Two years ago, GPS products cost more than $1,000. Car companies charged as much as $2,500 for the systems. Tom Tom and Garmin (GRMN) stocks hit remarkably high levels on demand for GPS  devices and on the rich prices that they could charge consumers. Less than two years ago, Gamin shares traded at over $125. The commoditization of GPS functions has helped push that price below $30.

The sales of expensive GPS products have been irreparably damaged by products like Google (GOOG) Maps which can run on smartphones. That process is continuing with Tom Tom’s release of a download product for the Apple (AAPL) iPhone. The cost of the software is only $100.

The new Tom Tom product will offer turn-by-turn directions and other GPS features.

Tom Tom needed to launch the product to remain competitive, but the move to low priced software further undermines the margins of the company and Garmin. The days of selling devices for hundreds of dollars are gone. Garmin still sells some GPS products for over $300, but products like those being released at the Apple App store will eventually kill the demand for Garmin’s high end offerings.

The Apple App store is turning out to be one of the most popular e-commerce destinations in history, perhaps only matched by Amazon (AMNZ) and eBay (EBAY). Just as those two companies destroyed much of the bricks-and-mortar economy, the App store is decimating the consumer electronics and expensive software products markets.

Apple is beginning to offer VoIP products for the iPhone which will hurt the business cellular providers have of charging for voice communications. iPhone apps for money management applications must be taking business from Intuit  (INTU) and other firms that supply expensive enterprise and personal products for calculating P&L and tax figures. Downloads that allow users to read newspapers will probably help undermine the use of the printed versions of those products.

The Tom Tom GPS application for $100 is just the tip of an iceberg. The App store will do as much damage to the traditional software and content businesses as anything every created.

Douglas A. McIntyre

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