Yet is all lost in the fiercely competitive personal navigation device (PND) sector? Yesterday, Garmin’s rival TomTom rose 16 per cent on the announcement that Apple will be licensing maps and related information from the GPS navigation firm.
When your sector is being turned upside down, it makes sense to hitch a ride with the innovators. With 48.9 per cent of the UK population owning a smartphone by 25 January this year, according to Kantar Worldpanel, it is the platform to be on. TomTom has been aware of this for years, teaming up with HTC in 2010, and announcing that Samsung’s Wave3 Bada smartphone would use its maps earlier this year. Nor is it alone: Garmin-Asus announced its partnership to make smartphones with built-in satnav as far back as 2009. And Apple’s willingness to bite proves just how much value it sees the satnav firm bringing to this deal, enough to tempt a tech behemoth out of taking such services completely in-house.
That’s possible because satellite navigation isn’t just about gadgetry: it also relies on supplying very large, very accurate datasets that are challenging to compile and maintain. TomTom added to this natural advantage when it spent €2.9bn buying Tele Atlas in 2008, which used to supply UK maps to Google until late 2011. Apple has given the push-off to Google, unsurprisingly keen to get out of its competitor’s bed, but TomTom’s astute acquisition has allowed Apple to buy access to the next best thing.
Yet Apple has other sources of maps than TomTom and this deal can’t solve all of its problems. This April, the Dutch company posted first quarter results with revenues down 12 per cent year-on-year. It also highlighted the shrinking market for dedicated satnavs: the European market was 2m units compared to 2.4m units in the same quarter of 2011, while the US market size fell from 2.1m to 1.4m quarter-to-quarter.
That matters, because TomTom still relies on the declining consumer market for more than half its revenue. The deal with Apple will boost licensing revenue, but it is also likely to cannibalise sales of the company’s own iPhone app.
Satnavs are a brilliant invention, and those licensing the software and map data at the technology’s heart will remain in demand. But not dedicated devices. My car has a built-in cassette player and a personal navigation device in the boot – but it’s the iPhone in my wife’s hand that plays music as we drive and points out what exit to take next.
Marc Sidwell is City A.M.’s managing editor