RSSWere PND devices just a flash in the pan?
by Tim Conneally
Dutch Personal Navigation Device company TomTom posted a dramatic 83% first quarter drop in European earnings thanks to a number of factors; many of which could add up to the commodification of GPS.
TomTom warned of its diminishing revenue first when it lowered its full-year guidance from €2.14 billion to €1.8-2.0 billion in the beginning of April as stocks dropped 13% in value internationally.
But then, during the company's 2008 first quarter earnings call, TomTom announced an unexpected 83% drop in earnings. The prior year's total first quarter earnings were $70.3 million, and this year's were only $12 million. Additionally, sales revenue fell 22% to $147 million.
NPD research shows that historically, TomTom leads the European market, while Garmin leads in the United States, both with around a 50% share in their strongest markets. This remains true, although Garmin retains a close second position behind TomTom in Europe, and a February 2008 ChangeWave survey showed that the closest rival to Garmin's 56% U.S. market share is actually Magellan with 12%, TomTom hovered somewhere around only 8%.
Though Garmin has not yet posted its earnings -- it does so on April 30 -- a Reuters report quoted a company executive anticipating a 40-50% drop in its first quarter revenue as well. That company's stocks have dropped almost 60% from their 52-week high.
The study "World GPS Market Forecast to 2012," says that at the end of 2007, 90% of GPS devices sold were PNDs. Including holiday sales, 33.9 million units were sold, against 11.9 million of the prior year. A softening of the market after such a surge indicates market saturation. Furthermore, the overall drop in the selling price of PNDs has significantly lowered their profit margin. Garmin's CFO actually predicted another 20% drop in its devices' selling price for 2008.
The study expects GPS-enabled cellular handsets will usurp the majority share presently held by PNDs, reaching as high as 78% by 2012. With the cost of many consumer GPS receivers at under $10 , and the growth of location-based rich applications, some anticipate GPS will be a standard option like Wi-Fi and Bluetooth in many devices.
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Substitute "PND devices" with "automobiles", "vacations", "computers" or anything else you want. Its the crippling of the US economy by the North American Unionists thats to blame. Want an economic turnaround? Oppose the NAFTA superhighway, fight the dismantling of borders in North America and vote against anyone who doesn't!
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Agreed. I have had a phone with a dedicated GPS chip (SiRF III) for about 2 years now and the next one I buy will definitely have one too. GPS on the phone is amazingly convenient since the phone is with you all the time anyway. Check out http://glofiish.com/
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