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GPS Market at turning point with sliding prices, demand off

By xXxZxXx
Apr 28, 2008
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  1. AMSTERDAM, Netherlands(AP) Consumer navigation devices have gone from expensive gadgets to mainstream gear in just three years, but Europe's largest maker is struggling.

    The experience of Netherlands-based TomTom NV _ which saw earnings fall 83 percent in the first quarter _ suggests the market for stand-alone global-positioning systems is at a turning point.

    "What we saw for the first time is that selling prices fell, but volumes didn't improve enough to compensate," analyst Eric de Graaf of Petercam said after the results were reported Wednesday. "It's a signal the market is getting saturated."

    Some analysts believe that as stand-alone versions are overtaken by cell phones and other devices with navigation technology built in, GPS devices will become low-margin commodity products, like pocket calculators. But others think a smart company could turn GPS devices into premium products the way Apple Inc. made its iPod music player stand out from a host of cheaper devices.

    For now, TomTom's larger U.S. competitor, Cayman Islands-based Garmin Ltd., appears to be faring better by virtue of its greater range of products.

    Including Taiwan's MiTAC International Corp. _ owner of the Navman and Mio brands _ the top three GPS makers hold around an 80 percent market share, giving them scale advantages over smaller players. But competition is coming from many directions, including big names like Nokia Corp., Sony Inc., Google Inc. and probably Apple.

    "TomTom and Garmin are branded well," said Thilo Koslowski of Gartner Research. "But functionally there's not much difference" yet among GPS devices.

    In 2007 alone, including strong holiday sales, 33.9 million units sold, almost triple the 11.9 million sold in 2006. Now, 10 percent of U.S. drivers and 20 percent of those in Europe own a navigation device. But prices for basic stand-alone devices have fallen below $200 from $500 or more.
     
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