is Tom Fox, Director of Investor Relations at NAVTEQ and welcome to our conference call to discuss financial results for the fourth quarter and fiscal year ended December 31st, 2005. With me today are Judson Green, President and Chief Executive Officer; and Dave Mullen, Executive Vice President and Chief Financial Officer. By now you should have received a copy of our earnings release, which was distributed earlier over the wire and is also available on our website. I would like to point out that this call is available by webcast and is being recorded. Following the call, replays will be available. Information on the replay and the webcast is available in the release and on the investor relations section of our website at www.navteq.com. Before we begin, I would like to remind you that some of the statements made during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations, assumptions and projections about NAVTEQ at the time that the statements are made. The forward-looking statements are subject to certain risks and uncertainties that may cause the actual results to differ materially from our past performance and our current expectations and projections. For a discussion of these risks and factors that may affect future performance, please review the reports filed by NAVTEQ with the SEC, in particular the risk factors identified in the company's quarterly report on Form 10-Q for the quarter ended June 26, 2005. NAVTEQ disclaims any obligation to update or revise any forward-looking statements, except as required by law. We will begin with some opening remarks from Judson, then Dave will walk you through a more detailed look at the quarterly financial results and provide our 2006 guidance. Judson will then offer a few closing remarks and finally we'll take your questions. We will finish the call no later than 6 p.m. Eastern Time. I'd now like to turn the call over to Judson.

