Garmin to Face Tough Test in Smartphone Market

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Garmin, the biggest U.S. maker of personal navigation devices, is plotting a new course -- some say an uphill one -- to take on Nokia and Research in Motion in the fiercely competitive smartphone industry.

BANGALORE (Reuters) - Garmin Ltd, the biggest U.S. maker of personal navigation devices, is plotting a new course -- some say an uphill one -- to take on Nokia and Research in Motion in the fiercely competitive smartphone industry.

Garmin's touchscreen "nuvifone", to be launched in the third quarter, puts navigational technology at the heart of the device.

But analysts say success will depend on whether Garmin can build brand recognition, find the right price and form relationships with wireless carriers -- areas where heavyweights like Nokia Oyj and Samsung Electronics Co Ltd have a huge advantage.

Garmin's device, which also has an Internet browser and offers personal messaging apart from global positioning system (GPS) technology, is expected to sell for between $500 and $600, in the ballpark of Nokia's hugely popular N95, an analyst said.

Garmin has not disclosed pricing details of the nuvifone, which will compete against Research In Motion's BlackBerry Pearl 8110 and Nokia's N95 and N82 multimedia phones.

The enV from LG Electronics and Samsung's i550 are among others that also offer GPS.

The nuvifone has drawn comparisons with Apple's iPhone for its design, simplicity and touchscreen display. Both devices have a 3.5-inch screen.

But Gartner analyst Roberta Cozza said she considered the nuvifone to be a navigation device with some phone capabilities, rather than the other way round.

It will be tough for Garmin to go head-to-head with handset makers as they have strong brands and established positioning, she said.

"They could remain a niche player, but to drive volumes you need more than personal navigation device capabilities," Cozza said.

However, Nokia's planned $8.1 billion takeover of digital map maker Navteq Corp stands testimony to the rising interest of handset makers in GPS technology.

The Finnish company has been ramping up GPS offerings in its phones, such as the N95 multimedia handset and its successor, the N82.


Garmin hopes its phone will create a growth area beyond its mainstay personal navigation devices segment, and possibly create a niche of devices positioned as GPS-centric handsets.

Oppenheimer & Co analyst Yair Reiner said the nuvifone compares favorably with any other portable navigation device.

"It builds on Garmin's reputation for sleek design and very simple and friendly user interface. It has been beautifully executed," Reiner said.

Reiner said a modest success will allow Garmin to sell one to two million units in the first year, which he said could boost annual revenue by $300 million to $500 million.

Garmin, which is expected to report fourth-quarter earnings on February 20, is expected to post revenue of nearly $3 billion for 2007, according to Reuters Estimates.

Market leader Nokia sold nearly 19 million smartphones in the fourth quarter alone, according to market researcher Canalys.

About 123 million smartphones were sold in 2007 globally, according to estimates from Gartner, another research firm.

Smartphones are increasingly being armed with a variety of features, which allow users to play music, take photographs, e-mail and help them chart their location through preloaded maps.

Some analysts compared the positioning of the nuvifone, with its accent on GPS, to the marketing strategies used to launch RIM's BlackBerry, which succeeded with e-mail as a selling point, and Sony Ericsson's Walkman phones, which are music-centric.

However, applications such as music, e-mail and imaging are consumer driven, Strategy Analytics analyst Bonny Joy said.

"I don't see GPS having that kind of leverage as a primary driver for buying a device," Joy said.

Handsets with GPS capability accounted for only 12 percent of 2007 global handset sales, but that is expected to grow to 17.2 percent in 2008, according to Strategy Analytics, a market research firm.

Needham & Co analyst Richard Valera said that Garmin can price its phone in the $500 to $600 range, but it would be better for the company to price it closer to the Apple's iPhone, which costs around $400.

Company spokeswoman Jessica Myers said Garmin is in talks to partner with several wireless carriers, but declined to name them.

For its other products, Garmin has relationships with Sprint-Nextel and Helio, a joint venture between South Korea's SK Telecom Co and EarthLink Inch.

Garmin has a contract with Google Inc, which will provide local search functions for the nuvifone.

Rival navigation device maker TomTom AS declined to comment on plans for future products.

The Dutch company has so far focused on adding wireless data capabilities to its navigation devices.

(Additional reporting by Purwa Naveen Raman in Bangalore and Niclas Mika in Amsterdam; Editing by Pratish Narayanan)

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This article was originally published on 2008-02-07
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