Garmin Predicts 60% PND Growth In 2008

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Olathe, Kan. — Garmin said it expects growth for the total North American portable GPS market of 60 percent in unit sales this year, with 20 percent growth or better possible in 2009.

Industrywide sales of personal navigation devices (PNDs) should total 20 million units in the U.S. this year, which represents growth of 60 percent, said the company. While this figure is down from the 300-plus percentage gains of the past years, “the PND is still growing at a healthy rate compared to other categories,” said Garmin president and COO Cliff Pemble on a conference call today on third-quarter results.

Garmin lowered its own sales expectations for the year to a year-over-year revenue gains in automotive GPS to 13 percent, down from 25 percent. Chief financial officer Kevin Rauckman said sales in October were “a little less than we anticipated,” and claimed that retailers “are limiting their risk and limiting inventory.” He added, “We didn’t see a big difference in September but saw a slowdown in October … We’re looking at real pressures on our economy.”     

Garmin said its unit growth in PNDs was 54 percent for the quarter ending Sept. 27, with North America leading the gains. Low-end PND products represented 80 percent of its unit sales and 70 percent of dollar sales. The company noted that average selling prices (ASPs) should decline by 25 percent for the year.

Spending on advertising is also expected to increase in the fourth quarter in absolute dollars and as a percentage of sales, said Rauckman  

When asked if industrywide U.S. PND growth could fall to 20 percent next year, Rauckman said, “I don’t see any reason why we shouldn’t see at least 20 percent growth next year. The benefit next year is that ASPs are moderating. Next year will be a little different with higher [household] penetration rates by the end of the year.” PND penetration is currently approaching 15 percent, he said.

Rauckman predicted less competition in 2009, as, “The operating margins of some of our competitors are getting pretty slim if not down to zero and that will help us on ASPs.”

The company also said about 20 percent of PND sales are now replacement, and that figure should climb over the next few years.

Garmin also reported that its Nuvifone GPS/smartphone to be released in the first half of next year will include many of the location-based services and related applications now offered for the iPhone by third parties. When asked if the company might open the platform up to third-party developers, Garmin said it was “open minded” on the subject.

Garmin reiterated it is hoping to sell a million Nuvifone units, at prices competitive with the $199 and $249 smartphones on the market. It has signed letters of intent or agreements with certain carriers and expects “carrier lab entry” of the

Nuvifone

in early 2009.

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