Do Microsoft and Google Have Their Sights on TomTom?

Since the NAVTEQ purchase by Nokia was announced, speculation has been rampant that Microsoft would seek to acquire GPS Personal Navigation Device (PND) maker Garmin. However, iSuppli, a market intelligence firm, says the combined TomTom/Tele Atlas group is a more attractive target for Microsoft, and for Google as well.

Speaking of a suggested Microsoft buyout of Garmin, Richard Robinson, principal analyst, for iSuppli said, “iSuppli considers this to be less likely than Microsoft buying TomTom/Tele Atlas. This is because the key item in the supply chain is the map IP [intellectual property], rather than the navigation devices themselves.” The firm says the combined TomTom/Tele Atlas group is even more attractive to Google, citing the search engine company's strong desire to offer mobile location-based services.

With prices of GPS equipped PNDs falling, it seems that many people have realized that the true value is the map itself. "Holders of map Intellectual Property (IP) now occupy the most important position in the global GPS navigation supply chain." the report said, citing the $8 billion purchase of Navteq Corp. by Nokia as evidence. Tele Atlas, the other world-wide mapping firm agreed to be acquired by GPS maker TomTom earlier this year.

The entrance of these huge companies into the mapping field illustrates that the competitive structure of the navigation market has changed dramatically. The stakes are huge, iSuppli estimates that global shipments of GPS-enabled mobile handsets will reach 250 million units by 2010.

Currently, there are about 40 companies offering GPS navigation capabilities in various products. However, consider how many companies made PCs at one time. If past experience is a guide, and I believe it is, this number will likely be reduced to 3 or 4 major players over the next few years.

See also: Nokia to Purchase NAVTEQ
Nokia + NAVTEQ = Trouble for Garmin?
Lower Cost to Drive Demand for Auto Navigation Systems