GPS navigation devices were the latest must-have tech toys just two years ago, and shares of device makers like Garmin and TomTom were soaring.

That didn’t last long. In a turnabout that has been remarkably swift even for the fast-moving technology business, those companies have suffered as competition has pulled down prices — and as more people have turned to their cellphones for directions.

In the latest blow to the business, Google announced a free navigation service for mobile phones on Wednesday that will offer turn-by-turn directions, live traffic updates and the ability to recognize voice commands. The service will initially be available on only one phone, the new Motorola Droid, but will be expanded to more phones soon.

In a briefing on Tuesday in advance of its announcement, Google said that the service might be supported by advertisements in the future. That would make driving directions the latest form of information to shift from being a paid service to one that is ad-supported.

“This is consistent with a certain pattern of Google, where they are able to build volume and usage of a product and then subsidize it with advertising,” said Greg Sterling, principal of Sterling Market Intelligent, a research firm.

The losers, he said, were companies like TomTom and Garmin, along with the cellphone carriers, which offer navigation services by subscription.

Eric E. Schmidt, Google’s chief executive, said that he didn’t view the new service as hurting an industry. Instead, he said, it is a boon to consumers, made possible by the increasing power of smartphones and the growing ubiquity of Internet access.

“Obviously we like the price of free, because consumers like that as well,” he said.

But analysts say that if successful, Google’s service could chip away at sales of stand-alone GPS devices and the subscription services offered by cellphone carriers.

Sales growth for those devices is already slowing. In 2007, global shipments of stand-alone navigation devices grew a hefty 131 percent from the year before, according to data from the research firm In-Stat.

But the firm predicts that shipments will grow just 19 percent this year from 2008, and a price war has hurt the industry’s profits.

“With a free alternative that is just as good, I don’t see much positive growth for the likes of TomTom, Navigon or Garmin,” said Dominique Bonte, director of navigation research at ABI Research.

“If it’s free and a good service, why would you pay for something you can get for free?”

Google’s announcement also reflects a broader shift toward consolidation in the gadget world.

The smartphone is already the Swiss Army knife of the digital age, able to transform into a camera, music player or game machine at the swipe of a finger. Now it is increasingly a navigation device too.

Many people still prefer dedicated GPS devices, which tend to display maps faster since the data is typically stored in the device rather than downloaded over a wireless network. But the list of smartphone shortcomings is shrinking. Smartphone users can download applications that offer spoken directions and live traffic updates.

By 2013, phone-based navigation systems, which are already more popular among younger smartphone owners, will dominate the market, according to a recent report from Forrester.

The makers of navigation devices have not ignored the spread of smartphones. But Google’s move could make it harder for them to adapt. (NYT)