Why SIRF Can Still Succeed in a Rapidly Commoditizing Business

Folks who follow the ups and downs of SIRF’s stock price in the hopes that it goes up more than down, have likely heard many time more than they care to admit how SIRF is a one trick pony in the rapidly commoditizing and increasingly competitive business of producing GPS chipsets.

I recall similar arguments about both Garmin and Navteq for a quite a while, about all the competitors that plan to enter Garmin’s PND market or how super high resolution photography would tank Navteq’s old fashioned map making business. Meanwhile shares of both companies have continued to see tremendous success despite these challenges which indeed have materialized, yet been slow to hamper either Garmin or Navteq’s growth. They succeeded because 1. The did one thing, and only one thing and did it well and 2. the overall market was growing so fast that any bumps created by competitors were smoothed over by the torrid overall growth.

Those arguments of the intense competition in PNDs is what led me to follow SIRF in the first place… logic being: heck if I know who will win the PND race, but they’ll all need top of the line GPS chips to have a go at it.

Keeping their technology at a premium price seems like the right approach for SIRF in the face of oncoming competition. What's the alternative? Drop price on even the latest and greatest models to keep market share up?

It’s much easier to lower prices than to try to raise them again later with pretty much anything, so going low doesn't make sense to me. SIRF still have basic chipsets to sell to low end folks who just want to have a line item in marketing that's says "w/ GPS inside" so they're not walking away from that market. Instead they're trying to keep their de facto standard for more leading edge and expensive devices that require 1. higher performance and 2. ease of integrating GPS with other things they want to do with the device, which for many manufacturers is a huge costs savings over multi sourcing components and testing to be sure they play together nicely on the device.

Here are five reasons why I think SIRF still has many bright days ahead of it:

1. Huge Category Growth Ahead
What’s that saying, a rising tide lifts all boats? LBS is a nascent market, with in dash navigation not even hitting mid single digits in North America let alone any other mass adoption of location awareness services. PNDs (personal navigation devices) are growing 100%+ a year with similar growth outlook ahead for the immediate future, and GPS chips seemingly going into everything these days, from portable gaming systems to package tracking and vehicles of all sorts.

2. Market Leadership Position
For folks who live and die by performance and features like PNDs, and OEM solutions (75-80% of SIRFs current biz), I just don’t see them trying to save $3-4 dollar on the GPS chip and risk poor performance for such an important component, particularly since most of these devices will retail in the hundreds of dollars. I think they’ll tend to stay with the recognized market leader. Reminds me of the early days of Internet ad buying, no one ever got fired for buying Yahoo, but if you recommended 100Hot.com, it was a heck of lot more work and well you were taking your chances. Same with recommending IBM computers in the 1980s.

3. Handset Market Will Be A Big Growth Driver
Only 20% of SIRF’s current biz is cell phones, and GPS in handsets is becoming more a necessity rather that a luxury. For one, U.S. based GSM carriers selected device based solutions for adhering to government e911 requirements, which for now means required GPS chipsets. Typical handset churn is something like 18 months so all new replacements phones will need GPS. Europe and other countries are also looking at mandatory e911 requirements. Also carriers and MVNOs are looking for ways to raise ARPU through data services and will increasing want LBS as a way to accomplish this. The U.S. is way behind in adoption of LBS applications, and if they ramp as has been seen in Japan and Western Europe then there is huge potential growth there in terms of revenue, and you need GPS chipsets in phones in order to earn this money.

4. Software based alternatives will likely supplement GPS rather than replace
Software based positioning solution are all over the place… if it propagates a signal in any mass way, someone has tried to triangulate off it. But at the moment many are commercially un-viable. One big structural problem with many software based mobile solutions is that they often require 'talking' to the network to get data points to triangulate from, talking to the network means paying big money to a mobile carrier or satellite service provider which makes them economically unattractive to many. In reality for the foreseeable future it’s likely these technologies would just be used as compliment or backup to traditional GPS rather than an outright replacement. And guys like SIRF should in theory be first to know of anything that's making traction, since enabling location awareness is their sole business. I'd expect that they'd more quickly adopt alternative location awareness technologies into a single solution more quickly than someone not 100% focused on the sector.