Thanks, Tom. Good afternoon, everybody, and thank you for joining us. We are pleased to report another quarter of record performance and the end of another exciting year for the company. 2005 was a remarkable year with respect to the growth of the navigation industry. Penetration of in-dash navigation systems continued to increase steadily and portable navigation device growth far exceeded our expectations. I am extremely pleased with our full-year performance, particularly in light of the business conditions and unfavorable foreign currency trends that we faced. Despite these difficulties, we were able to deliver revenue and earnings per diluted share at the high end of the guidance ranges we provided at the beginning of the year. We achieved revenue of $146 million in the fourth quarter, which represented growth of 23% over the fourth quarter of 2004. Excluding foreign currency rate differences, revenue actually increased by 28%. The revenue increase was driven by continued growth in map unit volume, which was up 125% when compared to the fourth quarter a year ago. Operating income in the fourth quarter grew 31% over the year-ago period to $41.6 million. Net income grew 79% to $27.7 million in the quarter and earnings per diluted share increased 75% to $0.29. We recorded additional income tax expense in the quarter of $700,000 or $0.01 per diluted share related to tax rate adjustments in Europe and the U.S. The European tax adjustment was due to a change in the Dutch corporate tax rate enacted in December by the Dutch government. The U.S. tax adjustment was related to shifts in the amount of income NAVTEQ generates among individual states. As a result of these adjustments, the deferred income tax asset on NAVTEQ's balance sheet was revalued, resulting in a decrease in the asset and a charge to income tax expense. While these adjustments increase the company's effective tax rate in the fourth quarter, it is important to note that they will actually reduce the company's effective tax rate in 2006. As a reminder, the company recorded additional tax expense of $3.8 million or $0.04 per diluted share in the fourth quarter of 2004, related to an earlier reduction in the Dutch corporate tax rate. In terms of full-year results, revenue of $496.5 million grew 26% over 2004. Full-year map unit volume rose 84% to 7.9 million compared to 4.3 million in 2004. For the year, in-dash vehicle map units grew 24% to 3.7 million and mobile device map units increased over 200% to 4.2 million. Operating income for the full year declined 42% to $134.3 million. Net income for 2005 was $170.8 million compared to $54.1 million in 2004. Earnings per diluted share for the full year were $1.81 compared to $0.59 for 2004. Net income and earnings per diluted share for the full year increased significantly when compared to 2004 due, in part, to the recording of a net income tax benefit of $80.6 million or $0.85 per diluted share during our third quarter. The benefit was related primarily to the third quarter reversal of the valuation allowance on deferred tax assets associated with net operating loss and deferred interest carry-forwards in the United States. Full-year net income and earnings per share were also impacted by the fourth quarter tax adjustments I described a moment ago. Net cash provided by operating activities was $137.8 million for the full year, compared to $106.4 million in 2004. We ended the year with $218.8 million in cash and marketable securities and no debt. As was stated in the press release, European revenue in the quarter grew by 9% in dollars. I want to point out that the year-over-year fluctuation in exchange rates played a significant role in that number. In the fourth quarter of 2005, the average dollar/euro exchange rate was $1.19 compared to $1.29 a year ago. Ignoring the impact of foreign currency translation, European revenue actually grew 17% in the quarter. For the full year, the weighted average exchange rate was nearly identical in both periods so European revenue grew 18% regardless of currency. North American revenue grew 38% in the quarter and for the full year. Turning to the vehicle business, based on available data for the full year, we estimate penetration of in-dash navigation systems at approximately 13.1% for Western Europe compared to 11.7% in 2004 and 6.7% for North America compared to 4.9% in 2004. We know that there is a great deal of interest in the state of the European vehicle navigation business and while I am pleased to report that we saw some recovery in the final three months of the year, this continues to be an area of some disappointment. In terms of car sales, we did see improvements in Q4 in sales of certain models with high navigation take rates that underperformed in the third quarter, including the BMW 3, 6 and 7 series and the Mercedes S and CLS classes. However, sales of the BMW 5 series and Mercedes Benz E-Class, which have strong navigation take rates and are two of the best-selling luxury cars in Europe, were down 17% and 16%, respectively in Q4 when compared to the prior year. The poorer performance of these flagship models was only partially offset by the growth of the Audi A6. Navigation take rates continue to grow across Europe, but the impact of PNDs is being felt most in the medium-class car segment. In this segment, take rates have been growing, but only modestly, due to the relatively high price of in-dash systems and the surging popularity of cheaper portable devices. We have not seen a significant revenue impact on economy class cars as take rates are generally low. Interest in navigation in the luxury segments remains robust and take rates are growing steadily. PNDs continued to put intense pressure on traditional in-dash after-market systems in Q4 and, in particular, on systems that lack a full map display, which are more prevalent in Europe than North America. As a result, we saw no growth in after-market volume in Q4 when compared to the prior year. The first hard-disk-based navigation system was launched in Europe during the quarter on 2006 Mercedes Benz S-Class. The system is powered by NAVTEQ data and all indications are the launch has been very successful. The rollout of hard-disk-drive navigation systems should continue in 2006 with a number of introductions expected in Europe and the U.S. We expect an even greater number of hard-disk system introductions in 2007 and 2008. The rollout of hard-disk systems means, over time, our vehicle distribution revenue will likely decline as a percentage of total revenue. At the same time, the hard-disk navigation systems represents a marked improvement in technology that we expect will facilitate the sale of updated map data and additional content. In North America, our strong revenue growth continued in the fourth quarter, despite a weak car sales environment. Fourth quarter U.S. car sales were down 7% compared to the prior year. The Big Three automakers showed the weakest sales performance in Q4, while the Japanese again showed sales increases and share gains. Increases in adoption and take rates helped to sustain our growth in North America. Adoption, or the percentage of cars sold offering navigation, rose significantly to 45% in 2005 compared to 37% in 2004. Most notably, navigation was offered for the first time in Q4 on a number of mass-market car models, such as the Honda Civic, the Mazda 6 and several Ford vehicles, including the flagship 500 sedan and the Explorer SUV. Take rates continued to increase due primarily to good performance on the part of the Japanese and European manufacturers and the predictably strong interest in navigation for the new model year of vehicles introduced in the fourth quarter. Turning to the mobile device business, 2005 was a watershed year for portable navigation, with dramatic increases in our volume and revenue. The PND emerged as a device with the potential to reach broad mainstream acceptance in Europe and North America. Europe led the charge in terms of units, but 2005 growth rates in both of our major geographic regions were noteworthy. We are particularly proud of our progress in terms of our share of mobile navigation solutions in Europe. Based on available data, we believe our full-year share of map units for mobile navigation devices in Europe grew substantially from approximately 35% in 2004 to nearly 50% in 2005. The increase was driven by great performance from Garmin, Medion, Route 66 and PTV. The first widespread advertising campaigns for major PND manufacturers hit the airwaves in Q4 and helped spur demand during the all-important holiday season. The number of PND products on retail shelves in Europe grew from 10 in last year's fourth quarter to over 100 this year. The category grew in the United States as well, with premier retailers like Best Buy, Circuit City, Staples, Amazon.com and CompUSA either offering PNDs for the first time or increasing the number of devices they offer. Still, we believe North America is one to two years behind Europe in terms of the number of portable products offered, their retail availability and consumer awareness of the technology and while retail prices have been declining steadily, most solutions still cost more than $500 and thus remain out of reach for many consumers. We continue to be the primary supplier of map data to portable navigation leaders such as Garmin, Magellan, NAVIGON, Destinator and Route 66, and we recently added two top-tier consumer electronics players Sony and LG, who began shipping PND products in Q4. During the quarter we saw the entry of other types of hardware players into the PND space, including NAVTEQ-enabled devices from traditional in-dash system vendors such as Harmon/Becker, Alpine and Delphi and a number of information technology hardware companies like Acer, Hewlett-Packard, Packard Bell and Fine Digital. Turning to the database, we launched nine new countries in 2005, bringing our year-end total to 53. In 2006 we plan to launch eight to 10 new countries and territories, including Australia. In January we announced the acquisition of MapIT, a leading provider of digital map data in Mexico. We believe Mexico is an important geographic market and an area of future growth for the GPS industry. This acquisition immediate gives us complete road coverage of Mexico, which is critical to our vehicle and consumer customers. Over time, we will continue to add navigable attributes to improve the depth of MapIT's coverage and bring the database up to the NAVTEQ specification. Today MapIT's customers are primarily geographic information services or GIS companies that use MapIT's data for business services applications. Integration of the MapIT database is underway and we expect to have this process complete later this year. We do not expect the transaction to have a material impact on 2006 financial results. I will now turn the call over to Dave, who will review some of the fourth quarter numbers in more detail.

