Garmin’s Q4 Profit Drops

By Amy Gilroy -- TWICE, 2/23/2009

Cayman Islands — Garmin's net earnings for the fourth quarter were cut nearly in half compared with last year’s high flying fourth quarter for the navigation segment.

The company reported net earnings of 157.7 million for the quarter ending Dec. 27, 2008, compared with $307.3 for the period last year, citing a challenging economy.

Total revenue declined 14 percent to $1.048 billion, compared with $1.217 billion last year.

Automotive revenues declined 17 percent to $828 million for the fourth quarter while outdoor GPS increased 5 percent to $120 million. Garmin’s aviation segment fell 5 percent to $67 million and the marine segment revenue was flat at $33 million.

Garmin said it was able to maintain healthy gross margins of 41.1 percent during the period, compared with 41.8 percent for the quarter last year, because of its vertically integrated structure that it allowed it to react quickly to the economic downturn. As a result, the company reduced inventory by $274 million from the third quarter, resulting in year-end 2008 inventory of $425 million.

“The inventory reduction of $274 million was a great achievement for our organization given the extremely volatile environment that we are currently experiencing,” said chairman and CEO Dr. Min Kao, claiming, “This was accomplished in part by eliminating overtime labor and contract workers within our Taiwan factories, proving we can scale manufacturing as needed.”

Although the personal navigation device market has slowed, Garmin experienced unit growth in North America and Asia for the fourth quarter and reported a 35 percent global market share at the end of the third quarter, which it believes increased during the fourth quarter.