How Androids Are Killing Garmin

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Google (Nasdaq: GOOG  ) doesn't dominate every market it enters. Rivals in freshly staked Big G territories aren't automatically dead meat, though they'd best keep a wary eye on the newcomer.

But sometimes, Google's tactics just happen to fit that new market like a glove, and there's really no room for old-school incumbents anymore. That's where TomTom and Garmin (Nasdaq: GRMN  ) come in. The latest update of Google's mobile maps app makes it perfectly clear that the old navigation giants must change radically -- or die.

Google Maps for Android devices will now route you around heavy traffic. Drawing data from Department of Transportation sensors, and using GPS data from Android phones to assess car landspeed velocity (African or European?) along major roads, Google's maps have outlined traffic congestion in colorful graphics for a while now. But now, the navigation app takes advantage of that information to help drivers avoid nasty hotspots.

The massive and fast-growing installed base of Android phones makes Google Maps a dangerous competitor to any on-the-go information gadget. It also ensures a heavy flow of self-sourced traffic data.

It's not that the GPS guys aren't trying. Garmin's latest and greatest nuvi 2460LMT, for example, proudly boasts free map and traffic updates for life. In the case of Garmin, its premium subscriptions tap into databases from Nokia's (NYSE: NOK  ) Navteq maps service. Also competing in the space -- if you happen to own the right GPS model -- is XM Traffic from Sirius XM Radio (Nasdaq: SIRI  ) . You'll certainly tap into the same official sources that Google uses (Department of Transportation sensors, etc.), but without the benefit of an army of data-gathering Androids to increase the effectiveness of monitoring traffic.

And those plans will cost you. XM NavTraffic on its own is $9.99 per month, or an extra $3.99 if you're an XM Radio subscriber. Most Garmin models still require an extra $50 to add premium traffic from Navteq.

Consumer-level GPS service has become a smartphone app, removing the need for a separate gadget. It's hard enough to beat "good enough but free" with high-priced premium alternatives, but it's even harder when the free stuff is at least as good as the premium version. Maybe even better.

Garmin has tried its hand at navigation-happy smartphones and failed miserably. Automotive and mobile sales are falling precipitously. It's a good thing the company is big in GPS devices for fitness, aviation, and marine applications, because the car-mounted market is moving to Mountain View.

Garmin will survive, but it's becoming a shadow of its former consumeristic self. The stock has lagged behind the S&P 500 over the last five years, and it would have lost you money if not for a generous dividend program. That's not changing anytime soon -- unless Garmin can reinvent itself.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (4) | Recommend This Article (9)

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  • Report this Comment On March 08, 2011, at 4:29 PM, Pitcheephus wrote:

    Nice Holy Grail reference. IMO Garmin's days as GPS for autos are waning, but I have heard good things about their products in the marine and aviation industries. I wonder if aviation is Garmin's Holy Grail

  • Report this Comment On March 09, 2011, at 9:10 AM, jalan94 wrote:

    I think this article nailed the issue, with one exception. In the short term this may be about PND versus smartphone navigation. But long term this is about LBS and mobile advertising. I don't know how the board of directors for Garmin and TomTom let their management teams stay in place. They've missed the wave and given up the market. They've focused all of their time trying to figure out how to sell their next $300 piece of hardware in a time when consumers are only interested in $300 hardware from HTC and Samsung. Business students will study this case study some day as an example of not adapting your business to the obvious trends slapping you in the face.

  • Report this Comment On March 09, 2011, at 11:47 AM, pryan37bb wrote:

    Let me play devil's advocate. I'm a pilot in training at Embry-Riddle in Florida, and our planes are outfitted with Garmin G1000 units. Let me tell you, they make things much easier than they could otherwise ever be. They consolidate navigation, communications, and engine performance monitoring equipment in a very easy-to-use interface. I don't own GRMN, although I did look at it for its yield. If you ask me, I think they should sell their automobile operations and focus more on planes and boats, where they are still top dog.

  • Report this Comment On September 12, 2011, at 8:00 PM, Mivali wrote:

    I have navigators, have phones and computers in my office, and phones and computers at home. I'll have a laptop at airports and these days hot spots are common. I never really needed an Android phone since I use my phone mostly in the car, and hands free. But these days, I can get an Android phone for free.

    The catch is that I don't need a data plan for anything else (although it would be a nice frill), and it wouldn't help me in Europe, Asia or elsewhere anyway. So I looked into offline map support for Android, since the GPS is there. I ended up finding a few, and unlike Google, the good ones cost money. But the reviews I found for the paid ones showed that they offered value beyond what frustrated users got from Google.

    It turned out that of all the ones I saw, Navigon got the most favorable reviews for both offline support and on line use. It also turned out that Navigon is now a Garmin company.

    That being said, I didn't go out and buy it. I don't know how far Google will go and how fast, but for now I don't need new navigators. When I do, Google may have caught up. Or I may find that it would be cheaper to have reliable off line use in Saigon than spotty third party coverage by the megabyte.

    Likewise, for those who need an Android phone for day to day use, using Google (at least domestically) is a good wait-and-see solution, but people who need something more probably have handheld navigators anyway.

    The real question is going forward. Will Google become good enough or will Garmin be able to survive in the "app for that" market? If I could click on something in an app store and get Garmin for $9.99, I'd buy it. I'd probably pay for non-US maps with little hesitation when needed. But is there a price point at which Garmin can survive on quantity, low cost and thin margins? Given that they won't need to sell hardware, I wouldn't give up on them just yet. How high would you go before thinking about the cost for such an app?

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