Garmin Profits Fall
Cuts Auto GPS Guidance For Full Year
By Amy Gilroy -- TWICE, 10/29/2008
Cayman Islands — Garmin reported a net income loss of 12 percent for the third quarter, citing the tough economy and the weakening of the euro against the dollar, although revenues for the portable GPS maker rose 19 percent for the period endking Sept. 27.
The company cut revenue guidance to a 13 percent gain for the full year in automotive GPS, down from the 25 percent growth it predicted in July.
Garmin chairman and CEO Dr. Min Kao said, “We are experiencing challenging macroeconomic conditions, yet Garmin’s products continued to attract consumers, generating revenue growth and allowing us to expand our global leadership position in the industry during the third quarter. While most of our segments continue to grow, we are cognizant of the continued economic slowdown and business climate. As such, we are actively taking steps to manage our business appropriately.”
The company will scale back operations and take steps to reduce inventory levels by about $150 million by the end of the year. In addition, the company “will be more focused in our advertising spending as the economy and PND market change,” said Kao.
Garmin competitorTomTom, which reported a 41 percent profit loss yesterday, also said it will focus on advertising in the U.S. in the fourth quarter.
Garmin also stated that its Nuvifone GPS/smartphone is on track for release in the first half, and that is has signed letters of intent or agreements with certain carriers. Garmin said it expects “carrier lab entry” of the Nuvifone in early 2009.
For the third quarter, the company reported net income of $171.2 million, compared with $193.5 million for the third quarter last year. Revenue climbed to $870 million, up from $729 million for the year ago period. Gross margins were down slightly to 44.3 percent, compared with 46.9 percent for the year ago quarter.
The outdoor/fitness category, up 35 percent to $119 million, generated the highest revenue growth for the quarter due to new products and the expanding marketplace. Automotive revenues rose 21 percent to $626 million, and aviation was up 9 percent to $81 million.
Marine GPS revenues declined 8 percent to $44 million, marking the second straight quarterly drop on a year-over-year basis due to “the severe impact on this industry of macroeconomic conditions and high fuel prices,” Garmin said.
The North America and European revenues continued to grow, up 29 percent to $585 million for the former and 9 percent to $247 million in the latter. Asia revenues declined 21 percent to $38 million.
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