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Garmin Targets $99-$119 PNDs For Black Friday

11/04/2009 02:40:52 PM Eastern

Cayman Islands - In an unexpectedly strong third quarter, Garmin reported a higher net income, and said its selling prices for portable navigation device (PND) increased.

Garmin's total net income for the quarter, ended Sept. 26, was $215 million, compared with $171 million for the quarter last year. Total revenues, however, fell 10 percent to $781 million, compared with $870 million last year. 

The company said average selling prices (ASPs) on its PNDs were stronger than expected and that the company also lowered its cost of materials and benefitted from a strong euro against the dollar.

Total ASPs for PNDs for the full year are expected to decline 15 percent to 20 percent below 2008, said Garmin, while noting that Garmin's low-cost models on Black Friday will sell in the $99 to $119 range.

Gross margins for the quarter improved to 52.4 percent, compared with 44.3 percent last year, and operating margins improved to 30.3 percent, compared with 24.6 percent last year, said the company on an earnings call with analysts today.

Garmin president and COO Cliff Pemble admitted that sales of Garmin-Asus G60 Nuvifone have been "slow," but said the company is taking actions to improve sales, including a just-launched television advertising campaign, "which we feel is critical to establishing Garmin as a wireless brand." AT&T also recently lowered the price on the G60 to $199.  An Android-based Nuvifone is slated for 2010, he added.

Pemble also addressed competition from GPS mobile apps, stating, "While these developments are interesting, we don't think they will impact the market of PNDs any time soon."   He claimed that free navigation apps "still require the purchase of a premium device and a service plan for the carrier." He cited the pitfalls of navigation on a smartphone compared to PNDs, including smartphone overheating and lesser GPS reception.

Garmin said revenue in its automotive/mobile segment fell 13 percent for the quarter to $546, compared with $626 million last year, and unit sales declined 2 percent from last year. However, ASPs improved over last year and over the second quarter.

Garmin also increased its market share in PNDs to 60 percent, up from 57 percent in North America in the second quarter, and kept its European market share steady at 20 percent.

The company expects PND unit sales to improve by 40 percent to 50 percent in the fourth quarter when compared with the current quarter, and unit sales in the category to be basically flat or down 5 percent for the year when compared with last year.

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