Live

Watch CBSN Live

Garmin Has What Carmakers Want, but Smartphone Users Are Another Story

Garmin (GRMN), the mobile GPS navigation and software maker, has a business problem: the nav apps on smartphones have displaced its devices. Garmin knows this and has plotted paths to survival. But which path is the right one to take? Chances are, it will have something to do with the auto industry.

BNET's Damon Brown made this argument last year:

Garmin, TomTom and other GPS-dedicated companies are fighting for relevance -- and they are going in the wrong direction. Instead of adding "smartphone-lite" features to their overpriced gadgets, they should be streamlining, simplifying, and discounting their hardware to position them as superior single-use tools. The emphasis should be on low-cost, focused hardware, which is the only way they can keep their devices relevant while people lean more on smartphone GPS features powered by software from Google, Nokia and, ironically, Garmin.
Cozying up to the carmakers
Garmin just announced that it's setting up shop in Detroit, to be closer to the companies it hopes will be able to use its services. Emphasis on services -- I think it's likely that GPS-enabled "smart" devices will become ubiquitous in coming years and that even if Garmin offers something simple and cheap, moving wisely away from mimicking smartphones, it will be impractical for consumers to gadget-juggle.

However, gadget-juggling itself may become increasingly stigmatized in the one place where it matters most: cars. The Department of Transportation's campaign against distracted driving has been upped to a new level. California, for example, has issued hardcore new directives against using devices in vehicles. And of course the carmakers themselves are loath to completely lose their grip on in-car nav systems to Apple (APPL) and the Android market.

This could be the beginning of a beautiful friendship
Garmin was able to gain its brief, initial brand advantage by providing off-the-shelf portable GPS devices that were better than what the automakers were selling. That lead is now rapidly eroding, so Garmin needs to innovate -- and integrate that innovation with the next generation of vehicle navigation and telemetrics.

It's an open question whether smartphone makers and their software development partners will be able to make your phone smart enough to handle everything the transportation grid may throw at it in coming years. Sure, you can text, IM, play Angry Birds, find a place to have lunch, Twitter, and post photos to Facebook. But will smartphones be able to integrate themselves with vehicles in a way that's powerful enough to make your car effectively aware of itself -- and all the other cars on the road?

Garmin's disruptive opportunity
The automakers already realize they're not very good at gadget-y tech. Ford (F) has long relied on Microsoft (MSFT) to power its SYNC system, and General Motors (GM) has hooked up with Google (GOOG) to bring Android into its vehicles. Ironically, the opportunity for Garmin (and others in the space, such as TomTom) is to position itself as the in-vehicle GPS/communications tech and software provider for Detroit.

That would mean giving up the device business, but it's a lost cause at this point anyway. The future lies with making cars much, much smarter, at every level -- from traffic awareness to energy consumption. Garmin is signaling that it wants to move its business in this direction. It's a smart move. To borrow the old Isaiah Berlin distinction, smartphone makers have to be foxes, offering many things in one device. Garmin can be a hedgehog, doing one thing very well.

Related:

Photo: Garmin