Garmin may be the king of GPS, but for years, smartphone makers have been nibbling away at its market share through their incorporation of GPS technology into their talk-boxes. As GPS tech became ubiquitous, we saw Garmin's margins tumble. The spread of GPS into the cell phone creates a powerful, disruptive force that threatens Garmin's core business.
Clearly, something had to be done. And in January 2008, Garmin promised to do "something" -- the nuvifone G60. (Of course, it then proceeded to spend 20 months futzing around before finally announcing the nuvifone's arrival this week.) And now that Garmin has finally set a release date, it then turns around and locks the phone into an exclusive deal with AT&T. Why?
I mean, if Garmin had chosen to go with Verizon
But AT&T? It lives and dies on the iPhone's success. To AT&T, nuvifone may be a shiny new toy, but it's hardly going to get the same kind of support that AT&T throws Apple's
Three's a crowd, and four's even worse
Faced with the same "convergence" problem dogging Garmin, rival TomTom chose to develop an "app" for Apple's iPhone. They get $100 a pop for the software, with no hardware expense to drag margins down.
That seems like a pretty sweet deal to me. And even Garmin recognizes the economic advantages of "going virtual." It sells similar apps for smartphones by Research In Motion
Call me a pessimist, but I simply see no way this can end well for Garmin. It bungled the nuvifone from the get-go, and now it's made things worse by choosing AT&T as its dance partner. Suffice it to say that my faith in Garmin's genius has been well and truly shaken.
Disagree? Feel free. If you see method in Garmin's madness, scroll down to the comments section below and tell me why I'm wrong.
Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. Apple is a Motley Fool Stock Advisor selection. Sprint Nextel is a Motley Fool Inside Value recommendation. Garmin is a Motley Fool Global Gains pick. The Motley Fool has a disclosure policy.