Thanks, Judson. If I can, I'd like to provide some quantitative color to the results Judson outlined and share our expectations for 2006. First, a word on foreign exchange. As Judson mentioned, the impact of currency is critical to analyzing our financial performance. The stronger dollar reduced fourth quarter revenue by $6.4 million and diluted EPS by $0.02 compared to what they would have been if the exchange rate had been equal to that in the fourth quarter of 2004. When compared to the $1.30 rate assumed in our 2005 guidance, foreign exchange had a significant negative impact on fourth quarter and full-year results. Had the exchange rate been $1.30, fourth quarter revenue and diluted EPS would have been higher than the reported figures by $8.6 million and $0.03, respectively, and full-year revenue and diluted EPS would have been higher by $15.3 million and $0.06, respectively. European revenue represented 58% of total revenue in the quarter and 64% of total revenue for the full year. Media revenue represented approximately 87% of revenue for the fourth quarter and 90% for the full year. In terms of our full-year 2005 revenue by customer application, the in-dash vehicle business represented 72% compared to 82% in 2004. The mobile device business represented 19% compared to 10% in 2004. The Internet and wireless business represented 5%, which was the same number as 2004, and business and government represented 3% again, as it did in 2004. All other revenue accounted for the other 1%. We performed distribution services on 42% of our vehicle OEM-related unit volume in the quarter compared to 47% in last year's fourth quarter. Distribution business made up approximately 18% of fourth quarter revenue and 20% of full-year revenue. As we've done in the recent past, we calculated the change in license fees paid to us by each of our top 10 customers, who together represent about two-thirds of our revenue, on their most popular NAVTEQ map product in Europe and North America. This percentage change reflects base license fee reductions as well as volume discounts and other considerations. For the fourth quarter of 2005, license fees at our top 10 customers decreased approximately 9%, on average, compared to the prior year. Turning to expenses, database creation and distribution costs were up 19% in the fourth quarter over the year-ago period. This increase was driven primarily by two factors, first, increased investment in database coverage and content, including core maintenance, geographic expansion and content additions and second, modest increases in per unit distribution costs related to a mix shift in data conversion fees charged by navigation system vendors. Distribution-related and other direct costs represented approximately 23% of total company-wide expenses in the quarter and 24% of total expenses for the full year. Selling, general and administrative expenses grew 20% in the quarter compared to the year-ago period due to increased personnel costs and expenses associated with the support of new product initiatives related to the database and dynamic content. This growth was concentrated in the area of product management, which helps direct our data collection and product development activities. Total company-wide stock-based compensation expense was $2.2 million in the quarter compared to $2.5 million in the prior year's fourth quarter. For the full year, stock-based compensation expense was $9.1 million compared to $7 million in 2004. Our operating margin was 28.5% for the fourth quarter and 27% for the full year. Our fourth quarter effective tax rate of 36.6% was higher than expected due to the tax adjustments that Judson described. A comparison of the full-year effective tax rates is not meaningful due to the tax adjustments that we recorded in both Q3 and Q4. Finally, I'd like to finish up by sharing our expectations for 2006 financial results for the company, which were summarized in the press release. We expect revenue in the range of $590 to $615 million. Unit volume growth should be driven by strong increases in portable navigation in both of our primary geographic regions and steady growth in penetration of in-dash systems in new cars. With respect to the penetration of in-dash navigation, we expect an increase of approximately 1 percentage point in Europe and 2 percentage points in North America. On the consumer side, we anticipate that navigation on mobile devices will continue to grow rapidly in both Europe and North America, driven by PNDs and, to a lesser extent, emerging mobile phone applications. Volume growth is expected to be partially offset by average license fee reductions of around 10%, which are an ongoing part of our business. Turning next to profitability, because of the operating leverage in our business, we expect to drop a meaningful portion of our incremental revenue to the operating income line and, as a result, we anticipate income margin expansion of approximately 150 basis points. We expect earnings per diluted share for the year in the range of $1.21 to $1.28 after the impact of options expensing, which is expected to result in incremental 2006 stock-based compensation expense of approximately $6 million compared to 2005. In arriving at this guidance, we assumed average diluted shares outstanding of approximately $96 million and a constant average U.S. dollar/euro exchange of $1.20 for 2006 compared to an average rate of $1.25 in 2005. Obviously, our operating margin expansion and income growth would be significantly greater if not for the impact of the lower exchange rate assumed in our guidance and the full expensing of options starting on January 1st of this year. Our effective tax rate for the year should be in the range of 33% to 34% and we expect to be a cash taxpayer in Europe for the first time during the back half of the year. On a constant currency basis, 2006 revenue is expected to grow 22% to 27%. The operating margin is expected to increase by approximately 200 basis points and earnings per diluted share are expected to grow 32% to 39%. In terms of the sensitivity of our 2006 expectations to changes in the dollar/euro exchange rate, each $0.01 change in the rate would result in a $3 million change in revenue and a $1.1 million change in net income on a full-year basis. One area where foreign exchange will have a particularly significant impact is on our quarterly results. As you know, it's not our practice to provide specific quarterly guidance. However, we feel it is important to comment at a high level on how foreign exchange and the evolution of our business are expected to impact the quarterly distribution of our income to help you in adjusting your models, because it is somewhat different from what it has been in the past when we've suggested that analysts simply look at historical trends to model results on a quarterly basis. The average exchange rate for the first quarter of 2005 was $1.32 and the rate declined throughout the year. As a result, we recognized an unusually large portion of 2005 revenue in the first quarter. If the 2006 rate remains near our assumed rate of $1.20 for Q1, our true revenue and earnings growth will likely be concealed by this differential. In addition, there are two key factors that should cause less income to fall into the first quarter of 2006 as compared to prior years. First, we've chosen to accelerate some significant database and technology-related projects into the first quarter, which should significantly increase expenses in this period and, second, based on vesting periods, we expect to recognize a larger portion of our 2006 stock-based compensation expense in the first quarter. Finally, as a reminder, our fiscal quarters end on the Sunday nearest the calendar quarter end. This means that for 2006 the first quarter will have 92 days and the second, third and fourth quarters will each have 91 days. And with that, I'd like to turn it back over to Judson.

