I like GPS, even wrote a block entry about it. So the question is why did the share value drop faster than gravity on Jupiter? Answer is that it baffles even the CEO of the TomTom.
Ok so what gives is it justified? No! Let me explain a bit more about GPS, and this is what I think the market is missing. The market is concerned about shrinking margins and lower product costs. Well duh, when was the last time tech did not drop in price. And people are concerned about competition from China. But I think there some big things being missed here.
- Competition from China is irrelevant. Don’t you think that TomTom and Garmin are already getting their devices built there?
- Competition trying to compete on price is irrelevant. Let me explain GPS (I have had multiple GPS units since 2000). The strength of a particular GPS unit is not the device but the data and software that runs on the device. Hardware is a small part of an actual device.
- The future of GPS is the combination with a cellular network which both TomTom and Garmin are pursuing in their own ways.
- The data on the GPS which are the maps are created by a set of companies and they charge each company an equal price. Thus a cheap manufacturer cannot go below a certain price. In GPS there is a bottom to how much somebody can charge because other costs are not flexible.
- The future of GPS is software and not just the device that you see in your car. Take a look at the individual homepages of each respective company and you will see that there is quite a bit more.
- And neither company has yet targeted South America, Russia, and Africa with any effort. Think hard about this. These places are considered “growth” places and yet the navigation makers have yet to scratch the surface. Why? This goes back to my original premise. GPS is only as good as its software and data. Right now there very little map data for these places, but imagine if there were!
Though who am I to argue with the market…