Friday, June 30, 2006

One GPS Giant Too Many?

Sci-Tech Today pens an article about the growing consumer market for GPS navigation devices following the entries of Philips Electronics. and Sony (SNE).

Ron Stearns at Frost & Sullivan "pegged the automotive portion of the consumer GPS business at $922 million and reckons consumers will buy more than 1.2 million units this year. Add in outdoor units aimed at hikers and boaters and you hit more than 4 million units and $1.8 billion in sales. And both market segments are growing." Stearns expected "by 2010, combined unit sales (both automotive and outdoor markets) of 8.3 million and $2.7 billion in revenue."

The article notes that Garmin (GRMN) "is now the dominant player in the U.S. market with share just shy of 50 percent," while "TomTom controls more than half the market in Europe, and Garmin struggles with share of about 10 percent over there."

Rich Valera at Needham and Co. said, "I will confess I was among those concerned about this turning into a commodity business, especially when Sony came in. But Sony's product is really mediocre, and there's nothing to really differentiate it from Garmin or TomTom or Magellan."

Valera added, "Garmin and TomTom waged an all-out marketing battle last year, and TomTom showed itself extremely effective at getting share. They got about 25% [of the market], which is a huge improvement over low single digits the year before that, and most of that was at Magellan's expense. Garmin was mostly flat."

Jon Braatz at Kansas City Capital opined, "It's going to be a big market, and I'm not surprised to see companies other than Garmin and TomTom wanting to get into it. But I haven't seen anything yet to indicate that there's anything disruptive here. The market is big enough to support a few more players with prices staying firm."

Hard to see this being any more than a niche market with devices starting around $300 a pop. Just to add some perspective, Frost & Sullivan forecasts total GPS unit sales of around 8 million by 2010. That number is now a slow quarter for iPod sales and Nokia alone sold more than 76 million cell phones in Q1 2006.

You would have to think the handset has the best chance of taking GPS navigation to the mainstream if they can price the service at a reasonable level and/or offer a price per usage model for those people who only need it a couple of times a month....