Garmin Needs Rerouting

November 3, 2010 by
Filed under: Business, Finances, Technology 

Imagine you are a leader in your market and you have been dealing with your competition day in and day out, extremely successfully by having arguably the best product in your category.  Then, all of the sudden, a disruption occurs that makes your product obsolete.  If you still hold Garmin shares (NASDAQ:GRMN), well, I’m sorry.  They are not coming back up, ’cause that’s exactly what happened to Personal Navigation Devices (PND), where Garmin was a dominant player.  Smartphones with integrated GPS made them obsolete.

Now, to their credit, they tried to remain relevant by launching 2 phones, one of them even running Android.  But as they reported today in their 3Q results call, they’ll be “winding down” that business.  I can’t blame them.  Trying to compete with Apple, RIM, Motorola, LG, Samsung, Nokia, and all those multimillion brands that spend millions on each smartphone is tough.  The question is what’s left for Garmin to hang their hat on?

At roughly $6B US in market cap and still making $130M in earnings last quarter you’d think there is hope.  Focusing on their fitness, aviation, and marine business, which grew last quarter, seems reasonable, but I doubt they can sustain a $6B market cap that way.  So, my fellow reader (singular) there might still be room to short, but not a lot.  They may be an acquisition target for their technology, but it is a gamble.  So exit your position, whatever it is and be glad it didn’t go any worse.

Enjoy.

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Comments:

2 Comments on Garmin Needs Rerouting

  1. cav69 on Fri, 19th Nov 2010 7:17 pm
  2. I found your article very interesting. It’s amazing how things have changed in the gps market in the last couple of years but I think that there are still a lot of people around the world that even though they might have a smart phone they don’t really know how to use it and would prefer the simplicity of an “old” gps.
    Also, what about garmin’s business with Volvo? They still might be doing well there.

    Thanks!

  3. lfllmg on Fri, 19th Nov 2010 7:23 pm
  4. Thanks for the comment! I agree there is still a market for dedicated PND’s for the reason you mention, and the fact that they have better screens. Like everything else, the navigation on the smartphone is not as good as a dedicated one, pretty much like the camera. However, as an investor you do not want to be invested in a company with a decreasing market. In-car navigation, like Volvo, I’m afraid is a decreasing market too. Manufacturers are looking for more functionality, like with the Ford Sync, so Navi will become just another feature. They can try to compete there too, but will face more fierce competition. I’m afraid it is a no go for me.
    Thanks!