Garmin Forges Ahead – Slowly
Last week, I spent a few minutes listening to the recording of Garmin’s Annual Shareholder meeting. In addition, I downloaded the presentation file and a copy of the company’s 2008 Annual Report, both of which included lots of interesting stuff.
Last October, the Investor’ Business Daily printed its belief that the bottom had dropped out of the PND market, indicating that the PND growth rate had been cut by 40% when Apple’s iPhone came out. However, this spring, Canalys indicated that worldwide sales of PNDs were up 18% over 2007 and that the market was now around 41 million units (I suspect that number is incorrect and that the total was closer to 50,000,000 units). But back to Garmin.
Garmin’s 2008 revenue grew 10% to $3.49 billion, a rate of growth 69% lower than 2007. Their net income was $733 million. A market survey included in Garmin materials indicated that they sold 16.9 million PNDs in 2008 and extended their worldwide market share over their competition, as can be seen in the following chart from their presentation.
Although the company refused to speculate about its sales for 2009 or make any financial projections, it is clear that they and the market are struggling this year and possibly longer term.
Curiously, their presentation did not mention the NuviPhone, originally announced in 2007. In fact, the only reason it was mentioned was the result of a shareholder grilling management about the apparent lack of progress in releasing the product in any meaningful way.
Garmin’s management indicated that the product was on schedule and that they were in discussions with several carriers about releasing the product later this year. The answer was actually quite humorous if you know the mobile industry and indicated to me why companies that do not understand the mobile telecom markets, carrier infrastructure requirements, carrier testing standards and the convoluted distribution channels in the mobile industry should try to avoid creating their own phone. Unfortunately, that is the path Garmin has taken (even going so far to develop its own OS). Nokia, Samsung, Sony-Ericsson, Motorola, LG, Apple and Garmin? Just doesn’t roll off the tongue does it? In addition, since we have no NuviPhone to compare, Garmin may not measure up well against the industry’s leading navigation application suppliers Research in Motion and Telenav.
At the Shareholders meeting, Garmin re-announced it was going to provide a navigation unit integrated into a car, unfortunately, the car is a Chrysler Jeep Grand Cherokee for the 2011 model year. If the transaction survives Chrysler’s merger with Fiat, it will still leave Garmin as a Tier-2 supplier to the auto industry. TomTom seems to have done better here, as it functions as Tier-1 supplier to Renault (for the embedded navigation system called Carminat ). It appears that the leaders in the PND industry continue to try and cross the chasm between them and in-dash systems.
One bright spot for Garmin was the growth of its Aviation Group. More interesting to me was the growth of its “Outdoor Fitness” product line that, in general focuses on providing useful devices for runner, bikers and hikers.
Although the market is still quite small, it may be one area where GPS, maps and navigation can be quite successful for companies like Garmin. On the other hand, do you need a dedicated device to perform these tasks? Maybe something you already own could do this instead, like an iPhone? Perhaps that is what Intermap was thinking when it announced its AccuTerra product for the iPhone at the Apple Conference this week. Let’s talk about Intermap’s news and why it’s important next time. In the process we will need to speculate on why Google mappers are now mapping … hiking trails with a nifty new rig.