Two years ago, navigation devices of the kind that you find mounted on car dashboards were one of the hot gifts of the holiday season and the stocks of Garmin and TomTom were riding high.
Not any more. Wednesday brought a double-whammy that knocked 21 per cent off shares in TomTom and 16 per cent off Garmin. Of the two pieces of news, it was the second that sounded the more ominous.
First was a warning from TomTom that prices for these devices, which not so long ago commanded a hefty premium, are likely to continue to slide. They dropped 27 per cent in the company’s latest quarter to an average of under 100 euros, and that erosion shows no sign of slowing.
Then came news of a direct – though expected – attack from Google.
To coincide with the launch of Motorola’s Droid – the first handset running version 2.0 of Google’s Android operating system – Google announced a free application that replicates the turn-by-turn directions currently found on a purpose-built navigation device.
The service, Google Maps Navigation, has everything you’d expect in a car navigation device, like the voice that tells drivers which way to turn next.
Tellingly, much of Garmin’s share price decline on Wednesday came only after the Google service had been announced.
The real challenge for Garmin and TomTom is not how they hold off an attacker bent on replicating their technology at a lower price, but instead how they expand onto Google’s own turf: the internet.
Navigation devices gain greater utility as they become connected, and that plays to Google’s strength. Its Android application has everything from real-time traffic alerts to local search. The navigation companies had already been moving in this direction, but now find themselves in head-to-head competition with the internet juggernaut.
Still, at least specialised navigation devices have one thing that Google-powered smartphones can’t yet replicate: the rubber suction cup for sticking them to the dashboard.