5. Major online players embracing location and mapping in a big way
Digital search guys are looking at location awareness quite aggressively. Google, Yahoo, Microsoft, and Ask are all investing and developing significantly in mapping space. It's just a matter of time before people will want to see more real time stuff around those maps… and local advertising is new fertile ground for expansion for folks like Google who will need to aggressively identify new growth areas in the form of local and mobile search.

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Is the Map All That? Google, NAVTEQ and Imaging America

There was an interesting blog posting on Directions Magazine that is essentially a comment by a Google exec saying that they weren’t interested in bidding for Navteq because they felt that if they wanted to get into the digital map making business they could do so much more economically by opening up map making to the masses and develop a wiki map program to build maps through their Google Earth Platform. There is an interesting article over on O’Reilly Radar about how Google already used ‘crowdsourcing’ to develop maps in India.

Google currently sources data for their maps from a large variety of sources, but I don’t think it should come as too much of a surprise to see Google make their own maps in the very near future if they so wish. With the all the street level initiatives under way as well as the recent acquisition of Imaging America many of the pieces are there for Google to begin building build their own navigation maps from data they already own or can now more easily acquire. For simple road navigation the existing maps are likely more than adequate and my guess is that NavTeq and TeleAtlas have priced the maps low enough for online players like Google that there is not a financial motivation for developing their own. Only 5% of Navteq revenue comes from Internet and Wireless, which must means many orders of magnitude smaller revenue on a per-map render or user basis that in the auto segment… my guess is that this is in part a defensive maneuver, to keep folks like Google from turning from a customer into a competitor.

One short year ago, Navteq shares were getting beaten up in part because of concern by Wall Street types that technology such as the very high resolution photos that Imaging America’s equipment makes possible, would soon mean that detailed maps could be created by a variety of new market players. Buyers of the images would simply need to use the images to build their own maps using a few folks in a back office somewhere using some CAD software rather than via the more expensive and time consuming process of driving the nations’ roadways. That threat still exists, particularly for consumer navigation quality maps, but I don’t think that is as interesting to Google as the acquisition of previously unmapped items ranging from fire-hydrants to pine trees and street signs which will continue to feed the need for more and more data that is Google’s lifeblood.


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You can steal my car but you can't run fast and far...

This may be old news to some. Anyway, last week GM subsidiary OnStar announced that it has demonstrated a LBS technology that can slow down a stolen vehicle by limiting the fuel flow to the engine. According to the Onstar website, here's how it works:

• Once the vehicle has been reported stolen to law enforcement, the subscriber calls OnStar to request Stolen Vehicle Location Assistance.
• OnStar uses real-time GPS technology to pinpoint the exact location of the stolen vehicle and provides this information to law enforcement to help them recover the vehicle.
• When law enforcement has established a clear line of sight of the stolen vehicle, they may request OnStar to slow it down remotely.
• Safeguards will be in place to ensure that the correct vehicle is slowed down.
• OnStar then sends a remote signal to the vehicle that interacts with the Powertrain system to limit fuel flow to the engine which slows the vehicle down gradually.

Is GM car safer now with this new Onstar feature? Or, should I be concern that a glitch in the system may slow down my car by mistake?
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"Turn Left into Kentucky Fried Chicken... Then Continue 10.5 Miles to Destination"

One of my favorite financial blog sites Seeking Alpha has an entry on why Microsoft should buy Garmin. I know, I know everyone likes to speculate why Google or Microsoft should buy pretty much anything and everything, but whenever anyone puts actual pen to paper to make a sound argument as to why it may be a good thing, it’s always worth a read.

The author has five reasons why, but three of them can be summarized as Garmin is a well run company trading at a reasonable price and Microsoft has the cash to burn. But besides that, Garmin would very solidly fill a need within the new Microsoft in-car Sync platform and would build on the company’s existing relationship where its Garmin/Ford products already integrate MSN Direct for many features.