Thanks, Dave. I would like to wrap up the call this afternoon, as I usually do, by offering a few comments on our outlook for the business. Those of you that attended the consumer electronics show a few weeks ago would probably agree that the number of portable devices and location-based applications on display were astounding. The entry of Sony and LG into the portable market, which I mentioned a few moments ago, is further confirmation of the growing popularity of GPS technology. We believe the show was a remarkable sign of things to come for us and for our industry. At the recently held Frankfurt and Detroit auto shows, virtually every vehicle on the show floor featured advanced in-dash navigation systems. It was clear automakers will continue to embed navigation and potentially other map-enhanced systems as a means of differentiating their products and enriching the driving experience. Looking forward, we believe that location awareness will add value to people's lives in imaginative ways. Whether it is advanced driving systems, dynamic content or 3D graphics, the user experience will be transformed in the coming years. And while it is difficult to predict which devices and applications will be hits with consumers, thankfully we do not have to. Today we are in a terrific position to benefit from whichever solutions are successful, so long as we continue to offer the highest quality content and a superior customer experience and we will strive to do just that. This concludes our prepared remarks, so thank you for your attention. Now I would like to ask the operator to open the line so that we might answer your questions.

Thank you, sir. Operator Instructions Sir, our first question is from the line of Brandon Dobell with Credit Suisse First Boston.

Hi, guys. Thanks. A couple of questions, mostly focused on looking forward to your assumptions for '06. Maybe get a couple more data points on how you guys think about the different geographies and different media types. You said steady growth in vehicles. Should we assume that that means somewhat like we saw in '05 in terms of units and price? Is there a big variation in how you think about North America versus Europe? The same kind of question for handhelds, with one twist. How have you guys gotten comfortable with the seasonality in the PND business and trying to look at the back half of the year? It's becoming a holiday-centric kind of business. How does that figure into how you guys assumed 2006 guidance?

Well, with respect to the Europe/North America split, we break out the percentage of revenues. I think you can see that Europe as a percentage of our total revenue is declining over time. Some of that is exchange-rate-driven, Brandon, and some of it is driven by the fact that, obviously, the North American market is growing faster than Europe and it's, in essence, catching up. So I would expect to see a continued gradual decline in the percentage of our revenue that is generated in Europe. And I don't think we want to or are able to quantify that beyond that characterization.

