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April 28, 2008

Standalone GPS prices to plummet?

Toby Sterling at the AP has an assessment of the GPS market which is bad news for makers of standalone GPS boxes, but good news for consumers – GPS market at turning point with sliding prices, demand off:

Consumer navigation devices have gone from expensive gadgets to mainstream gear in just three years, but Europe’s largest maker is struggling.

The experience of Netherlands-based TomTom NV — which saw earnings fall 83 percent in the first quarter — suggests the market for stand-alone global-positioning systems is at a turning point.

“What we saw for the first time is that selling prices fell, but volumes didn’t improve enough to compensate,” analyst Eric de Graaf of Petercam said after the results were reported Wednesday. “It’s a signal the market is getting saturated.”

Some analysts believe that as stand-alone versions are overtaken by cell phones and other devices with navigation technology built in, GPS devices will become low-margin commodity products, like pocket calculators. But others think a smart company could turn GPS devices into premium products the way Apple Inc. made its iPod music player stand out from a host of cheaper devices.

Now, 10 percent of U.S. drivers and 20 percent of those in Europe own a navigation device. But prices for basic stand-alone devices have fallen below $200 from $500 or more.

TomTom’s main competitors are Garmin and MiTAC which are numbers 1 and 3 in sales respectively and all three combined amount to 80% of the market. MiTAC is indicating 15% lower sales while Garmin hasn’t reported as yet and is cushioned by making industrial GPS units for aircraft and ships.

The big competition in the future is apparently expected to be from cell phones, but I find standalone GPS units hard enough to read, much more trying the same thing on the average cell phone screen. Still, in a saturated market, price should continue to fall and manufacturers will keep adding bells and whistles to try to prop them up.

Posted at 2:50 pm. Filed under Bargains, Companies, Garmin, GPS, TomTom

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