However Garmin maintained – even if lower than last year – relatively good margins at 41.1% (gross) and 22.6% (operating) and generated $340 million of free cash flow during the fourth quarter. For the full year 2008 total revenue was $3.49 billion, up 10% from $3.18 billion in 2007. The total cash and marketable securities balance of the company is just over $973 million.
Reduced inventory levels
“We continued to experience a challenging economic environment in the fourth quarter with worsening trends throughout the period”, explained Dr. Min Kao, Chairman and Chief Executive Officer. “However, we were able to demonstrate the power and agility of our vertical integration business model by responding quickly to the changes and scaling our production outputs to match demand. This allowed us to maintain healthy margins in the quarter, as well as significantly reduce inventory levels. The inventory reduction of $274 million was a great achievement for our organization given the extremely volatile environment that we are currently experiencing. This was accomplished in part by eliminating overtime labor and contract workers within our Taiwan factories, proving we can scale manufacturing as needed.”
“While the PND market has slowed, we continued to experience unit growth in both the North American and Asia-Pacific regions in the fourth quarter and were pleased with our market share gains around the globe”, stated Min Kao. “According to an independent market research report, our global PND market share stood at approximately 35% at the end of the third quarter and according to internal estimates our market share increased further in the fourth quarter.”
“Revenue in our outdoor/fitness segment continued to grow though not on the same trajectory as the first three quarters of the year”, said Min Kao. Indeed, during the first three quarters of 2008 outdoor and fitness grew 37% against the previous year while in the Fourth quarter it declined 5%. In January, at the CES trade show Garmin introduced its first GPS product dedicated to the golf market; however Garmin does not expect meaningful revenue in this field in 2009.
No guidance offered for 2009
“In light of the uncertainties and dynamic conditions, we will not offer specific guidance for 2009 until the outlook for the year becomes clearer”, said Garmin’s CFO Kevin Rauckman. However, he already expects the PND market to be flat in 2009 in units.
Regarding the Nuvifone, “Both the G60 and M20 will launch in selected markets during the first half of 2009”, said Garmin in its press release. However, during the conference call with analysts Garmin executives recognized that no final agreement has been signed so far for its distribution with a wireless operator. The company is still expecting to sell 1 million Nuvifone in the first 12 months of its availability, now the question is: when does it start?