Portable navigation device (PND) suppliers in deep water
Discussions at the GPS-Wireless 2009 conference suggest a murky outlook for GPS providers this year. The PND market in particular is expected to stagnate. PNDs enjoyed very strong growth over the last few years, but increased competition, consistent price declines, a staggering auto market and the recession are now taking their toll on results.
According to research firm iSuppli, PNDs accounted for 50% of all navigation device shipments in 2007, while automotive in-dash systems, smart phones and cell phones made up the rest. The situation is now expected to reverse, with cell phones and smart phones taking market share. The research firm expects PND sales to shrink to around 23% of all navigation devices by 2013. Navigation-enabled cell phone and smart phone shipments are expected to make some gains this year, growing 70.6% and 51.6%, respectively.
Certain phenomena came to light at the conference. It became apparent that all the major players were rethinking their strategy.
TomTom NV Amsterdam made its intentions clear when it purchased Tele Atlas (a leading mapping company). Last month, the company announced the Navigator 7 software, which could be used by consumers in mobile phones. This two-pronged strategy was intended to help TomTom maintain its position in the PND market, and also prevent share erosion as GPS enabled cell phones become more popular.
Garmin (GRMN) had a slightly different game plan. The company decided to enter the cell phone market itself through the introduction of the proprietary nuvifone. However, the nuvifone continues to be delayed, possibly due to unsatisfactory arrangements with carriers.
At the same time, Nokia Corp (NOK), the largest player in the cell phone market, has acquired Navteq (a mapping company which provides GPS maps to Garmin).
Although cell phones are cannibalizing the PND market, there is no doubt that PNDs are more suitable for use in automobiles. However, automakers these days are more interested in connectivity than navigation. This means that PND manufacturers have to make the adjustment or exit the market. Connected PNDs are expected to grow from around 3% of the North American PND market in 2008 to around 15% in 2010, and constitute half of all PNDs by 2013 (iSuppli). This would be good news for companies like Microsoft (MSFT), as its software usage rates are likely to increase.
Cell phones are also getting increasingly connected, which opens the door to Google (GOOG) maps. For most teens and youngsters, a connected cell phone with a Google map would take care of navigation requirements at no extra cost. This is a real threat for all PND makers.
Read the full analyst report on “GRMN”
Read the full analyst report on “NOK”
Read the full analyst report on “MSFT”
Read the full analyst report on “GOOG”
Zacks Investment Research
