Shares in sat-nav device manufacturers slumped yesterday after Google introduced turn-by-turn driving directions technology into new versions of its smartphone software.

Garmin and TomTom saw stock prices fall sharply as the internet search group added the sat-nav market to the growing list of industries it is seeking to disrupt.

Shares in TomTom, based in The Netherlands, fell by more than 20 per cent while Garmin, based in the US, experienced a dip in its shares of more than 17 per cent in heavy trading.

Google’s new Google Maps Navigation product will provide real-time, turn-by-turn directions directly within smartphones that are based on the new version of its Android software.

The navigation product, which features speech recognition, represents a threat to companies like Garmin and TomTom, which sell specialised hardware navigation devices.

While TomTom makes a software navigation app for the iPhone that sells for $99.99 in the US, Google will offer the product for free.

Most smartphone manufacturers, including Nokia, Apple and Research In Motion, the BlackBerry maker, offer driving directions software for their devices.

TomTom, announcing its quarterly results yesterday, said that the average selling price of its devices would continue to fall in the fourth quarter.

The company said that it had sold units at lower-than-expected prices in the third quarter, adding that the continuing economic weakness made it tough to project consumer spend in the key holiday sales period. “We have limited visibility of what the actual spending on the navigation category will be in the fourth quarter,” chief executive Harold Goddijn said.

Google executives said that the company decided to offer turn-by-turn driving directions in its four-year-old maps product because it was the most requested feature by users. Google said that the product would initially be limited to driving directions in the US.

“Obviously, we like the price of free and consumers like that as well,” Eric Schmidt, the chief executive, said, adding that expanding into a new market with new competitors was not a part of Google’s motivation. Google would figure out how to make money from the product later, he said.

The new product taps into Google products and technology, including Google’s flagship internet search, Google satellite images and Google Street View, for more realistic views of a route. For use in a car, customers can purchase a cradle for their phone

Source: Times Online October 2009