Shares of navigation software-maker TeleNav Inc. plunged 7 percent a day after Apple said its new mobile operating system includes turn-by-turn navigation, a change that could mean iPhone users stop paying for TeleNav's service.
THE SPARK: Apple Inc. CEO Tim Cook announced Monday that the new operating system for iPhones, iPads and iPod Touch will include navigation software for users who need real-time directions based on GPS.
TeleNav has specialized in this feature in part because it was not included in Apple's software. TeleNav sells its services to AT&T and Sprint wireless customers through those providers. The fee is $10 per month for AT&T subscribers.
THE BIG PICTURE: Apple is dumping Google Inc.'s mapping service, which has been on iPhones since they were introduced in 2007. The move aims to distance Apple from its long-time rival as competition intensifies between Apple's operating system, called iOS6 in its latest iteration, and Google's Android operating system.
One reason for the split: Google had kept some features, including turn-by-turn navigation, exclusive to Android users.
In addition to turn-by-turn directions, Apple's mapping software will include a "flyover" feature using three-dimensional images captured by helicopters.
THE ANALYSIS: If iPhone users no longer have to pay for turn-by-turn navigation, a big chunk of TeleNav's revenue might evaporate, analysts with Baird Equity Research said in a note on Tuesday. The analysts said TeleNav currently derives 70 percent of its revenue directly from AT&T and Sprint — much of that from iPhone users who want in-car navigation.
Apple also plans to target the auto industry, a recent area of growth for TeleNav, analysts William Power, Steven Beckert and Andrew Flis said in the note.
They downgraded TeleNav to "underperform" from "neutral," and reduced their 12-month price target for the stock to $4 per share from $8 per share.
SHARE ACTION: TeleNav plunged 37 cents, or 6.3 percent, to $5.40 by midday Tuesday. Last July, the stock hit a record closing high of $21.88 but plummeted to about $9 by the end of that month after it issued an earnings forecast that disappointed investors. It has declined steadily since.