PREVIEW-Garmin profit seen in line with Street, may cut outlook

martes 29 de julio de 2008 18:43 CEST

   * Garmin (GRMN.O: Cotización) second-quarter results
 * On Wednesday, July 30
 * Sales seen at $955.6 mln, earnings at $1.01 a share
 * Analysts expect at least an in-line Q2 result
 * Seen lowering 2008 outlook
 * Investors to look out for information on "nuvifone"
 By Purwa Naveen Raman
 BANGALORE, July 29 (Reuters) - Navigational device maker
Garmin Ltd (GRMN.O: Cotización) may post a second-quarter profit in line
with Wall Street estimates, driven by good demand for its
devices in the United States, even as pricing and margin
concerns persist.
 Encouraged by Dutch rival TomTom's (TOM2.AS: Cotización) strong results
last week, analysts say Garmin, known for its popular range of
'nuvi' personal navigation devices (PNDs), will benefit from
the favorable environment that helped its chief competitor.
 "There is very good volume growth in the United States and
good but moderate growth in Europe," analyst Scott Sutherland
of Wedbush Morgan Securities said by phone.
 Last week, TomTom beat market expectations with a rebound
in sales and operating profit after a slump in the first
quarter, and said demand for its products had held up.
 Analysts, however, believe that Garmin might lower its
outlook for the full year.
 "We believe Garmin will modestly reduce 2008 guidance, but
that it would remain above consensus estimates, which will
likely be taken positively," Sutherland said in a research
 For the second quarter, TomTom's strong sales were driven
by a robust 140 percent unit growth in North America. Garmin
has a higher exposure in the region, with almost 50 percent
market share. Sutherland said he was expecting a unit growth of
well over 100 percent for Garmin in the United States.
 According to Reuters Estimates, analysts on average expect
Garmin to post a profit of $1.01 per share for the period,
compared with 98 cents a share a year ago.
 Revenue is expected to rise almost 29 percent to $955.6
million. Garmin reports second-quarter results on Wednesday.
 Garmin and TomTom dominate the PND market, which has seen
scorching growth in the last few years. But since the start of
the year, intense competition and several new entrants have
chipped away at the huge margins they used to enjoy.
 Analysts say gains from unit growth will likely be offset
by a fall in average selling prices, which are expected to
continue their decline into the second quarter.
In addition, Cayman Islands-based Garmin's earnings will be
weighed down by a higher tax rate in Taiwan, where its key
manufacturing units are located, and by macroeconomic woes.
 Investors will also be on the lookout for an announcement
on the company's proposed smartphone "nuvifone", slated to be
launched in the fourth quarter.
 The company has yet to disclose pricing and carrier details
for the nuvifone, which will compete against giants Research In
Motion's RIM.TO RIMM.O BlackBerry Pearl 8110 and Nokia's
NOK1V.HE N95 and N82 multimedia phones.
 Apple Inc's (AAPL.O: Cotización) latest version of its popular iPhone
also includes navigation capability.
 "We see potential PND catalysts with the introduction of
the nuvifone and new carrier deals later this year," Robert W.
Baird & Co's Reik Read said in a research note dated July 22.
  Following is a breakdown of analysts' estimates:
             Revenue*  Earnings* Gross margin Operating
             ($, mln)    ($/shr)      (%)           (%)
 Average           955.6     1.01       45.4          27.6
 Highest         1,038.2     1.11       46.3          30.0
 Lowest            894.0     0.92       42.3          25.6
 No. of analysts      17       19          6             8
 *Data from Reuters Estimates
 (Editing by Mike Miller, Himani Sarkar)