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Is Skyhook’s Location Services Business Doomed?

Broadcom executives think they have a superior solution.

Skyhook Wireless provides a software layer that allows for precise geolocation on 100 million devices, including the Sony Playstation Vita and, through apps, the Kindle Fire. But according to executives at hardware manufacturer Broadcom, maker of the GPS chips in the iPhone and countless other mobile devices, long term, Skyhook may not have a business at all.

Yesterday I reported on Broadcom’s latest offering, a super-accurate GPS chip that also integrates information from other sources, including Wi-Fi hotspots. For as long as Skyhook has been around, and that’s almost a decade, they have been the leader in using this technique to give accurate geographic fixes to mobile devices, which is key to enabling location services in an ever-growing array of software, from old standbys like mapping to recent developments like place-specific mobile gaming.

Ted Morgan, CEO of Skyhook, had this to say about Broadcom’s offering:

“Broadcom is just now talking about something we have been doing for seven to eight years, uncovering all the challenges,” says Morgan. These include battery management and cataloging a new wave of mobile Wi-Fi hot spots. “Broadcom has never done major deployment,” adds Morgan.

But when I talked to executives at Broadcom, they asserted that their new chip means the end of software-based location services as we know them.

For example, when I asked whether or not Broadcom maintains its own database of Wi-Fi hotspots, like Skyhook’s, Scott Pomerantz, vice president of the GPS division at Broadcom, said that “long term, I don’t see any value in it.”

Pomerantz asserts – and given his visibility into device manufacturers ranging from Apple to Android, he would know – that most are simply making their own databases of Wi-Fi hotspots. That appears to be the route that Apple took when it dropped Skyhook for location services in the iPhone after the 3GS, and it seems to also be at the root of Skyhook’s lawsuit against Google.

I gave Morgan a chance to respond to this assertion. Via email, he said:

And so all the OS’s need to build teams of people to manage all this constantly changing data (remember 20% of APs move every year) and tuning algorithms constantly to deal with new issues like mobile Wi-Fi hotspots, battery management, background location etc. Maybe, but why do all that if you can just license the entire system that works now?  What is the strategic value in each OS having their own Wi-Fi databases?

It’s clear that both Broadcom and Skyhook have their own self-interest at heart when they assert that either of their competing solutions is ultimately going to win this battle over who will best serve device makers. Regardless, it seems likely that both solutions will have their place.

In other words: If you’re Apple and you have the resources and the desire to control every part of your own location services, buying a chip from Broadcom that makes that even faster while using less power is a win. But if you’re Sony, and you don’t want to deal with that aspect of mobile, you’ll go with Skyhook – as the company did with its new Playstation Vita. 

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