Is Garmin's Move to Europe a Shot across TomTom's Bow?
June 8, 2010 By: Kevin DennehyLBS Insider, June 2010
The PND and other location-based services battlefield lines were drawn recently as Garmin said it would be moving its place of incorporation to Switzerland. Garmin PND rival TomTom, and its subsidiary Tele Atlas, have enjoyed strong sales in Europe, so the move will be followed closely by the industry. In addition, Garmin’s rollout of the Andriod-based Garminfone and recent financial success by TomTom has made some analysts say “I told you so” in terms of the decline in portable navigation device sales. However, it remains to be seen how well these companies will do in this age of free navigation services.
As GPS World reported, Garmin received approval from legal authorities in the Cayman Islands to move its place of incorporation, not its operational headquarters, to Switzerland. Some say the company, which still calls Olathe, Kansas, its operational headquarters, may be moving its place of incorporation to challenge rival TomTom, which is a major PND player in Europe.
Garmin says Switzerland’s proximity to its European markets makes it a base for expansion and to acquire or partner other businesses there.
Rival TomTom, with its Tele Atlas subsidiary, is strong in Europe, with its new TomTom Start PND and relationships with Alfa Romeo, Fiat, and Ford. During the first quarter, TomTom’s European PND market share grew to 47 percent.
Garmin, which had been incorporated in the Cayman Islands since 2000, will retain its GMRN ticker symbol and will close the transaction on June 28.
Traditional PND Manufacturers Finding New Revenue With Services
Although not admitting or accepting many analysts’ predictions of the demise of portable navigation devices, some companies are trying to diversify into location-based services with decent results. TomTom, while still selling 1.6 million PNDs in the first quarter, said it grew non-PND business that included a 41 percent subscriber increase in its WebFleet system, automotive market sales, and licensing revenue.
Always critical of PND companies’ long-term strategy of selling units, not services, Thilo Koslowski, Gartner vice president, says that companies such as TomTom are seeing better financial results as a result of refocusing their navigation portfolios.
“TomTom and other navigation solution providers that were able to grow or maintain their business have benefited from more aggressive and creative marketing and the overall economic recovery,” he said. “TomTom, in particular, is more nimble and market aware than others and has leveraged this opportunity. The company has also understood the writing on the wall a bit earlier than others.”
However, Koslowski says the real proof for a PND manufacturer’s long-term strategy will come over the next two years when the traditional routing value proposition will be tested by no-cost offerings and continued platform diversity for navigation solutions. “Many of the navigation solution provider heavy weights may realize that they can’t quickly enough turn around their ships,” he said.
Garmin’s Android-based Garminfone, a follow-on to last year’s Nuvifone G60, will be rolled out on the T-Mobile USA network. The Garminfone was rolled out at the Mobile World Congress in Barcelona to good reviews.
However, some analysts wonder whether the now-Switzerland-based company is doing the right thing with its 3G GPS phone, or should PND manufacturers stick to navigation? Koslowski, true to form, is not one who is questioning the move.
“One of the strategic directions we advise PND manufacturers to take is to embrace platform diversity. This includes offering their navigation applications on smartphones,” he said. “Garmin took it one step further by offering its own smartphone device. While this provides the opportunity for greater application and service integration, it does also expose the company to new competition from companies that are often larger than Garmin. Long-term, Garmin may hand more of the device manufacturing responsibilities off to partners and focus more on the application.”
Overall, Koslowski believes PND manufacturers should continue in their quest to diversify their marketing plans, or they could be in for rocky times.
While Garmin and TomTom are bitter rivals on the PND front, things get trickier with Tele Atlas. Garmin-Asus, a co-branded alliance between Garmin and Asustek Computer Inc., offers its Garmin-Asus M10 smartphone powered by Tele Atlas maps.
TeleNav Quietly Launches Successful IPO
The decisions of Google and Nokia to offer free navigation didn’t deter mobile GPS manufacturer TeleNav from launching an initial public offering. The Motley Fool website said that TeleNav, which debuted on the Nasdaq Global Market, was the only company out of seven new IPOs that was above its initial price a week later.
TeleNav, which doesn’t shy away from calling itself an LBS company, recently offered its business mobility products for Verizon’s Wireless enterprise customers. The company was an early GPS integrator, working with Nextel to jumpstart the nascent handheld navigation business.
The IPO is interesting timing in a volatile stock market — and with Nokia and Google offering free navigation. However, while Nokia, which owns digital map giant Navteq, is only giving away basic navigation maps, analysts would be surprised if the company also gave away detailed pedestrian maps for free. In addition, analysts say that Google’s free navigation intention is to sell ads to generate revenue.
RSS
Become a Fan
Join our Network
Follow Us
Please send any technical comments or questions to our webmaster.