Cayman Islands — Garmin reported the best quarter in its history, with revenue up 99 percent to $1.217 billion, as personal navigation devices (PNDs) became one of the hottest products over the holidays and sales exceeded company expectations.
For the quarter ending Dec. 29, 2007, net income also skyrocketed to $307.3 million, up from $180.3 million for the period a year earlier, as margins on PNDs remained healthier than expected at 38 percent.
While all of Garmin’s product categories including marine, aviation and fitness increased by at least double digits, automotive/mobile revenue soared 124 percent in the fourth quarter to $999 million.
Garmin said current retail inventory is lean, as sell-through was strong for the fourth quarter.
During a conference call today, Garmin estimated total sales for the U.S. PND market were approximately 12 million units in 2007 and will increase to 20 million in 2008.
The company would not say how high the U.S. penetration of PNDs could climb but noted that industry estimates range from 25 percent to 50 percent. Currently PNDs have an approximate 8 percent to 10 percent penetration in U.S. cars, according to industry estimates.
Further, Garmin said that GPS phones will not render the PND extinct. “The PND is still going to be strong and the mobile market will grow and there will be more users. The PND will not be cannibalized to the point where it goes away,” said a principal.
Sales of Garmin’s newly announced Nuvifone, to be launched in the third quarter, should represent only 5 percent to 10 percent of sales in the fourth quarter, said Garmin chairman and CEO Dr. Min Kao. “Nuvifone sales for the year are not expected to take away form Garmin PND sales,” added a spokesman. No carrier partners have yet been announced for the much anticipated Nuvifone.
For the year, Garmin’s revenue skyrocketed 79 percent to $3.18 billion and net income grew to $855 million, up from $514.1 million in 2006. Automobile/mobile sales climbed 115 percent to $2.34 billion and unit sales in that segment grew by 210 percent for 2007 over the year prior.
For the current year 2008, revenue is expected to grow by 45 percent in automobile/mobile in 2008.
Garmin also said it was able to offset lower PND margins in the fourth quarter by lower costs in NAND memory and operating efficiencies. For the coming year, the company said PND average selling prices will drop by 20 percent.