I think he is probably right… I don’t know how much Microsoft is investing in its Sync business, because $25B certainly doesn’t seem cheap, but the navigation system would seem like the most critical component of an in-vehicle networked technology system, so getting that part right will be critical for success. Garmin has proven over the years to be one of the biggest innovators in the space and is a pro at understanding consumer needs and translating those needs into features in consumer electronics device that sell very well. Microsoft doesn’t have the same track record.

Over the past few quarters, advertising and marketing revenue have been talked about more and more as a new source of revenue for Garmin. With Microsoft looking for new niches in which to get an edge over Google in the search and digital display advertising business, locking down this important part of the mobile experience with a leading PND and in vehicle navigation systems innovator like Garmin could give it a big leg up in location aware ad serving and location based search. And while it waits for that business to arrive, they continue to make a ton of money from the existing Garmin device sales which still have much room to grow on their own.




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Need Help... Beer Running Low... Peanuts Too

Wandering though the SATCOM expo here in NYC today and was surprised at how close we are to having the next generation of wireless technology include beaming your call to Aunt Sally up through a satellite directly from the handset in your front pocket. Check out the Terre Star Networks website for more on that.

One LBS solution taking advantage of this today is a company called Spot the Satellite Personal Tracker. The device is about 2 ½ times the size of a Palm Treo and seems designed as a worse case scenario satellite messenger locator product for the outdoor/adventurer market. The device makes use of a combination of GPS to determine location and then satellite communication to communicate back to pre-determined list of recipients.

The device features various buttons from which adventurers can send pre programmed alert to others, including their whereabouts, no matter where they are. A ‘Check In” button lets users locate themselves and send their location to friends and family to let them you know where you’ve been and that you're ok. An “Ask for Help” button is there to send your location to friends and family for more minor non emergency help or assistance, and of course the device has a 9-1-1 alert button to alert search and rescue teams to your whereabouts in case of a dire emergency.

Seems like an invaluable safety tool for those hard core outdoor enthusiasts… once the product becomes available November 1st I’ll be interested to see how well the battery performs and also how customizable those alerts can be.

The system uses Google Maps.

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Digital Location Management Inc.

I was looking through the Google Maps terms of service and legal notices yesterday to see if we could use Google Maps for a project and uncovered a few things of potential interest.

First, the geo encoding is performed by Navteq in case anyone was wondering.

Second, besides the usual suspects of Navteq and TeleAtlas, I was surprised at the number of other map related resources that are working together behind the scenes to power Google Maps… many not so well known names such as Euro Geographics, Top Map and GeoNext.

Third, also interesting to note that the foundation of business POI data seems to be from infoUSA and Acxiom… but Google of course adds to this through both business listings submitted via the Google Local Business Center and its patent on scraping address data from web pages.

I guess with all these different sources, I shouldn’t find it surprising that I can often more reliably find a local retail businesses location through a search on Google Maps than through the retailers own web store locator.

For anyone looking for a new business to start, I can see this area of Digital Location Management developing into a full blown cottage industry, as we’ve seen with search engine optimization (SEO).

As the digital world turns more and more to finding things via maps, whether on the web, a PND or mobile phone, the reliable representation of retailers on those digital maps will become increasingly important and a consultancy/management market will need to be created to help anyone with a retail presence in the bricks and mortar world to ensure that their locations are properly reflected in all the various digital map data sources for such information, and to ensure that retail location information is accurate and updated.

What do you think?

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Garmin Mobile XT: Plug 'N Play Maps for Your Phone

Garmin International Inc., a unit of Garmin Ltd. today announced Garmin Mobile XT, a unique, all-in-one software solution that turns select smartphones with internal GPS into high-end Garmin navigators. This mobile phone software application seamlessly pairs the phone's built-in GPS with Garmin's software so that customers have the benefits of navigation anywhere in North America or Europe. Unlike other mobile phone applications, Garmin Mobile XT offers convenient preloaded maps and includes access to dynamic content like premium real-time traffic alerts and fuel prices, but does not require any monthly fees or subscriptions of any kind.

