GPS-Wireless 2009: Dreary Year for PND Manufacturers
May 13, 2009 By: Kevin DennehyLBS Insider Newsletter, May 2009
The market for portable navigation devices (PNDs) is so low that companies are re-thinking their entire business models. Companies such as TomTom, Garmin, Navigon, and others have seen sales drop to record lows. With $30 PNDs soon to be a reality, companies are trying to see if it makes sense to continue to offer product lines. While companies struggle to find answers to counter a worldwide economic meltdown, strong competitors like Google are swooping in to offer similar services at no cost to battered consumers.
SAN FRANCISCO—Declining worldwide sales, low-cost competitors, and the rise of the smart phone have all been factors in the recent freefall of portable navigation system revenues, said executives at the GPS-Wireless 2009 conference here.
Recent reports that Navigon is getting out of the North American PND market — and Garmin having its most challenging quarter since becoming a public company — have fueled talk of how the industry plans to salvage this ailing market segment. This renewal may include having connected PNDs become strong enough to salvage the market — though many in the industry are skeptical.
For the connected PND to be a reality, it will take as many as three more years, said Michael Mouser, Magellan’s senior director of strategic business development. “We learned that [connected PNDs] are a folding tent — consumers were not ready to pay for extra bells and whistles. They wanted basic levels of navigation,” he said.
While the argument exists whether consumers need another screen in a car for navigation besides a cell phone, the PND also needs to evolve, said Jim Nardulli, Nav N Go vice president. “The connected car is backwards marketing. Companies need to talk about the connected person,” he said. “Engineers are the worst product marketers — and auto companies shouldn’t define the experience. All connected PNDs solve the wrong problem — how to get stuff in a small box with bandwidth problems — but who really cares? I don’t think PNDs die, but they had better evolve.”
Nardulli says that most PNDs are very inefficient—and that 90 percent of map data, which is the major unit cost, is never used.
A few panel members believe connected PNDs still have potential to help restart the market. “It’s still the way of the future — live traffic and proactive advertising. With MSN Direct, the added cost is not prohibitive with a lifetime subscription,” said Andy Frankel, Nextar vice president and business development director.
Thilo Koslowski, Gartner vice president, said that the connected car is already here — the real question is the next step for PND companies. “There are some very different value propositions. Consumers want more than the standard PND, but they are not willing to pay a whole lot of money for it,” he said. “I am less worried about embedded telematics hurting PND sales than basic handsets. Younger consumers will use their cell phones for navigation. It won’t be intuitive, but it will be no cost to them using Google maps.”
Koslowski reiterated his past position that it did not make sense for TomTom to buy Tele Atlas and Nokia to buy Navteq. “It was incredibly bad for the market. There has been a 10-month declination [in PND sales] and price drops,” he said. “Yet map data, which is 75 percent of the cost of a PND, has not dropped a nickel.”
From an auto manufacturer’s point-of-view, it comes down to two main market points — either an intelligent device for navigation, or a service that incorporates it, said Jeff Zabel, BMW senor engineer. “It’s got to make economic sense. You have got to create a consumer electronics ecosystem to get intelligent mobile devices into a car,” he said.
Kanwar Chadha, SiRF Technology founder and vice president of marketing, said the PND market has been squeezed by embedded systems and the growth of smarter mobile phones. However, he sees China and India as growing markets for PNDs.
One company executive at GPS-Wireless said he doesn’t see the market growing much for PNDs at all — and said connected units are “for the early Christians to get hungry lions.” He said he has seen his units offered for $65 on Amazon, which is less than his company pays to have them manufactured.
Okay, PNDs Hurting — How about Smart Phones?
Even smart phones with navigation capability for location-based services may have a tough road ahead, particularly in Europe. “Last year, Europe was significantly behind everyone else. There is no [FCC Enhanced-911] mandate driving them,” Chadha said.
Mark Neff, Networks in Motion senior business development director, said that Europe is tough to break into because of established players there. “There also seems to be a growing pedestrian navigation requirement there,” he said.
Is Google the Evil Empire?
Because Google believes navigation should be free to its users, the web portal giant is perceived to be a major threat to companies offering paid products and services. “Google is threatening to everyone. They leverage the strength of their ad revenue,” said Michael Dobson, TeleMapics president.
Dobson also believes that local search is rarely a satisfying experience for the end user. “Nokia bought Navteq in part to make the mobile local search market a reality. If they can’t do that, they won’t make half the money they should,” he said.
In other conference news:
- DigitalGlobe, which recently signed a deal with Nokia Maps to integrate its satellite imagery for LBS applications, is planning an initial public offering. It is one of the few mobile information companies, in recent memory, to file for an IPO.
- GPS-Wireless attendees received an overview of the Ford Sync program by Joe Berry, Ford Sync director and chief architect. Ford Sync, which is touted as a more capable OnStar and has several industry partners, is rolling out a version for the European market. Sync offers customers traffic, directions and information for three years for free.
- With the rise of application stores, there was talk of how relevant wireless carriers are to LBS market growth. “Suddenly, it’s not just the carriers that have relationships with customers. This is only going to increase,” said Scott Sedlik, Inrix vice president of marketing. Wireless carriers, once a staple at GPS-Wireless, were few in number because of restrictions on company travel, division reorganizations, and the overall downturn in the economy.
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