Garmin Strengthens Position in Europe

19 July 2011

Garmin recently made a strong push into Europe, announcing it had signed an agreement to acquire German navigation software and hardware maker Navigon, according to the IHS iSuppli Automotive Infotainment & Telematics service, from information and analysis handler IHS.

In Europe, Garmin has been lagging behind its main competitor, TomTom, in market share for portable navigation devices (PNDs) as well as in terms of reach beyond the dedicated navigation market. TomTom has strong ties to a variety of European automotive OEMs, which work to integrate TomTom-provided solutions in an increasing number of models.

Similarly, Garmin has missed an opportunity to turn the growth of on-board mobile/smartphone navigation applications into a viable business model while the company sought to address the smartphone market with its own navigation-centric handsets. While Garmin’s alliance with ASUS failed, competitors like TomTom, Sygic, Magellan and especially Navigon have seen devices like the iPhone and Android handsets become new revenue drivers for their navigation software, in a market where dedicated navigation units continue to be threatened by smartphones and cheaper integrated solutions from worldwide original equipment manufacturers.

Acquiring Navigon, therefore, is a good opportunity to strengthen Garmin’s business in Europe on virtually all levels of the navigation market.

PNDs navigate market stagnation
In ?rst quarter 2011 ?nancial results, Garmin stated that while the company had seen some growth in the PND business during the period, the company did not expect further growth in this area of business, though it would continue to invest in the sector to further gain market share. Especially in Europe, Garmin has potential to grow, despite the fact that TomTom has dominated the PND market there from the beginning.

For its part, Navigon has been able to establish itself as one of the leading PND makers in Europe. Beyond that, the company entered the North American market with success, but had to withdraw in 2009 due to pricing pressures which the company could, or would not, support. Since its exit from North America, Navigon has focused its PND business on Europe.

Mobile phone strategy gets lost
Garmin, on the other hand, chose to focus on its own navigation-centric handsets as its answer to increased interest to always-connected navigation. While the original announcement for the upcoming handset was made early in 2008, the phone did not reach carriers or customers until mid-2009. Not only was the device more than one year late after the originally announced launching timeframe, but also by that time the smartphone market had changed dramatically—negating the original selling point of the Garmin handset.

Carrier ties buoy Navigon
In addition to being successful as a third-party developer for iOS and Android, Navigon has been able to establish tight carrier ties with Deutsche Telekom. Since April 2010, Navigon has been providing Deutsche Telekom with the Navigon Select service, starting with the iPhone. The application provides basic functions for free, like map views, but can be expanded via in-app purchases. From the time of the initial release, Navigon Select has been expanded to cover ?ve countries, and is available for customers with Android, Windows Phone 7 and Bada devices in addition to the iPhone.

Automotive business drives success
While Navigon has partnered with the likes of JVC and Mercedes-Benz in the past, the company is not discussing current or future engagements.

Similarly, Garmin has identi?ed the automotive business as a growth sector for the company, even though its focus until now had been on the North American market, highlighted in April this year with the opening of a dedicated facility for its automotive business in Detroit. Currently, Garmin is providing navigation in all Chrysler, Dodge, Jeep, and RAM products for Model 2011+, including the new UConnect Touch system in the Chrysler 300, Dodge Charger and Dodge Journey.

In Europe, TomTom has taken the leadership role in the form of partnerships with Renault and Mazda for integrated systems, as well as a host of other semi-integrated solutions for Fiat and Toyota, among others.

Sign of the times
The acquisition of Navigon by Garmin is a sign of the effects of competition from players like Nokia and Google as application providers, and also the result of the increased saturation of the PND market and continued demand for smartphones, which are replacing dedicated navigation devices. In this light, Garmin’s acquisition makes sense because it strengthens the company’s position in Europe, a big PND market where the company traditionally has played second ? ddle to TomTom.

The PND market continues to shrink in terms of the number of players in the space. Not only did Navigon combine with ViaMichelin operations in 2008, but other brands have been acquired and combined. While Magellan, Navman, Mio, and Falk and Becker all used to be independent PND makers, Magellan, Navman and Mio are now part of MiTAC, and Falk and Becker have been combined into United Navigation. Though the individual brands remain in various markets, the companies behind the brands realized that consolidation was inevitable.

While Navigon is a small company, it has been able to produce quality navigation products, including PNDs, as well as successful navigation applications. With the acquisition, Garmin will be able to ? x a weakness in its product portfolio while strengthening the other aspects of the navigation market. Equally, as a subsidiary of Garmin, Navigon should be able to innovate in the space with more ? nancial backing than might have been previously possible.

Find Out More > IHS iSuppli’s Automotive Research Portal—Portable & LBS

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