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RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. Good morning. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

Many drivers will do their holiday traveling with the help of a GPS system. A device on the dashboard locates your car on a map and even gives direction. The companies that make those systems are looking for directions of their own. Cell phones offering GPS guidance seem likely to cut into the sales of companies like Garmin and TomTom. Here's NPR's Tamara Keith.

TAMARA KEITH: Cell phones have become the Swiss army knives of electronic devices. They take pictures, play music, deliver email and now, increasingly, they offer GPS navigation. And we're not just talking about a map that knows where you are. This is full service, turn by turn, directions.

I took the new Droid smart phone out for a test drive with Melanie Ortel, a spokesperson for Verizon.

Ms. MELANIE ORTEL (Spokesperson, Verizon): Take us to RFK stadium. It says it's getting driving directions.

Unidentified Woman: Head northwest on Massachusetts Avenue Northwest towards 7th Street Northwest.

KEITH: The Droid phone uses the new Google Maps Navigation system. Ortel drives a lot and she doesn't seem to have the best sense of direction. 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.

Ms. ORTEL: 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, gives me other options, route-wise, for getting there, or if I make a wrong turn it redirects me immediately.

KEITH: Droid's Google-based navigation system is totally free � there's no extra monthly service charge. So if you can get a good navigation system on your phone, why would you go out and spend $150 on a stand-alone GPS device?

That seems to be what the market is wondering. Stock in Garmin is down 16 percent since Google announced its navigation app for the Droid. TomTom stock is off 32 percent. Steve Koenig is with the Consumer Electronics Association.

Mr. STEVE KOENIG (Director of industry analysis, Consumer Electronics Association): 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.

KEITH: Koenig says the stand-alone devices tend to have bigger displays than smart phones.

Mr. KOENIG: 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.

KEITH: Not long ago these devices were the darlings of consumer electronics. Sales volume doubled from 2007 to 2008. Now, most expect sales will be flat at best.

Tom Murray is the vice president of market development for TomTom. He says the Droid is raising some provocative questions for his industry, but he isn't convinced it will be a game changer.

Mr. TOM MURRAY (Vice president of market development, TomTom): I think that as the dust settles and people have time to appreciate what its impact is truly going to be to the category, I think that, you know, different perspectives perhaps will prevail.

KEITH: And there's one other thing these companies are counting on: Not everyone will want to use their phone to get driving directions. Jessica Myers is with Garmin International.

Ms. JESSICA MYERS (Garmin International): We still think both will exist, because 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.

KEITH: After all, Swiss army knives haven't put corkscrew makers out of business, and cell phones that take pictures haven't killed the digital camera industry. Frank Dickson says the pressure is on for Garmin and TomTom.

Mr. FRANK DICKSON (Vice president of research, In-Stat): It's going to force those other devices to get that much better.

KEITH: Dickson is vice president of research with the firm In-Stat.

Mr. DICKSON: It's got to be a whole lot better if I'm going to spend that much money. And so it's going to force them to innovate.

KEITH: Because the competition has arrived.

Unidentified Woman: In one-quarter mile you will arrive at your destination.

KEITH: Tamara Keith, NPR News, Washington.

Unidentified Woman: You have arrived.

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