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Thursday, October 05, 2006

Flood of GPS navigation devices hits market

By William Trent, CFA of Stock Market Beat

We have written several times that navigation leader Garmin (GRMN) is in a tricky situation. It’s lucrative market segment, once dominated by itself and TomTom, is now lucrative enough to attract new competition.

The Pittsburgh Post-Gazette reports:
A new generation of navigation devices, designed to have the sleekness and portability of an iPod, are finding their way to store shelves this fall. The hand-held devices, which are being pushed by both traditional navigation-device makers like Garmin Ltd. and big personal-computer companies like Hewlett-Packard Co., are meant to be used by walkers as well as drivers. Meanwhile, cellphone companies are beefing up their own navigation services in an effort to capture the growing market.

Sprint, for example, is offering Garmin Mobile service for $9.99 per month. While Garmin gets a share of this recurring revenue, it is potentially losing customers for its stand-alone devices. While its P/E of 27x trailing earnings is not outrageous, any misstep would likely be punished.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

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