Is This the End of the GPS?

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Nokia (NYSE: NOK  ) hates Garmin (Nasdaq: GRMN  ) . Oh, and Google (Nasdaq: GOOG  ) , too.

Yesterday, the mobile market leader said it would begin giving away turn-by-turn navigation services based largely on technology acquired in an $8.1 billion deal for NAVTEQ in 2007.  

"Why have multiple devices that work in only one country or region? Put it all together, make it free, make it global and you almost double the potential size of the mobile navigation market," said Nokia Executive Vice President Anssi Vanjoki in a press release.

This isn't a cheap stunt. According to the Nokia observers at the website, Ovi Maps was costing users a yearly fee of 50 British pounds per region in Europe, with additional charges for traffic information. That revenue is now history.

Interestingly, these are the same analysts who in November called on Nokia to distribute Ovi Maps freely in response to Google. The Big G introduced turn-by-turn navigation in Motorola's (NYSE: MOT  ) Droid smartphone, which uses the Android operating system.

As writer Steve Litchfield put it at the time:

By this time next year, Nokia's Ovi Maps might find itself with a direct competitor which is absolutely free. And which, if we're all honest, has much better underlying sources of points of interest and is much better at finding things in the real world.

No need to wait till November, Steve. Nokia's taken your advice, which means it just got harder for this hardware and handset maker to diversify into higher-margin mobile services. Investors can't be pleased.

Free works for Google, because what The Big G offers for free, someone else pays for -- advertisers, specifically. Nokia doesn't have this cushion, nor does Research In Motion (Nasdaq: RIMM  ) . Apple (Nasdaq: AAPL  ) bought help when it acquired the Quattro Wireless ad network, but it's still a hardware company.

This strategy only works if Nokia's smartphones outduel alternatives. Specifically: the BlackBerry, the iPhone, Palm's (Nasdaq: PALM  ) Pre, and in Asia, well-designed handsets from Samsung and LG, among others.

Now it's your turn to weigh in. Does giving away Ovi Maps give Nokia a competitive advantage? Or is it a desperate move by a desperate company? Make your voice heard using the comments box below.

Apple is a Motley Fool Stock Advisor selection. Google is a Motley Fool Rule Breakers recommendation. Nokia is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is here for you, just a click away.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2010, at 11:03 PM, LeeSongK wrote:

    Yes, I agree Nokia doesn't get it.

    The iPhone has 20 navigation solutions. Some are ports of other like TomTom and some are next generation like MotionX.

    That's a huge advantage on the iPhone: Choice. I evaluated all of them and the MotionX seems to be improving every week and is not the better solution and the most cost effective.

    That's what diversity and competiton does: If the rate of improvement for navigation on the iPhone continues with products like MotionX, soon the question on othert SmartPhones will be: How do we get MotionX. But MotionX is only for the iPhone.

    So Nokia tries to compete by making their very average solution free and not having *ANY* other choices. Apple promotes diversity and innovation.

    Apple will win in the long term. Making things free doesn't push innovation. It chases any alternatives away. Nokia will become closed and sterile.

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