"Garmin Mobile XT is easy-to-use and affordable, with no monthly charges," said Charles Morse, Garmin's director of mobile and PND marketing. "It's a one-time investment that gives customers full-featured GPS navigation on their smartphone whenever and wherever they need it, including areas outside of wireless network coverage."

Garmin Mobile XT is preloaded on a microSD card (with miniSD and standard SD card converter) that includes Garmin navigation software for the United States, Canada and Puerto Rico, or Europe. Once the card is inserted into a compatible smartphone with embedded GPS, the Garmin Mobile XT application will launch automatically. Customers are then greeted with Garmin's intuitive "Where to?" and "View map" welcome screen. With a few screen or button taps, customers can easily route to a specific street address or choose from millions of points of interest -- such as restaurants, hotels, ATMs, and gas stations. In addition to turn-by-turn, voice prompted directions, users will also see their exact position on a detailed moving map. If a turn is missed along the way, a new route will be recalculated automatically.

Thanks to Garmin's vast product line and ability to leverage technology from the other GPS markets Garmin serves, Garmin Mobile XT builds in unique features such as support for travel guides, topo maps and custom points of interest, as well as advanced features such as route planning with saved routes, custom avoidances and visible trip logs. Garmin Mobile XT users also have the benefit of routing to the location of a contact in their phone's address book or to a calendar appointment (on supported platforms).

Garmin Mobile XT also includes PeerPoints(TM), a powerful feature enabling users to send their position to any other phone as well as view and navigate to the location of other Garmin Mobile XT users. PeerPoints is the perfect way to keep track of friends and family and navigate to them with the touch of a button.

In addition to navigation, Garmin Mobile XT includes free access to Garmin Online(TM) so that customers have useful, constantly-updating information at their fingertips like real-time traffic, fuel prices, hotel prices and weather forecasts. The real-time traffic service from traffic.com identifies accidents, road construction or other incidents affecting traffic, and routes users around the congestion. The fuel price feature displays the filling station's name, fuel price, type of fuel, and distance to the station (U.S. only). Garmin Mobile XT users can also help customers find hotel information, ratings and discounts from hotels.com. Real-time weather information provided by Custom Weather lets users see weather forecasts at their current location or anywhere in the world. Garmin Online is accessed through the phone's wireless data service.

Garmin Mobile XT is available now for a suggested retail price of $99 in the U.S. Garmin Mobile XT products purchased in the U.S. include maps of all North America. In Europe, Garmin Mobile XT includes map data for 30 countries in Europe. Map data is provided by NAVTEQ(TM) -- a world leader in premium-quality mapping.

Visit the Garmin Mobile Buyer's Guide, http://www.garmin.com/mobile, for more information or to purchase Garmin Mobile XT.

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Maybe Soon Your TV Can Sit on Its Butt and Watch You

Another interesting company using alternative technologies for determining location seems to be getting some traction. Rosum, founded by James Spilker, the co architect of GPS, announced a new licensing and joint development partnership with Intel yesterday where Intel will help market and distribute the Rosum technology.

Spiker and fellow GPS co-architect Dr. Brad Parkinson, a Rosum board member, are well aware of GPS’s limitation, particularly with dense urban and indoor environments, and created Rosum to address those limitations.

According to the company’s marketing, “Traditional positioning systems are satellite-based and were designed for outdoor applications. However, they have limitations indoors, in obstructed areas or difficult urban environments. TV signals are plentiful, powerful, low and diverse in frequency, and easily penetrate walls, automobiles, and city buildings, making them optimal for urban-area and indoor positioning applications.”

The Rosum module integrates with Global Locate’s Hammerhead A-GPS chip, however in this case the “assistance” is provided by server based positioning information about the location of nearby television towers, rather than cell tower typically used in A-GPS.

