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Is Garmin’s Mini-Revival for Real?

Innovate or die!

That motto applies perfectly to satellite navigation manufacturer, Garmin (GRMN).

If you’ll excuse the cheesy pun, the company was once king of the road when it came to in-car navigation systems.

Pricey, yes. But priceless for folks who wanted to reach their destinations without needing an unwieldy map, or printing directions from MapQuest or Google (GOOG). And then trying to read them while driving!

Everything was rosy for Garmin, as it proved more popular than rivals like TomTom and Magellan. Shares rocketed over 200% higher during the company’s heyday in 2006 and 2007.

Then the mobile revolution hit…

If You Can’t Beat ‘Em… Join ‘Em: A “Heads Up” Play From Garmin

As people began to use GPS apps on their smartphones instead of specific navigation systems, Garmin shares plunged from a high around $120 in September 2007 all the way down to the mid-teens by February 2009.

The stock has rebounded to $40 today, but it’s still way off its heady triple-digit days. And with the number of smartphone users only increasing, Garmin’s GPS devices have become obsolete.

So it’s innovating. Or trying to, anyway.

In an attempt to make itself relevant again, the company is embracing augmented reality technology. Subscribing to the theory that “if you can’t beat ‘em, join ‘em,” it just released a portable heads-up display (HUD) designed to work with your smartphone, not against it.

Retailing for $149, Garmin bills the portable HUD as “advanced navigation through projection.” Rather than being an all-in-one navigation device, it syncs up with the Garmin StreetPilot or NAVIGON app on the driver’s (Bluetooth-enabled) smartphone. The directions are sent to the device, and the user can choose to either beam them directly onto a plastic film attached to the windshield, or to the HUD’s pop-up reflector lens.

The HUD provides the same basic features as Garmin’s more extravagant GPS devices – current speed, speed limits, directional arrows, distances, ETA and Lane Assist. The device automatically adjusts the brightness depending on whether it’s day or night, and speaks directions through either the user’s smartphone or Bluetooth car stereo.

Okay, so based on that, what’s your verdict?

Mobility is King

At first glance, you might think, “Big deal. Too little, too late. Garmin’s done.”

And I hear ya. After all, some automakers have incorporated this HUD technology into their cars for a few years now.

But consider this…

~ High Rollers Only: For the most part, HUD technology tends to appear in higher-end cars. And even when it’s featured in lower-end models, it costs extra.

~ Mobility Crushed Garmin… But Will Mobility Now Save It? How’s this for irony? The very thing that torpedoed Garmin’s mojo could now end up working in its favor.

Quoted on the BBC, Tim Edwards, an engineer at research firm Mira’s transport technology division, says: “Carmakers are starting to [build HUD technology into their cars], but their challenge has always been development lifecycles. Your smartphone changes almost daily, but there’s a limit to how fast a car can be updated. In a car, a HUD is usually built-in and you cannot update it.”

That’s why a growing number of people are snubbing expensive built-in navigation for cheaper, more portable, easier-to-update mobile GPS apps instead.

According to a J.D. Power survey…

  • 47% of drivers said they used a smartphone GPS app last year – up from 37% in 2011.
  • 46% of consumers who bought a car with a built-in navigation system said they wouldn’t do so again if smartphone map apps could perform the same functions through the car’s dashboard. At the same time, consumer happiness with built-in systems has dropped over the past year. The top complaint? They’re too complicated and difficult to navigate!

Summing up the results, J.D. Power’s Executive Director of Automotive Research, Mike Van Nieuwkuyk, says: “Many people view their smartphone as having better processing speed, better points of interest and better map data. Consumers get frustrated when map data can be a year and a half old or more… to search for something they know is there and the map can’t find it.”

So they’re turning to smartphone apps instead.

Di-Ann Eisnor, head of map app company Waze’s U.S. business, says: “If you have a choice between paying a lot of money on an expensive in-car nav system or a free app on your iPhone, which are you going to choose? It’s a considerable threat [to automakers].”

And automakers know it…

A Break for Garmin?

Tim Nixon, CTO of General Motors’ (GM) OnStar service, tells the Montreal Gazette: “We’ve historically had these on-board, embedded nav systems. That’s just not going to cut it anymore. The game has changed and the bar has been raised by these always-connected devices that bring fresh information into the car.”

As a result, automakers are developing navigation technology that’s more versatile and cost-effective. And while they do, it’s opened a window in the market for devices and apps that boast greater mobility and are easier, quicker and cheaper to update than built-in systems. Garmin’s HUD and accompanying StreetPilot app could fit the bill.

Will it be the magic bullet for Garmin, though? I doubt it. The company still faces stiff headwinds from more nimble players in the mobile revolution. And its prices remain way too high, which is precisely why I told you to bet against the stock over the long term in April. Cheaper map apps have squashed Garmin’s business.

Since then, of course, the stock has made me look foolish. Shares are up almost 20% if we factor in the recent dividend of $0.45 per share.

Nevertheless, my position remains the same. New HUD innovation or not, the company is still ultimately doomed.

So if you’ve been betting on Garmin, I recommend that you take the money and run while you still can.

Ahead of the tape,

Louis Basenese

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