Okay.

With respect to the seasonality, I will confess that we do not yet have sufficient experience in the consumer space to really have as good an understanding of it as somebody who plays in that market more extensively does, for instance, Garmin or TomTom or any of those folks. But one of the reasons that we mentioned the evolution of our business and the impact on quarterly results is that traditionally that consumer business is back-end loaded. That's been our experience before and the third and fourth quarters tend to be the time when we do the most volume in the consumer space. And beyond that, our experience isn't extensive enough for us to provide you with more detailed guidance.

Some consumer companies talk about the split between first half of the year, second half of the year, just trying to give people a sense for where the revenue might show up on a relative basis. Anything we could go towards that direction, maybe, is it going to be 60/40 for you guys? 80/20? I'm just trying to get a sense of how we should think about seasonality.

I think the best way to do it would be to ask the Garmins and the TomToms and see what they say.

That's fair enough. That's fair enough. And then one final question. Assumed operating leverage in '06 is a touch lighter than I think we had thought about, longer term, for you guys with that 40% target on the incremental margin. Is that mostly due to what you guys talked about in Q1 with the extra spending there for some of those projects or is it just going to be a heavier spending year in general for you guys relative to what we've seen in '05 and '04?

Well, I think if you normalize for exchange rate, and I think I mentioned this in the script, if you see our -- we're anticipating margin expansion of about 200 basis points, which I don't know how that fits with your expectations, but it's consistent with our guidance and has been for some time and that is, by the way, factoring in the fact that we'll have substantial expense from the first-time expensing of stock options in the year.

Right. And then final one, if I could. With the bigger consumer guys getting in like a Sony and an LG and the volumes from your traditional guys like a Garmin, Magellan, the bigger customers you have, what kind of expectations do you think we should make or you should make for either list price declines or volume price declines as you look forward. Should it be still in that 9% range of is the appearance of these bigger guys and the volume explosion going to start to change that equation?

Again, I think in the text of our guidance we said that we thought it would be approximately 10%, and we don't have any reason to believe it will be different from that right now.

Good, perfect. Thanks a lot.

And, sir, our next question is from the line of Jay Vleeschhouwer with Merrill Lynch.

Thanks. Judson, what are you anticipating or perhaps even counting in your guidance for the year from the introduction of less-expensive installed systems, particularly by some of the European systems OEMs, Siemens, Bosch and the like? Do you expect that could have a material impact this year or perhaps more so next year? Secondly, with respect to the acceleration of some project spending you alluded to in the script, what is prompting that? Is there some geographic component to that? Or was that competitive in the sense that TA is about to wrap up their North American database project? Are you feeling some pressure to respond competitively to that at the technical level?

First of all we've talked before about the in-dash systems and the fact that there are a lot of pressures on those prices, total system prices to come down over time. One of the factors that's going to impact that is the introduction of less expensive systems. I would not see that there is much impact in 2006 from that. I'd expect more impact in 2007 and 2008, but we are seeing activity there and we think that's a healthy thing for the in-dash vehicle market and the OEM market. But there wouldn't be much impact in 2006. With respect to spending, there's just so many factors that go into that. It's very opportunistic. It depends upon geographies. It depends upon a lot of our internal planning, logistically. There isn't one theme here, but we did want to highlight that we see some impact on the first half of the year, but nothing really pops out that I would highlight for you other than that.

You suggested that the introduction of hard-drive systems would make an updates business more feasible. To date it's been fairly small. Do you think that this year will be more of an inflection point for a regular update, subscriptions business, perhaps, as well, for data services? Or do we have to wait, perhaps, until '07 for more of a regular ramp in that respect?

Well, it obviously is tied to the actual roll out of hard-disk-drive systems, which effectively has just begun. So it's going to be a gradual impact, but it's going to be felt much more in 2007 and beyond than in 2006.

Okay. And then lastly, Dave, I know you're assuming about a 10% average price decline in the prepared remarks. Can you at least comment along the same lines with respect to the difference you're seeing between the in-dash license price you're getting, exclusive of distribution services, and the PND ASP? Is it still about a 2.5 or so multiple over PNDs for the auto ASP?

Yes, I don't think I can comment specifically on that, because the PND vendors pay us many different prices depending on their application and geography and all those things. But I would say that prices are getting -- in general, they're getting closer together.

All right. But I guess the real question is you're able to maintain this spectrum of price according to differences in device and functionality? You're not seeing an undue shrinkage of that spread according to functionality?