The system requires monitoring units in the geographic area being covered to send data about the areas broadcast signal to a location server, the location server then sends location aiding information to the device via either SMS or GPRS. The Rosum module on the mobile device receives signals and send information information back and forth to the server to help determine location.

It looks as though for the moment at least Rosum is targeting the technology toward the government as a fail safe system for back up to GPS. The location information for broadcast tv transmitters is controlled by the FCC and the TV-GPS technology not only meets the FCC E911 Phase II specifications but 50% of their tests were conducted indoors as compared to the recommended 5%.

This technology for indoor positioning seems promising, at least on paper. It may be better than some of the existing positioning using cell towers that can only give a very coarse position, and it may also have a larger coverage grid than Wi-Fi positioning. However, the seemingly large amount of communications required with the network may create a barrier to this technology gaining traction as a mass market alternative for non emergency uses.

Eng Hua Yap/Ben Allen

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Cheapest GPS Navigation Package with Voice?

Recently I bought a BlackBerry 8800 with built in GPS and has been playing with different map and navigation software. Personally, I think Google Map and Blackberry Map work great and the big plus is they are free. Unfortunately, both of them don't support Voice Navigation and they are inconvenience to use when I'm driving alone. Pressing the tiny buttons to move to the next instruction, reading the small letters and staring at the blinking blue dots while driving can be a bit challenging.

Therefore I spent some time looking for the cheapest GPS voice nagivation package. So far, I think Veripath provides the cheapest with only 4.99 per month for 10 trips. If anyone think there is a cheaper or free solution, please do share with me.

However, the announcement by Garmin today for the Garmin Mobile XT package that can turn a phone into GPS navigation with voice for a one time price of just $99 may seem to be quite affordable.
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StarChase Pursuit Management

As much as the folks out in Los Angeles love to watch a good car chase on the evening news, the L.A. Police understand that high speed chases through heavily populated areas is not always the best solution to pursuing and catching certain criminals. So they’re working with a Virginia based company StarChase, who’s running a tagging and tracking pursuit management solution. With this solution police vehicles are equipped with a small cannon that sits in the cruisers grill, and with the help of a laser pointer can fire a small projectile embedded with a GPS device with an ‘aggressive’ adhesive at the suspects vehicle. Once the vehicle is successfully tagged the police officer can back off and track the vehicle and its driver remotely and make a more safe apprehension after a quick trip to Dunkin Donuts. The system continually reports back on the suspect vehicles movements so has the additional benefit of providing court evidence supporting excessive speeds and recklessness driving behavior.

Check out the video demo at: http://www.starchase.org/movies/StarChasevideo.wmv

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MIT iFind; Intel Place Lab

A team of folks over at MIT are running an interesting wireless location based social networking project called iFIND out of the MIT Senseable City Labs. The project allows anyone with a valid email address from MIT to download the iFIND application and use it to share their location with other iFIND users anywhere on campus. The application which works in conjunction with the Intel Place Lab software works by sniffing out the beacons transmitted by a variety of wireless access devices throughout the campus including over 2,800 wi fi hotspots as well as fixed Bluetooth and local GSM cell towers. The beacons carry with them an identifier associated with each device, the location of which has been mapped out by the iFIND team. The application determines the devices position to within a few meters by triangulates off of whichever beacons are present.

The system is also unique in that, for added security, it doesn’t store user’s location information centrally, but instead distributes via a peer to peer system that stores information on an individuals device.

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Nokia to Buy NAVTEQ

Well looks like NAVTEQ has been bought out by Nokia for $8.1B. Hard to believe that NVT had a market cap of under $2.5B this time last year, what a difference a year makes. I guess that is why some Nokia shareholders view the deal as expensive. I wonder how hard it is to make a map this day and age anyway. This move does seem to put Garmin in a bit of a precarious situation for the moment at least, forced to buy arguably one of the most important components of their products from guys who are trying to eat your lunch day in and day out. Maybe Garmin could be looking to purchase TomTom/TA and not only get an arguably more innovative map maker but also take out their largest competitive PND threat, the company is currently valued at $6.2B euro.
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