As millions of Americans hit the road this week, many will use GPS devices to guide the way. But there could be trouble ahead for the portable navigation business, and it comes in the form of cell phones.
Analysts say GPS-enabled cell phones are going to cut into the sales of stand-alone devices from companies like Garmin and TomTom.
Cell phones have become the Swiss Army knives of electronic devices. They take pictures, play music, deliver e-mail and now, increasingly, offer GPS navigation — not just a map, but full-service, turn-by-turn directions.
On a recent test drive with the new Droid smart phone, Verizon spokesperson Melanie Ortel demonstrated its voice recognition system.
"Take us to RFK Stadium in Washington, D.C.," Ortel said slowly into the phone, mounted on her front windshield.
The Droid quickly pulls up information for the stadium and calculates a route.
The Droid phone uses the new Google Maps Navigation system. In a lot of ways, the Droid isn't all that different from stand-alone portable navigation devices or other smart phones with GPS capabilities.
"Navigation systems on these devices are so helpful because no matter how far I'm driving, if I come across traffic, it helps me redirect," Ortel said. She drives a lot but doesn't seem to have the best sense of direction.
"It gives me other options route-wise for getting there, or if I make a wrong turn, it redirects me immediately," Ortel added.
Droid's Google-based navigation system is free — there's no extra monthly service charge.
Market analysts wonder: Why, if there is a good navigation system on a cell phone, would someone spend $150 for a stand-alone GPS device?
Stock in Garmin is down 16 percent since Google announced its navigation app for the Droid. TomTom stock is off 32 percent.
"I think the writing is on the wall for the marketplace that apps, navigation apps for your smart phone are going to eat into the market opportunity for dedicated portable navigation devices," said Steve Koenig, director of industry analysis for the Consumer Electronics Association.
Koenig says the stand-alone devices tend to have bigger displays than smart phones.
"They're not quite to the same level of functionality and ease of use, so that's a ray of hope, at least for the short term, for portable navigation," Koenig said.
Not long ago, these devices were the darlings of the consumer electronics industry. Sales volume doubled from 2007 to 2008. Most sales now are expected to be flat at best.
Tom Murray, the vice president of market development for TomTom, says the Droid is raising some provocative questions for his industry, but he isn't convinced it will be a game changer.
"As the dust settles and people have time to appreciate what its impact is truly going to be to the category, different perspectives perhaps will prevail," Murray said.
And there's one other thing these companies are counting on: Not everyone will want to use a phone to get driving directions.
"We still think both will exist," said Jessica Myers with Garmin International. "You have people that want an all-in-one device that does it all, and then you have people that are more interested in having devices that do one thing extremely well."
Swiss Army knives haven't put corkscrew makers out of business, and cell phones that take pictures haven't killed the digital camera industry. The pressure is on, however, for Garmin and TomTom.
"It's going to force those other devices to get that much better," said Frank Dickson, vice president of research with the firm In-Stat.
"It's got to be a whole lot better if I'm going to spend that much money," Dickson said. "It's going to force them to innovate."