A Booming personal navigation market
The Automotive/Mobile segment performed very well in this second quarter generating a revenue of $508 million, a 99% increase from Q2 2006. In the same timeframe TomTom revenues increased only 37%: €277 million to €380 million. With a US dollar/Euro exchange rate of 1.35 TomTom revenues in the quarter were $513 million: for the first time Garmin is getting head to head with its key competitor on the mobile navigation segment. Garmin also increased its margins in this segment: 46% gross margin and 29% operating margins. (45/25 for TomTom).
Dr. Min Kao, CEO of Garmin, said: “Garmin experienced a very exciting second quarter. Our strong growth in the automotive/mobile segment demonstrated that our products continue to be well-positioned to take advantage of the growing demand for portable navigation devices. We are pleased that, according to independent market research, we have maintained a strong leadership position in North America with approximately fifty percent PND market share”.
Garmin thinks the US PND market could reach 9 to 10 million units this year while the European market should be around 15 to 16 million units.
While the Automotive/Mobile category is doing very well, the outdoor fitness segment is a bit disappointing with only revenue of $77 million, a small 9% increase compared to last year. At the last financial earnings conference Garmin’s management team was confident in bringing 20% increase for the whole year, now the target has been reduced to 10%. “We still see good growth opportunities for this segment, however we believe revenue growth for this segment will be lower than earlier anticipated due to the timing of our new product introductions” said Min Kao. Nevertheless, “Our outdoor/fitness gross margin also improved sequentially (55 to 57%) as we began shipping new products toward the end of the quarter”, he commented.