As GPS Navigation Devices Become Commodities, Profits Drop

Lower consumer spending, pressure from all-in-one phones from Nokia and company, and plain ol’ competition are cutting heavily into the profits of GPS navigation devices from TomTom and Garmin, reports BusinessWeek:

Consumers bought more than 22 million PNDs in 2007 and are expected to buy more than 32 million this year, says Richard Robinson, an analyst at market research firm iSuppli. But the average selling price on a PND in 2007 was $249, less than half the 2004 average of $505. Margins are slipping, too. “These companies got used to making profit margins of 45% to 60% during the 2004 to 2005 time frame,” Robinson says. “Now they’re having to contend with margins that are closer to 18% to 20%. That’s not ringing well with the financial guys. The problem is you can only make so much on each unit you sell.”

This is why Garvin is making its own phone. Eventually the only gadgets will be communication lumps produced by a variety of vendors, capable of navigation, MP3, video, photos, internet, and—oh yeah—voice. But that “eventually” will still take another decade or so to sort out, especially if some company comes up with some new feature that takes more than just a chip and a little software to add.

TomTom and Garmin Lose Their Way [BusinessWeek.com]

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