I don't think that the pricing environment has changed substantially in the last quarter from what it has been before.

Okay. Thanks very much.

And, sir, our next question is from the line of Bill Benton with William Blair.

Good afternoon, guys. Congratulations. Just a quick one. I presume that the PND mix was nicely in excess of 19% that you talked about for the year in the fourth quarter. And if you could, confirm that. And then also, how does this shift in terms of PND growth impact kind of your view in terms of the visibility and the predictability of the business with, given, obviously, there's a lot of competition, I guess, emerging and potential market share shifts on a quarter-to-quarter basis?

Yes. With respect to the first question, I don't think we have that handy in terms of what the growth in units by quarter or portable by quarter?

Oh, no, I was just looking for the mix of the mobile. It was probably well in excess of 19, I guess, in the fourth quarter?

Probably, some of that is seasonality, too, Bill, so it's hard to say how much of that -- in other words, if you're trying to set a trend, you have to factor out seasonality.

Exactly.

And the second question was?

The second question had to do with as the PND market grow, as that portion of that business grows, the predictability and clearly these are-- we have enjoyed the fact that within the automotive industry there is a certain cycle, as you well know. So clearly the predictability of the PND business is less than in the vehicle space. Having said that, the whole PND market has grown up so quickly, as you know. I mean, it's just gone from in '04 2 or 3 million units to 6 or 7 million units in '05 to well over 10 million units in '06. So I think this has grown up so fast it has been difficult for us to predict it, but with the passage of time and as things mature I think we'll gain a lot more confidence in terms of looking out to the future than we enjoy today.

Okay. And then just in terms of the hard-drive-driven systems, when-- at what point do you think virtually all the IDN systems will be hard-drive driven? And do you have any incremental information on when you think wireless capabilities will be married to that hard drive for it to allow for kind of over-the-air map update capabilities?

That's those are good questions. Clearly, it's going to take years for the rollout of hard-disk-drive systems and I'm really not at a -- I really couldn't give you a guess as to exactly when wireless availability would couple that. Those are good questions, but this is just at the infancy of this whole technology and it's too early to tell.

But you expect in 2007 is when we really start to get more of an inflection point, at least on the hard-drive side?

I think that's fair.

Okay. Okay, great, guys. Thanks a lot.

And, sir, our next question is from the line of Maynard Um with UBS.

Hi, thanks. A clarification and then a couple questions. Or if I missed this, but the EPS of $0.29 does not include the full impact of stock options expense next quarter?

That's correct. We will start to expense options in the first quarter of '06 in accordance with FAS 123R.

Got it. So in terms of the $15 million for stock options expense in your guidance for '06, is that pretax?

Yes, sir.

Okay. So when I look at apples-to-apples, the EPS guidance, excluding stock option expense, I guess, would be around $1.31 or $1.328?

I haven't done the math on it. We gave you the number so you could do that.

Got it. Okay. And then on the mobile side, Verizon soft launched its navigator products in December and can you talk a little bit about the mobile opportunity, the mobile phone opportunity, going forward and how the business model differs or is similar to the in-car PND?

Well, the business model will likely differ in the cell phone market, because it'll most likely be, as we've already seen begin to develop in the space, either a subscription model, potentially a transaction-based model. We've anticipated this for some time. We think in the cell phone space-- I mean, technically, you could either have onboard where everything resides on the device. You could have everything offboard which everything resides on a server, or you could have a hybrid. And we've always felt that in the cell phone space it'll either be completely offboard, as we're beginning to see, or, someday, potentially a hybrid model. As that business model evolves, we're going to be able to adapt to what the market place really calls for, but our best guess at this point is you're going to see more of the subscription-based-type applications roll out over the next two or three years and then who knows where the market will go from there, but we're prepared to see that happen over the next two or three years?

Got it. And just one last question. When you talked about the in-car nav system and the pricing there, you expected a bigger impact in '07 and '08, but I guess what are you seeing that leads you to believe that the in-car nav systems won't see that decrease in 2006? Anything in particular?

When the question was asked, Maynard, it was asked about how the reduced pricing of navigation systems, in general, of in-dash, would affect the in-dash market. In other words, if nav systems, instead of costing $2000 now cost less than $1000, which we anticipate will occur but not until 2007, what impact-- or late this year, what impact would that have on the market. And we think that that would actually be an impetus or-- yes, an impetus to greater sales in the in-dash market. That was the question that was asked.

Okay, great. Thanks.

Sir, our next question is from the line of Brett Manderfeld with Piper Jaffray.

Hi, guys. Dave, I think you've mentioned or you put it in the release that $15 million in stock-based comp for '06. Can you tell us what the impact of options is as a percentage or a dollar amount in '06?

