Navigation devices set to take mass market route

ICT Materials 16 September 2007 22:24 (UTC +04:00)

( Reuters ) - Portable navigation devices are poised to take off this holiday shopping season as market leaders Garmin and TomTom race each other to make deeper inroads into the mass market by pushing out cheaper models.

The trend for entry-level gadgets will mean lower profit margins for Garmin Ltd and TomTom, but the companies are willing to make that sacrifice to lure consumers and go one up in their intense battle for market share, analysts said.

"Portable navigation devices are becoming a 'must have' device for a growing percentage of the population," JMP Securities analyst Ingrid Ebeling said.

Prices in the portable navigation devices market, worth about 8.5 billion euros ($11.79 billion) this year, have been sliding as Garmin and TomTom make more of their products for ordinary consumers.

The sleek gadgets show users where they are through preloaded maps on touch screens and also offer related information and features like a MP3 player and Bluetooth capability depending on the model.

Garmin's global average selling price has fallen to 320 euros ($443.9) in the year to date, from 458 euros ($635.4) in 2005, according to Canalys analyst Caroline Chow. TomTom's average selling price fell to 270 euros ($374.6) from 452 euros ($627.1) over the same period, Chow said.

Nasdaq-listed Garmin overtook its Dutch rival by a whisker in the second quarter to become the world's largest maker of navigation devices. In the quarter, Garmin had a 24.9 percent share of the burgeoning market and TomTom 24.3 percent, according to a report by market research firm Canalys.

But TomTom's planned acquisition of its main map supplier, Tele Atlas, could turn up the heat on Garmin, analysts said. Once closed, the deal could give the only other major map supplier, Navteq Corp, significant pricing power over Garmin.