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GPS Breaking Through?

Investors in growth companies often find themselves waiting for that moment when a company’s product goes from just another cool gadget to a “must-have” item.

For example, when will American businesses really start using the “video phone” — or “video conferencing” or whatever you want to call it — to communicate over long distances? Investors in Polycom (PLCM) have spent years hoping the era of the video phone was right around the corner.

Another example is the GPS navigation device. Already popular among hobbyists like hunters or boaters, when will it catch on for drivers in a big way? News over the weekend suggests the era of the GPS navigation device may be upon us. (GPS, or global positioning system, technology uses satellites to tell users exactly where you are.)

Retail analysts walking around electronics retailers on Black Friday noticed that GPS devices were selling like hot cakes. “GPS sold out almost everywhere at all price points, from what we observed and heard,” wrote Bank of America (BAC) analyst David Strasser. (I wrote about Black Friday and electronics retailers here.)

If this is the Christmas of the GPS, that is great news for navigation device makers Garmin (GRMN) and European firm TomTom. Both stocks were moving higher on Nov. 26, with Garmin at one point up nearly 10%.

What made GPS so popular suddenly? Maybe Americans have gotten a chance to try out these devices, perhaps in rental cars, and decided they can’t live without a dashboard navigator.

Or maybe Americans are curious about GPS because the devices keep popping up in popular culture. A GPS device helped George Clooney’s character find his way around in the movie Michael Clayton (which was a great film by the way).

This holiday season could settle the question of whether GPS will catch on. The next question: Who will profit from that popularity? Firms that specialize in GPS, like Garmin, have a head start, but they may face increased competition from auto makers and cell phone companies trying to move into their turf.

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