Analysis of Garmin-ASUS alliance



Analysis of Garmin-ASUS alliance
Following the announcement of their collaboration with ASUS, Garmin organized this week a conference call to answers questions from financial analysts. Not much has been revealed other than the fact this collaboration is not creating any new entity: “there is no JV, no merger and acquisition”, said Cliff Pemble, President and COO at Garmin. “Each company will have responsibility in designed geographies and share revenues and profits.”

Announcing this collaboration one year after the first presentation of the nüvifone is a bit surprising. Indeed, ASUS is moving from its previous role as ODM into being a full partner for a co-branded, co-developed solution. Despite the fact Garmin is not giving too much information about why this happened, it is clear that the Kansas City-based company finally realized that working with wireless carriers on a worldwide basis required a different set of skills and many additional investments than selling consumer electronics products. Therefore, sharing these investments with another company such as ASUS was making a lot of sense and would allow the development of many more products in a shorter period of time.


Analysis of Garmin-ASUS alliance
Analysis of Garmin-ASUS alliance
Smartphone market still a risky bet for Garmin-ASUS
On the one hand this partnership is reducing risks for Garmin but on the other hand it is not really increasing the chances to be successful. Indeed, what it is still missing today is the know-how in working with carriers and enough brand recognition to appeal to mainstream mobile consumers. ASUS is not bringing any of that to the table. Even if the Taiwanese has been selling PDA phones and Smartphones since 2003, its success has been pretty limited in that area. The only place where these smartphones have been gaining significant market share is in Eastern Europe, where, according to Garmin, ASUS is among the top three brands in the category.

The lack of brand equity is probably the biggest weakness of this new alliance and the combination of two brands – quite diverse – will not make it easier to understand for consumers. The problem for ASUS and Garmin is that they are facing very strong competitors with considerable brand equity: Nokia, Apple, and RIM to name the biggest Smartphone makers. But this market is also targeted by Sony Ericsson, Samsung and LG also trying to get some footprint here as well as a myriad of new challengers such as Toshiba, Dell and ACER which are known - or expected - to enter this market in 2009.

Continued...

Friday, February 6th 2009


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