Why Would Garmin Enter the Cell Phone Market?

Following the Nokia (NOK) bid for Navteq (NVT), which I openly criticized last week, rumors have been rampant that Garmin (GRMN) will enter the cell phone business. In fact Investor’s Business Daily is putting it in print. One simple question, why would Garmin consider this move? I am baffled.

Yes, the global growth story in the cell phone market paints a rosy red glorious picture of opportunity. There is no doubt the opportunity in China and India is huge. With that, let’s revisit the bidding:

1. Nokia is the market leader for the consumer segment, growing at breakneck speed globally. Nokia will likely be a big beneficiary of the global growth story into China and India.
2. Research in Motion (RIMM) has become a standard in the Corporate US Market and is expanding globally.
3. If the iPod is any indication, the upstart Apple (AAPL) iPhone will have an impact.
4. Between Samsung, LG, Motorola (MOT), and the rest there are lots of options.

There is no doubt Garmin makes great products and they are a leader in the GPS space. They cannot lose sight of the fact that they are not without competition. Further, even if you believe in the potential opportunity, the “follow the money” approach, you have to question the direction.

As strongly as I believe Navteq is a content company, I believe Garmin is GPS Company. They both cater to a specific customer. Yes in the past they have created a GPS enabled cell phone. It is foolish to believe that this means they know what it takes to win in the cell phone space. Note to Garmin, going it alone in the cell phone market is not a sound strategy.

On the other hand, they are an attractive target. But we can save that for another debate.

Comments

[Tom B:]

The irony is that even their core product, the GPS receivers, suck. A puzzling move.

2007 Oct 23 08:48 AM

[TP:]

" Nokia is the market leader for the consumer segment, growing at breakneck speed globally."

"Research in Motion (RIMM) has become a standard in the Corporate US Market and is expanding globally"

Sure, and so is Nokia in that segment. Not that Nokia would ever have been "consumer-segment only", but it is pushing now harder into the "corporate-only" segment than in the past. Not in the USA, though, where it has hardly any presence at all.

Of all smartphone devices shipped globally, Nokia ships over 50%, according to their own data.

Their smartphone software platform, Series60 or S60 now, is the market leader, followed by Windows Mobile as the distant second.

Yes, Apple may have an impact in select markets. Nothing relevant from Garmin or Nokia point of view, though. No, the iPod is not an indicator for anything related to the mobile phone industry... no more than it'd be for Apple's chances in the auto industry were it to create an iCar.

If Garmin were to move into the mobile phone business, they'd be after their own niche just like Apple. In such niches it is possible to operate profitably if you know what you're doing.

2007 Oct 24 08:09 PM

[TP:]

" Nokia is the market leader for the consumer segment, growing at breakneck speed globally."

"Research in Motion (RIMM) has become a standard in the Corporate US Market and is expanding globally"

Sure, and so is Nokia in that segment. Not that Nokia would ever have been "consumer-segment only", but it is pushing now harder into the "corporate-only" segment than in the past. Not in the USA, though, where it has hardly any presence at all.

Of all smartphone devices shipped globally, Nokia ships over 50%, according to their own data.

Their smartphone software platform, Series60 or S60 now, is the market leader, followed by Windows Mobile as the distant second.

Yes, Apple may have an impact in select markets. Nothing relevant from Garmin or Nokia point of view, though. No, the iPod is not an indicator for anything related to the mobile phone industry... no more than it'd be for Apple's chances in the auto industry were it to create an iCar.

If Garmin were to move into the mobile phone business, they'd be after their own niche just like Apple. In such niches it is possible to operate profitably if you know what you're doing.

2007 Oct 24 08:09 PM