December 9, 2009 / 8:47 PM / 8 years ago

UPDATE 1-Garmin's Q4 on track, eyeing acquisitions

* Says Q4 in-line with expectations so far

* Says evaluating acquisition opportunities

* Sees 2010 unit sales up 10 pct, selling prices down 10 pct

* Plans further launch of nuvifone products

* Shares rise 5 pct

By Savio D’Souza

BANGALORE, Dec 9 (Reuters) - Top U.S. navigation device maker Garmin (GRMN.O) said its fourth quarter through Black Friday was in line with expectations in terms of margins, the number of units sold and the selling price per unit, sending its shares up about 5 percent.

“We did not go down to the very low price point ... and elected to let some of the low-end units go to competitors because we wanted to make reasonable margins,” Garmin Chief Financial Officer Kevin Rauckman said at a Barclays investor conference on Wednesday.

Early last month, Garmin’s forecast for a weak holiday quarter had reignited concerns about the long-term survival prospects of the personal navigation device (PND) market and sent its shares tumbling. [ID:nBNG490338]

Prices of navigational devices hit rock bottom this Black Friday as device makers jostled for sales in a market that has seen new competition from smartphones with navigation aids as well as Google’s (GOOG.O) plan to launch free navigation software.

Last month, Garmin’s main competitor TomTom (TOM2.AS) also said its sales in the quarter were in-line with plans. [ID:nLI689959]

Garmin’s average selling price (ASP) in the fourth quarter was in the mid-$140 range, the same as the year-ago period, Rauckman said.

He said Garmin’s loss of market share in the quarter was no worse than expected even as it stayed away from price wars and discounts, especially at Wal-Mart Stores Inc (WMT.N), the world’s largest retailer.

Garmin would, however, retain a market share of about 55 percent to 60 percent in the United States going forward, he added.

The PND market faces an unprecedented threat from navigation-enable phones and, while most analysts believe that the PND faces a slow but sure decline, Garmin is focussed on milking the segment for profitability to maintain its margins.

“Garmin expects roughly about 10 percent unit (sales) growth in 2010 and we are looking right now at ASPs coming down about 10 percent,” Rauckman said.

    Shares of the company, which were down about 1 percent before the conference, rose about 5 percent at $31.45 in late afternoon trade on Nasdaq.


    Garmin also said it expects to end 2009 with more than $1 billion in operating cash, which would be used to pay dividends and fund probable acquisitions. “We are currently in the process of evaluating several deals and (acquisitions) probably moved up on the level of priorities,” Rauckman said.

    In August, Garmin had held talks to buy Britain’s Raymarine Plc RAY.L in a bid to gain market share in Europe, but nothing materialized. [ID:nBNG448245] “We fully expect the consolidation will continue and there will probably be fewer players in the space as we go forward into 2010 and beyond,” Rauckman said.

    Long term, Garmin expects to grow about 10 percent to 15 percent and expects that gross margins would fall to no lower than 35 percent to 37 percent, he added.

    However, Rauckman said the gross margin view would depend on the success of its own navigation-enabled smartphone, called nuvifone, which was recently launched after multiple delays.

    The nuvifone — built in partnership with Taiwanese PC maker Asustek (2357.TW) — has got a tepid response so far, as it was pitted against established leaders like Apple’s (AAPL.O) iPhone, Research In Motion’s RIM.TO BlackBerry, and phones from Nokia NOK1V.HE, HTC (2498.TW) and Palm PALM.O.

    “The key reason that we haven’t had as successful a launch as we had hoped was that the product was late to market,” Rauckman said.

    But the lukewarm response hasn’t dented Garmin’s plans as it said it expects to launch another nuvifone product in the second quarter of 2010, followed by more products later as it looks to develop a family of products centered on the navigation-enabled smartphone. (Reporting by Savio D’Souza; Editing by Anil D’Silva)

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