You mean of having to expense them for the first time?

Yes.

Let me see if we can track that number down. It's something, it's less than the $6 million, but not much less.

Okay, great. And then can you also give us a sense for on the PND side, what kind of assumptions you're building into the '06 numbers for unit increases? I mean, should we be thinking 100%? Obviously, 200% last year was a huge number. And related to that, what kind of pricing shall be thinking about for '06, given mix shift and price of the units coming down, et cetera? Thanks.

I don't think we have enough information to provide that kind of guidance.

In terms of the pricing or the units?

Units. We don't have the visibility on it. Again, my comment on the pricing is what we expect to see in price declines. I don't think we see that, we probably see it happening more in auto-- in the automotive sector than we do in the consumer sector. If there's going to be price declines-- there will be, probably, price declines in the consumer space, as well, but I don't know that we have visibility on what the unit volume increases are going to be in the consumer space, in the mobile display space. But it-- we expect, I guess, substantial growth. Last year it was-- what percentage was it last year, maybe--?

Over 200.

Yes, it tripled last year. I don't think it'll triple this year, but it could very well double.

Okay, very good. And how about just worldwide in-car revenue outside of Western Europe and North America? Worldwide revenues, I guess, overall? I mean, obviously you have South Korea now. Should we be thinking about $20 million from the acquisition or should it be a lot higher than that with some of the new countries that you've entered into? Thanks.

I think that that's probably a reasonable-- probably a reasonable number. I mean, there may be a little more, but those new countries aren't going to contribute a huge amount of revenue in the first year.

Okay, thank you.

And, sir, our next question is from the line of Noelle Swatland with Lehman Brothers.

Hi, guys. Good job on the quarter. First, just a housekeeping question. Just on the other income, moving forward, should we assume sort of flattish from the fourth quarter level? And then-- I'm going to let you answer that one first.

Other income is really coming from our investment it's our interest on-- what we earn on our excess cash, which I think should be relatively easy to model. I don't think there's anything else in there. There might be a little bit of-- nothing meaningful, other than that.

And then last quarter, you had talked about some strengthening orders you had seen on the PND side in the third quarter and you were monitoring the momentum of those orders into the fourth quarter. I was just curious, as we try and understand the seasonality in PND, did you see the orders for the fourth quarter come in mostly in the third quarter or did you see some additional turns business, I guess?

The third quarter was a huge jump from the prior year's third quarter. We had very nice increases in the fourth quarter, but they weren't quite as big. But we did more volume of-- substantially more volume in the fourth quarter this year than we did in the third quarter.

Okay. And then just in the guidance range that you've assumed on the top line, can you talk about some of the key differentials between the top and the bottom end of that range? Certainly you said, but also in your assumptions around the 1 percentage point increase in the in-built side of the market, I was curious as to the assumptions around that number. Does that assume some continued sluggishness in luxury car sales or some additional acceleration in cannibalization of the mid-end, mid-range?

I think there's probably a little bit of both in there. We're not -- we haven't yet seen the turnaround in luxury car sales in Europe, so I think we're not trying to get too heated up about that and until the prices come down, I think the in-dash in the lower end or the mid-range cars will still struggle to compete with the portable solutions. And, in fact, many of our automotive customers are now selling portable solutions in the after market. By the way, for Brett, the number-- the option expense number, the incremental option expense, is $8.3 million out of the $15. It relates to options that we didn't have to expense before.

Thanks.

And, sir, our next question is from the line of Scott Merlis with Thomas Weisel.

Congratulations. That was a good lead-in to my question. On the $8.3 million out of the $15, does that imply a non-recurring component because it wasn't expensed before?

No. I think we adopt on the prospective method and so, I don't know how to model that. I don't think we've gone out beyond 2006 to see how that spreads, but it is not a one-time charge.

Is there any catch up that might be considered unusually high or is $15 could be a recurring type of number?

I don't think there's any catch-up in there.

Okay. And getting back to the bigger picture, the Sony business and the LG business, how strategically important is that? How important is it from a growth standpoint?

Well, I think it's very important because what it means is that some big, very strong players have come into the space. They realize that it's a space that's going to continue to grow, has enormous potential and so we see it as a very positive development.

Can you talk about any more Japanese electronic companies that you're picking up business from at this time?

No. We don't have any other specifics to share with you.

Okay. And getting back to the medium-size car market in Europe, is there any, how does one compile the data on what cars are-- have PNDs, what cars have in-dash when they're sold?

The license…

What kind of data sources are there?

Oh, you mean for you?

Yes, I mean for us or are you getting a fairly accurate, do, you know, how do you know whether the Garmin and TomToms going into a car or into a medium car instead of a low-end car?

