Next target of cell phone industry: navigation
HELSINKI (Reuters) - After hitting alarm clock makers and camera manufacturers, the cell phone industry has a new target -- personal navigation device makers.
Handset makers see navigation as one of the next major value-adding offerings and even at this very early stage, analysts say the annual market for phone navigation is worth hundreds of millions of euros.
While a few years ago personal navigation device makers like Dutch TomTom shrugged off possible rivalry from the handset industry, they have now acknowledged the potential risk to their business.
The world's top handset maker Nokia started to sell its first navigation phone N95 a month ago, and other top vendors are expected to follow shortly, hoping to make 2007 the breakthrough year for cell phone navigation.
The N95, with a 700-euro price tag, is not in reach of the masses despite first reports showing strong sales, but the Finnish firm aims to bring GPS positioning chips to a wide array of its products.
"I believe it will quickly go through almost the whole of our portfolio," Kai Oistamo, head of Nokia's Mobile Phones unit, told a recent news conference.
The GPS technology enables handset makers to bypass mobile phone network operators and at least some of the navigation phones can be used for routing when not connected to operators' networks.
Operators would get a share of the business when real-time data traffic starts to grow. So far it is the handset makers' dream that people will use phones to find restaurants nearby, but car navigation firms have already started to offer road data.
GROWING PIE, FREE PIE?
According to researchers Canalys, the navigation products market is set to grow in 2007 by about two thirds from last year, with traditional personal navigation devices (PND) taking 85 percent of the market.
Analysis firm Berg Insight has forecast annual shipments of handset-based personal navigation products in Europe and the U.S. to reach 12 million units by 2009, compared with 1 million in 2005.
"As the pie grows, more powerful players want to have a piece of it. Nokia was the first to acknowledge it," said Oren Nissim, Chief Executive of Telmap, an Israeli navigation software firm.
Nokia, which bought into the navigation industry last year with the acquisition of German firm Gate5, rolled out a free Nokia Maps service in February, giving away maps and routing data while charging consumers for a turn-by-turn navigation service.
"Nokia's entrance has livened up this market. Interest towards the sector from outside has grown a lot," said Juha Murtopuro, chief executive of Finnish navigation software startup Navicore.
Google and Yahoo are seen as keen to add mobile navigation services to their mapping offerings, while car navigation firms are adding mobile services to their products.
"In the short term I am more worried about the personal navigation device makers, in the long term about the Internet companies," said Ralph Kunz, head of mapping and navigation operations at Nokia, who expects the Internet's advertisement-funded business model to spread to mobiles.
"In the mid term there is no reason to believe why the funding mechanism would not be the same as in the Internet," he said.
