Is Google's Navigation Launch A Category Killer? (GOOG, TRMB, GRMN)

Google Inc. (NASDAQ: GOOG) and its ‘new’ navigation via Google Maps Navigation is putting the hurt on the GPS competitors.  Trimble Navigation (NASDAQ: TRMB) posted income of $15.6 million, a 60% drop, in its quarterly profits yesterday and revenue was down 18% to $269.7 million.  Unfortunately, the guidance was under expectations.  And shares are only down 0.2% at $21.25 after recovering from morning lows.  Garmin Ltd. (NASDAQ: GRMN) is getting clipped far worse as the ‘launch’ from Google seems to be a direct assault on its model, and Garmin’s earnings are just a week away.  Today’s only real shock may be in the timing of the launch.

The full features are here from Google.  When you ask if this will hurt the GPS pure-play stocks, the answer is “yes” because this is just one more assault of a subscriber model that Google has decided to give away for free that it will either support with ads or other services down the road.  Free is hard to compete with, even for titans and former titans.  But today’s launch should be of no real shock to anyone in anything other than the timing as Google has been working in this direction for months.  Yet Garmin shares are down 16.5% at $31.55 on the day.

If you have spoken to anyone in the navigation and the global positioning systems, there should be no surprise today in the launch.  There might even be rules today or tomorrow against you typing in all these directions onto a little phone to follow directions if you are driving, but only in some cities and states.

Google’s mantra has been “Do no evil.”  The company keeps claiming that it is just offering more and more for consumers.  But it keeps entering more and more spaces outside of search and offering an alternative service that is free in hope that it will generate ad revenues or service revenues out in the future.  That in and of itself might not be evil in intent, but most business models can’t stand up to free competition out of the blue from a company that can take a wrecking ball approach in new launches and has a $22 billion cash arsenal behind it.   If this new Google entrance into more and more new markets for free keeps coming, eventually someone or a group of someones from the business world is going cry out.  And that is the sort of stuff that antitrust regulators have gone after.  Ask Bill Gates.

JON C. OGG
OCTOBER 28, 2009