Garmin loses its way
The No. 1 maker of GPS devices is having a tough time keeping Apple and other cellphone makers off its turf.
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| Garmin hopes its upcoming nuviphone (above) will help fend off cellphone makers. |
NEW YORK (Fortune) -- Not long ago, investors couldn't get enough of Garmin and its hugely popular line of GPS devices.
Today, Garmin's world has been turned upside down as a crush of competitors seek to cash in on consumer appetite for navigational devices and rising demand for applications, known as location-based services, that offer, say, restaurant recommendations or turn-by-turn directions based on where a customer is at any given time.
Garmin, the world's largest maker of GPS devices, is desperate to protect its turf. On Monday, the Cayman Islands-based company announced a new deal with online map sites Google Maps and MapQuest, a unit of Time Warner (TWX, Fortune 500), that lets users transfer their travel directions to Garmin devices via USB connections.
There's no mystery why Garmin (GRMN) announced the deal one day before Tuesday's opening of CTIA 2008, the wireless industry's annual confab in Las Vegas. The event promises to showcase the latest evolution of the cell phone, including a variety of software advances like navigation- and location-based services that threaten Garmin's dominance.
But if Garmin's goal was to steal its would-be rivals' thunder, it failed miserably. These days, moving any data via a USB connection is considered old school. Google (GOOG, Fortune 500) and MapQuest, by contrast, already have send-to features that deliver directions wirelessly to mobile phones.
Garmin's ho-hum move Monday highlights the challenges it faces from encroaching cell phone makers and software providers. Garmin's stock - down 43% so far this year - has reflected the worries among shareholders that the tech shop is about to be eclipsed.
The company's top threat is No.1 phone maker Nokia (NOK), which agreed last year to buy Navteq (NVT), Garmin's map supplier. In November, after a failed bid for rival mapper Tele Atlas, Garmin signed an eight-year supply contract with Navteq to make sure it had map data access after Nokia takes over. Terms of the deal were not disclosed.
Nokia's buyout of Navteq is one piece of an ambitious strategy to move beyond phones and into mobile services like GPS navigation and e-mail. If that doesn't send Garmin's compass spinning, Apple's (AAPL, Fortune 500) entry might. The next version of Apple's iPhone will include GPS navigation, a potentially compelling feature on a wide touchscreen.
Garmin hopes its upcoming "nuvifone," unveiled earlier this year, will crush rivals when it goes on sale before the critical holiday shopping season. That may be wishful thinking: Garmin rolled out a mobile phone several years ago that faded out quietly. While the nuvifone is sleek and has all the standard features of a mobile phone, it's unlikely to outshine the competition.
No pun intended, but Garmin's going to need more than Google Maps to keep from getting lost in this crowd. 
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