February 23, 2009 / 1:01 PM / 10 years ago

UPDATE 4-Garmin Q4 profit drops; shares up as inventory eases

* Q4 results miss Street view

* Will not provide an outlook for 2009

* Lowers inventory by $274 mln

* Feb sales up over Jan sales

* Shares up as much as 17 pct (Adds details from conference call, updates share movement)

By Purwa Naveen Raman

BANGALORE, Feb 23 (Reuters) - Navigation device maker Garmin (GRMN.O) posted lower-than-expected quarterly results on Monday as sales of its gadgets used in cars dropped, but shares rose 17 percent as the company reduced its inventory.

The top U.S. navigation device maker, which has been facing inventory issues, said it reduced its inventory by $274 million in the fourth quarter. In October, it had expected to lower inventory by about $150 million by the end of the year.

“It’s a sign that they may not have to price as aggressively to move the inventory in a slower economic environment,” Avondale Partners LLC analyst John Bright said.

Additionally, the company, which saw higher sales in February versus January, said it expects pricing declines to moderate in 2009.

“We anticipate average selling price declines will moderate in 2009 as additional competitors exit the market and retail inventories decline resulting in less margin pressure,” Chief Operating Officer Cliff Pemble said on a conference call with analysts.

Garmin said it continued to see unit growth in both North America and the Asia-Pacific regions, even as market for personal navigation devices slowed.

The company, which was earlier scheduled to report its earnings on Wednesday, said it sold 6.4 million units in the fourth quarter of 2008, up 15 percent from a year earlier.

“In general their quarter was good enough, but their future remains very cloudy,” Deutsche Bank analyst Jonathan Goldberg told Reuters.

Garmin, which competes with Dutch firm TomTom (TOM2.AS), also said it would not provide an outlook for 2009 due to lack of visibility.

Garmin’s fourth-quarter net income fell to 78 cents a share, from $1.39 a share a year earlier. Excluding items, earnings of 93 cents a share were below analysts’ average estimate of 96 cents a share.

Revenue fell 14 percent to $1.05 billion. Analysts were looking for $1.12 billion. Revenue from the company’s automotive/mobile segment declined 17 percent to $828 million. [ID:nWNAB5451]

Gross margin was at 41.1 percent, a 320 basis point decline sequentially, mainly due to a drop in the average selling price during the holiday season.


Garmin said it would launch its first navigation-centric mobile phones, the G60 and the M20, in selected markets during the first half of 2009.

However, the company did not give details on carriers and pricing, saying it will give further updates as the launch dates approach.

Earlier this month, the company had dropped plans to enter the cellphone market on its own, and teamed up with Taiwan’s low-cost PC maker Asustek (2357.TW) to sell phones under the nuevifone brand.

Last week, the two phones were unveiled in the Mobile World Congress in Barcelona, the industry’s biggest annual gathering.

“While its (G60) design feels outdated, the software was superior to the majority of touch phones displayed at the show,” Oppenheimer & Co analyst Yair Reiner said in a preview note on the company’s earnings.

The G60 runs on open-source Linux software, while the M20 uses Microsoft’s (MSFT.O) Windows Mobile software. The company also aims to bring out a phone based on Google’s (GOOG.O) Android operating system towards the end of the year. [ID:nLG226967]

Shares of Garmin were trading up $1.54 at $16.71 Monday afternoon on Nasdaq. They have lost almost three-fourths of their value since February last year, when they touched a 52-week high of $64.20.

TomTom shares closed down 5 percent on the Amsterdam exchange. (Additional reporting by S. John Tilak; Editing by Amitha Rajan)

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