It's a good question and I suppose the answer is we don't really know what car it's going into. We know it's going into a car. The reason we make the comment is that we can look at penetration levels model by model in our own detailed information and we can see places where the take rates for navigation have met our expectations or exceeded our expectations and those places where they haven't and that's how we infer that if they haven't met our expectations and it tends to gravitate towards less-expensive cars, then our assumption is that that is being substituted with portable devices.

Is it substitution or market expansion? I mean-

We believe it is.

In other words, is the penetration in medium up, still up? If it was flat, it would signify cannibalization, but if it's up, it could be expansion.

Oh, when we measure penetration, we are not including the portable devices in that number. That's in-dash only.

Right. Okay, so that's still growing.

Right. What we're hoping, what we believe is that the portable market is actually-- the portable device is a way to attack that 450 million cars on the road today without navigation. Because we believe that's the lion's share of where those devices are going.

Right.

But to underscore this, I think you've made a very important point, which is the overall market is growing and, therefore, we don't quite understand the use of the word “cannibalization.” This is a space where there are multiple different kinds of navigation products. Some are in-dash, some are portable and the different types of products may be growing at different rates, but the overall market is growing. And that's how we see the market evolving over the next few years, as well.

Right. So PNDs are market expanders at the lower end?

Right.

Got you. And just a last question on the cost side. At some point, does the data creation cost become more update than more new countries? I mean, there's only so many countries in the world and at some point do you, is there more leverage in this business? Is there more scalability? Because then a lot of costs are going to updates and updates is a very scalable model, right?

We understand the question and we understand why you're answering it, but I think we would tell you consistently, as we have in the past, that when it comes to the database, there's really four things that are going on at any point in time. One is the maintenance of what already exists and that was really what you're focusing in on, but remember there are other things going on. We have the completion of coverage wherever we haven't finished it. We have the addition of new content at the request of our customers, which, I might add, is quite a substantial list of where the car companies want to go and, therefore, we have to invest in new content. And then finally, we have expanding the global footprint, which is new geographies. If you take a mature country, you will find, over time, probably an increasing proportion of maintenance to the total, but the very time that may be happening with a more mature country, we've just opened up half a dozen to a dozen new countries around the world and in many of the other countries where we've been adding new content. So I wouldn't want to suggest to you that any time in the near future you're going to see the maintenance become more significant relative to the other and that's because there's so many other opportunities for us to grow the database and, therefore, grow revenue opportunities.

Okay. Good quarter. Thank you very much.

Thank you.

And, sir, our next question is from the line of Robert Schwartz with Jefferies & Company.

Thank you very much. What was your in-dash unit volume for 2005?

I got it. Hold on. 3.7 million.

That's worldwide?

Yes, sir.

And can you split that, Europe and the U.S., or--?

We haven't traditionally done that. You could probably infer it from market penetration numbers.

You're right; I could. I probably should. PND, can you give the same number for what your units were for PND?

4.2 million. 4.3 million, excuse me.

4.3 million. Now, you mentioned that, which was a pretty impressive number that you had achieved 50% market share of the PND business in Europe. Maybe you could give us a sense of what you-- what it is worldwide or what it is in North America, as well?

I was just highlighting the fact that there's been a significant improvement in terms of the market share in Europe and so I highlighted that to you. And we were only focusing on Europe in that conversation.

Is it greater than 50% in the U.S.?

We're very pleased with more than 50% in the U.S. I won't be more specific. And I think very quickly you'll see PNDs pop up in other parts of the world, as well.

Sure. Now you were asked the question directly, what do you think the PND market is growing at? And you guys decided not to answer that or just decided that it was beyond you to answer, but there must be some assumption underlying your guidance. I'm wondering if you can give you us-- speak to what your thinking is in the range of the guidance for PND unit growth next year?

I think, Robert, that we said that a doubling of that market would not surprise us.

Okay. And my last question was, you talked very eloquently about what's going on with the distribution business. It dropped off a little bit this year. Are you expecting a more precipitous drop next year or you just think a steady decline?

We don't expect a precipitous drop. I think it'll continue to be a smaller portion of our business. We don't do distribution in the mobile device market, so as that market grows, de facto, you're going to see a dropoff in distribution. But I don't think it's going to be precipitous.

Okay.

It's also as you-- as I'll just remind you, it's much lower margin business than our licensing business.

Absolutely. Thank you very much for answering those questions.

And, ladies and gentlemen, this concludes the question-and-answer portion of today's presentation. I'd like to turn it back over to the group for any closing remarks.

Thank you all for joining us. We appreciate it. Have a good night.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes your presentation and you may now disconnect.