Finding Profits in the GPS Economy
(Business 2.0) – Tractors that steer themselves. Property that "knows" it's been stolen. Airplanes that land without a pilot. The opportunities surrounding the global positioning system are already mind-boggling, but now the industry is set to skyrocket. This spring the U.S. government will launch its first next-generation GPS satellite--to complement the 30 older models already in service--creating stronger signals, increased bandwidth, and lots of potential for smart entrepreneurs.
Since the Defense Department made its GPS signals available for commercial use in 1993, the market for location-based services has swelled to nearly $5 billion, and that's only the beginning. "Demand for these services could easily double in the next few years," says Frank Viquez, a director at New York-based ABI Research. What's more, three hot growth areas--tracking, navigation, and hardware--promise to be multibillion-dollar markets by 2010. Though startups are pouncing, plenty of technologies remain untapped, such as automated navigation systems in family cars that keep drivers a safe distance from other vehicles.
The most visible GPS applications tend to radiate from huge companies. UPS, for one, plans to outfit 75,000 drivers with GPS-enabled handhelds this year to help them reach destinations more efficiently. But startups offering similar navigation and tracking services could also make out nicely. Consider AtRoad, a Fremont, Calif., firm that went public in 2000. It offers "geo-fencing" software that triggers e-mail alerts if a company vehicle speeds or ventures into unauthorized areas. AtRoad charges a monthly fee of $45 per head to track more than 133,000 employees of clients such as SBC, Verizon, and the city of San Francisco. For the fiscal year that ended in December, AtRoad's revenue grew 19 percent to $75.2 million, with a whopping 12.2 percent net profit margin.
And the lucrative location game doesn't end there. Just ask Apple co-founder Steve Wozniak, who in 2002 started a company named Wheels of Zeus that combines GPS data with local wireless networking. The technology helps parents keep tabs on their children or can alert IT managers when company-owned computers leave the premises. Meanwhile, Zingo in the United Kingdom uses GPS-enabled cars and text messaging to help subscribers hail cabs.
Agriculture and manufacturing, too, are getting a taste of the technology. Autofarm, a division of Menlo Park, Calif., startup Novariant, outfits tractors with antennas that pick up signals to automatically guide the equipment and control the amount of pesticides and fertilizer it uses. "Who would have guessed I'd be using satellites to farm?" asks Ellis Moore, a Texas farmer who says Autofarm saved him $500,000 in labor and wasted-chemical costs last year. So far Autofarm has shipped more than 1,000 guidance systems worth $50 million. Similarly, contractors at the Morenci copper mine outside Tucson, Ariz., use GPS receivers and software from Silicon Valley's Trimble to navigate giant dump trucks around cliffs and mine shafts. Trimble's takeaway: record earnings of $668.8 million in 2004, with profit of about $68 million. Next up? The maritime industry, which ABI Research predicts will invest hundreds of millions in coming years to outfit cargo containers and ships with GPS receivers.
Of course, under the hood of every GPS application is a special microprocessor to analyze satellite signals. Though chipmakers like Qualcomm offer GPS hardware, the company to watch is Sirf Technology, based in San Jose. Sirf charges its clients--including LG Electronics and Motorola--about $13 per device to put its GPS chipsets in phones, electronics, and car navigation systems. Since its public offering last April, the company has seen revenue climb 60 percent to $117 million, and net profit hit $30.7 million last year. And with a new federal regulation forcing wireless operators to include GPS in their phones and networking equipment, chip demand is sure to explode. The GPS opportunity is out there, if only you know where to look. -- MATTHEW MAIER