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.
