Analysis: Free Nokia GPS could hurt TomTom, Garmin
(Network World Middle East Via Acquire Media NewsEdge) Nokia Corp.'s announcement of free voice navigation for its GPS smartphones is bound to affect some GPS vendors, such as Garmin Ltd. and TomTom Inc.
There has already been a short-term impact; the stock prices of both of those companies declined. Longer term, the trend toward offering free navigation tools will enhance the value of multifunction smartphones, especially for Nokia, which makes more mobile phones than any manufacturer but has performed poorly in the U.S.
"Nokia's done incredibly bad in the U.S., but I wonder if this free navigation might give them the edge to increase smartphone market share there," said ABI Research analyst Dominique Bonte in a telephone interview.
Apple Inc. will have no choice but to offer navigation for free on the iPhone, given the pressure from Nokia and from Google Inc.'s Android phones, Bonte said. But Apple will face a dilemma with developers, because it already sells many third-party GPS applications in its AppStore. "Apple can't stay behind and will have to have turn-by-turn themselves," and it might even acquire a company to do so, Bonte added.
The Nokia news led to an 11% drop in the price of TomTom shares in trading in Amsterdam, and to a 5.5% drop in the price of Garmin shares on Nasdaq.
Those declines were not as great as the ones that occurred last fall when Google included free navigation in software that appeared first on the Motorola Droid, an Android phone sold in the U.S. by Verizon Wireless.
When Google made its announcement on Oct. 28, TomTom's share price fell 20% and Garmin's dropped 16%.
TomTom issued a statement after Nokia's announcement yesterday, calling attention to TomTom's "very high levels of customer adoption" of its core products for car navigation and digital maps. "In fact, customers have consistently demonstrated a willingness to pay for the best user experience. While competition continues to be fierce in the development of LBS [location-based services] and sponsored maps, TomTom remains focused on innovation." A Garmin spokeswoman said Garmin is "already innovating" and noted that the company offers similar free services, including on its Nuvifone, which was launched on AT&T's network last October. Garmin hasn't released sales figures for the Nuvifone, but the spokeswoman characterized it as "doing OK, with some other launches coming." Battles with industry giants like Nokia and Google will force TomTom, Garmin and others to innovate. They will probably take some predictable steps, such as launching dedicated GPS devices with screens as large as seven inches, which would be able to handle satellite images better than 3.5-inch smartphone screens can, Bonte said.
Vendors of so-called personal navigation devices (PND) like Garmin and TomTom "won't disappear because of Nokia and Google, but they will have to be incredibly inventive to keep designing very exceptional devices," Bonte added. "PNDs will survive, although I can't see much growth in that segment." A bigger, longer-term focus for all the players will be on location-based services, which are tied to advertising. Google is probably best positioned to take advantage of GPS and ads to deliver location-based services, although Nokia is fighting to dominate that market, analysts said.
With location-based service, a user who searches for, say, a store or restaurant would get several options near his location. Part or all of that information would likely be delivered via some sort of quick text-based ad or even one featuring a retailer's logo.
Garmin is "already doing advertising to some extent" on automobile GPS devices integrated with real-time free traffic information, the Garmin spokeswoman said.
Jack Gold, an analyst at J.Gold Associates, explained that Google is able to gather data about the travel habits of its Google Maps GPS users, and armed with that information it can tell an advertiser how many users pass his business daily. The cost of advertising will, of course, be higher for businesses in heavily traveled areas. "That's valuable information," Gold said.
Bonte predicted that premium smartphone-based GPS services, which can cost $5 a month, will go away. Sprint Nextel Corp. is already offering free navigation on its Simply Everything plan. "Free plans from Google and Nokia have effectively killed premium navigation services," Bonte said.
The emergence of free navigation on smartphones also means that a major consolidation among smaller GPS providers is likely, Bonte predicted. And some companies will go out of business entirely. In December, for instance, TeleCommunications Systems Inc. in Annapolis, Md., bought Networks in Motion Inc., a provider of wireless navigation for GPS-enabled phones, for $110 million in cash and stock.
The future of Appello Systems, Telenav, and other smaller GPS players is in question, Bonte said. "Maybe the bigger ones will survive, but I can't see how all will survive," he added. "They may disappear or merge or be acquired by Apple maybe." (c) 2009 IDG Middle East. All rights reserved. Provided by Syndigate.info an Albawaba.com company