Garmin posts strong quarter results but lowers guidance



Garmin posts strong quarter results but lowers guidance
Garmin today announced revenue of $870 million for the third quarter 2008, up 19% from $729 million in the same period last year. Gross margin was 44.3% compared to 46.9% in third quarter 2007; operating margin was 24.6% compared to 29.4% one year ago

Due to the current macroeconomics situation, Garmin anticipates overall revenue to be $3.6 billion in 2008 against $3.9 billion previously forecasted.

PND and Mobile navigation
The automotive/Mobile segment revenue increased 21% to $626 million in this quarter. Gross margin was 38% and operating margin 20%. “Moderated pricing declines allowed us to post better than expected margins in the automotive/mobile segment”, said Garmin. During this quarter “the blended product average selling price declined of 17% year-over-year; in-line with forecasted full year decline of 25% for PNDs”, added Garmin. To compensate this price decline, the U.S. company sees a continuing material cost reduction of 20% this year. Moving forward Garmin forecasts less price drop on the PND market because the smaller players driving the price down already operate on thin margin.

Because of the macroeconomics condition, Garmin has reduced its full year PND market forecast to 20 million units both in the U.S. and in Europe. This forecast is a bit more optimistic than TomTom which said yesterday the market should be around 18 million units in each region.

Nuvifone
Nuvifone
Nuvifone
Nuvifone
To boost sales during the last quarter Garmin will spend roughly $80 million in advertising and engage into many promotional activities for Black Friday sales in the United States.

Questioned about opportunities in the automotive sector, COO Cliff Pemble said: “the OEM opportunity is a very small number this year, a single digit percent within the auto/mobile segment. This is a long term investment”, he added, “it will take a couple of years, and the revenue in this area will not even be meaningful in 2009”.

Nüvifone

“Development of the nüvifone is on target for a first half of 2009 launch”, stated Garmin’s earnings press release. “We have signed letters of intent or agreements with certain carriers which we expect will lead to carrier lab entry in early 2009. We do not plan any specific announcements until closer to the launch date.”

As stated, Garmin executives were not willing to give much more information at this stage. Garmin’s CFO Kevin Rauckman only said he expects margin for the nüvifone to be slightly below what it is for the current range of PNDs. Garmin still continue to forecast the shipment of at least one million units in the first 12 months of availability.

Continued...

Wednesday, October 29th 2008


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