And you thought you had a bad day? Before the market open on Wednesday, Garmin reported lower than expected Q2 profit and lowered guidance for FY2008. The stock ended the day down 21% at a fresh 52 week low. And to top it off, the company delayed the Nuvifone launch to the “first half” of 2009. Ouch. We’re just barely past the first half of 2008.
“The nuvifone will not be available in fourth quarter as previously announced. While we had hoped to have carrier launches in the fourth quarter, we have found that meeting some of the carrier specific requirements will take longer than anticipated. We remain pleased with carrier interest in the device and are working toward making necessary design changes to meet their requirements. We anticipate launching the product during the first half of 2009.”
Carrier specific requirements could mean anything. Possibly issues integrating with the Nuvifone’s custom OS. Maybe the device still won’t make phone calls consistently (don’t laugh, I’ve seen this with high profile pre-launch phones before). In either case, the Nuvifone will be completely irrelevant by the time it eventually launches. The iPhone will be on its third iteration. Like many consumer electronics companies before it, Garmin is slowly realizing the numerous complexities of building a phone and working with wireless operators.
These are the kind of specs that most wireless consumers are drooling over: touchscreen, 3G data, WiFi, integrated GPS and media player. But would you pay $499 for a Garmin Nüvifone? I didn’t think so. That’s because iPhone 3G just launched today at a $199 price tag, with all of the same features. The Nüvifone still isn’t slated to launch for another three months or so.
And when it does finally launch, it will find itself competing with a number of sophisticated GPS-enabled smartphones in addition to the popular iPhone: BlackBerry Bold, Samsung Instinct, Nokia N96 and others. The pricing pressure will be brutal.
“Getting to the viable price of $199 could involve considerable pain,” says Oppenheimer analyst Yair Reiner. At a $200 subsidy from the carrier, Garmin is likely looking at a product margin in the mid-teens, estimates Reiner. Compare that to Yankee Group’s estimate of 50% gross margin for Apple’s 3G iPhone.
Pricing aside, perhaps the biggest competitive advantage Apple has is the new iTunes App Store. Can you get SEGA’s Super Monkey Ball for the Nüvifone? Nope. Other than Garmin’s turn-by-turn software, you’re pretty much left with GyPSii, a second-rate social networking LBS app. That’s the downside of not having a developer community, as Steve Jobs discovered decades ago in the Mac/PC wars.
It’s no wonder that investors seem to have priced in a Nüvifone disaster, with GRMN trading down 56% YTD.
Garmin made a splash last night and announced their new mobile phone. The nüvifone will feature a 3.5-inch touchscreen, internet browser, HSDPA support, Bluetooth, WiFi, camera, media player, and preloaded maps of North America and / or Europe. In addition, it houses “millions” of POIs, doles out turn-by-turn, and voice-prompted directions. Garmin has partnered with Google to integrate access to Local Search and Panoramio. But here’s the problem - the devices run Garmin’s proprietary PND OS.
As expected, there has been considerable confusion and ignorance coming from Street analysts and the media. No, this is not Garmin’s first foray into the mobile phone market (Garmin NavTalk) nor is it “the first time navigation and LBS have been put at the core of a wireless device” as an Oppenheimer note trumpeted (Nokia 6110 Navigator).
This strategy is hardly unexpected - GRMN has taken a ugly beating over the last three months because of the perceived threat of shrinking PND margins and increased competition from mobile phone manufacturers. Garmin knows they need to enter the market in a big way. But without the scale and distribution that device makers like Nokia and Samsung enjoy, does Garmin stand a chance? I think it’s likely that Apple, Nokia and HTC will eat Garmin for lunch. Keep your eyes peeled - nüvifone is expected in Q3.
Finally back and recovering from the 2008 edition of the Consumer Electronics Show in Las Vegas. It’s always jarring to go straight from a nice, long holiday vacation to the CES three-ring circus. My impression of the show in one word: disappointed. Maybe the most exciting thing was that Garmin had a GPS repeater set up at their booth to get a live feed for demo devices. Or perhaps that 150″ Panasonic plasma. But isn’t this the consumer electronics show? Come on guys, that’s an ego trip, not a consumer product. And Garmin shares have fallen nearly 25% since the show began, so obviously the Street didn’t like the repeaters as much as I did. Not much new for phones either, although I liked the GPS-enabled Sony Ericsson W760. But hardly big news. Truthfully, connected devices were the theme this year. Garmin announced MSN Direct-powered PNDs like the Nuvi 780 and 880. Magellan had the Maestro Elite 5340 with Google Local Search via two-way connectivity over GPRS, but that will set you back $1300 and $40/mo. And don’t forget Dash Navigation. Last year’s big news of the show was the iPhone, but that wasn’t even at CES. So here’s some food for thought - is the CES hype too big for its own good?
Don’t you love the drama? Less than a month after Tom Tom finalized a $2.5B bid for Tele Atlas, Garmin trumps with a $3.3B offer. This puts the Tele Atlas board in a very uncomfortable position. The strategic fit with Tom Tom is much stronger - both companies are based in the Netherlands and most of Tom Tom’s devices use TA data. But the board has a fiduciary responsibility to TA shareholders and would have no choice but to accept the new offer, if the bid is indeed apples to apples. On the other side of the table, Garmin almost exclusively uses Navteq data. I’m not sure how deeply integrated the data is, but it won’t be a trivial process to change horses. And here’s the kicker - Garmin won’t make the offer official until December 4th, the same say the Tom Tom bid expires.
How’s this for a possible soap opera: Tom Tom loses Tele Atlas and switches to Navteq for licensing data. Garmin gets TA, overpays and has a nice goodwill write-off in a few years. Nokia ends up the winner, despite a mammoth $8.1B price for Navteq, since mobile LBS is the future. Meanwhile, Google launches an open source mapping program that makes all of this consolidation seem laughable in hindsight. It could happen…
Helio just introduced Fin, a super slim 3G phone from Samsung. With Fin, Helio debuts Garmin Mobile for voice-guided navigation. The service is now available on the Ocean handset as well. Priced at $2.99 per day, Garmin Mobile can also check weather for driving conditions and find alternate routes in the event of heavy traffic. Interesting to see that there’s currently no monthly subscription option. Which is probably a smart move - how many subs in Helio’s demographic are frequent business travelers who would need a monthly plan? Despite the buzz, Helio only has 100K subscribers, so this is just another indication of how desperate Garmin is getting on the mobile front after finding little traction with the Big 4 carriers.
And with the new HelioUP service, photos and video shot with Fin’s 3 megapixel camera can be uploaded to YouTube and Flickr directly from the phone. HelioUP is GPS-enabled so users can geo-tag photos and video with location information and other metadata. Subscribers can post geo-tagged photos from their device directly to Flickr’s World Map (flickr.com/map). This is where things start to get interesting. Navigation is getting the most attention right now, but I think social LBS (including content sharing) will be the big winner.
An article in today’s NYT profiles Garmin’s recently launched Astro, a GPS system that keeps tabs on dogs during walks in the countryside or in the dense ground cover of a hunting trip. It has two parts: a hand-held GPS unit for the owner and another device that is mounted on the dog’s collar or harness.
The market is vast: nearly 45 percent of United States households own dogs, according to the American Pet Products Manufacturers Association. Garmin is selling the Astro for $599, which may not be too pricey for a market segment (hunting) that already spends quite a bit on their dogs. Businesses that sell the Astro include Bass Pro Shops and Cabela’s, and even Target.
The system will keep track of dogs up to five miles away in the countryside, Garmin spokesman Ted Gartner said. If the dog goes over a mountain, the radio signal between dog and owner will probably be lost, because the radio needs a line of sight to communicate.
Several GPS systems on the market track dogs by sending location alerts to a cellphone, but Garmin had a reason for not going that route. “Dogs are not always in areas that have cell coverage,” Gartner said.
IntelliTours has launched GPS audio driving tours for the Garmin Nuvi and other Garmin navigators, and invited drivers to sample the tours for free. The demos include sections of Interstate 95 in New Jersey, Maryland (around Washington, D.C.) and Richmond, VA, and Route 1 through the Florida Keys. The second phase, a full catalog of fee-based GPS tours for select Interstate highways, scenic byways and national parks, will be launched later in the year. Test drivers who sign up now will receive a free tour for their feedback.
I’m a big believer in custom navigation content and think this could do quite well if marketed right. But to start with I-95 from Secaucus to East Brunswick? I’ll wait for Yellowstone…
Personal navigation device (PND) maker TomTom made an announcement this morning about plans to acquire Tele Atlas, the #2 provider of digital map data. TomTom said it would pay 21.25 euros ($29.33) per share for the Netherlands-based Tele Atlas. The offer was a 28 percent premium to Tele Atlas’ closing price on Friday. TomTom is the world’s leading PND manufacturer, with market share in Europe of just under 50 percent and around 20 percent in the United States.
Tele Atlas has deals to provide map data to TomTom, Qualcomm and Nokia, while Garmin, Google, Yahoo and AOL’s MapQuest use mostly Navteq. But the bigger companies use at least some information from both, and analysts say they have an interest in ensuring neither Navteq nor Tele Atlas becomes too dominant at geo-mapping information.
This show isn’t over yet - some analysts commented that TomTom’s offer is low and that a counteroffer could come from someone like Google. Navteq, the leading provider of map data, is considered an unlikely bidder for anti-competitive reasons. Tele Atlas management supports the deal and is talking to shareholders, but a tiny breakup fee of €20 million ($27.6M) could make them change their tune if something better comes along.
Garmin announced today that Handmark, a mobile software distributor, will sell Garmin Mobile for BlackBerry devices enabled with GPS. The app will be priced at $9.99/mo. “We are pleased to offer Garmin Mobile through Handmark’s vast distribution channels because it will make it easier for BlackBerry customers to subscribe to Garmin Mobile, regardless of the carrier,” said Charles Morse, Garmin’s director of mobile and PND marketing.
The key phrase there is “regardless of the carrier.” Garmin, despite their enormous brand in the GPS space, has failed to make much progress in mobile. They are currently available only on Sprint, although Telenav is the carrier’s preferred partner. Garmin Mobile is relegated (along with MapQuest Mobile) to poor deck position. Looks like they are tired of waiting for the carrier to come around.
Finally back and recovering from the 2008 edition of the Consumer Electronics Show in Las Vegas. It’s always jarring to go straight from a nice, long holiday vacation to the CES three-ring circus. My impression of the show in one word: disappointed. Maybe the most exciting thing was that Garmin had a GPS repeater set up at their booth to get a live feed for demo devices. Or perhaps that 
