October 29, 2008 / 12:52 PM / 10 years ago

UPDATE 3-Garmin Q3 results beat Street; cuts '08 outlook

* Q3 EPS, revenue top Street view

* Lowers ‘08 outlook

* Still sees PND price declines of 25 pct in ‘08

* Nuvifone on target for launch in H1 of ‘09

* Shares up 4 percent (Recasts; adds analysts comments, conference call details)

By Purwa Naveen Raman

BANGALORE, Oct 29 (Reuters) - U.S. navigation device maker Garmin (GRMN.O) posted better-than-expected third-quarter results and said its smartphone plans were on track, sending its shares up as much as 9 percent.

The company, however, followed its Dutch rival TomTom (TOM2.AS) in lowering its 2008 outlook as a slowdown in economy and a weak euro are expected to eat into its earnings.

For 2008, Garmin expects adjusted earnings of $3.78 a share, 8.5 percent lower than its earlier outlook. It lowered its revenue outlook by 7.7 percent to $3.6 billion. [ID:nWNAB3690]

“The new targets are not exciting, but they are not awful,” said analyst Yair Reiner of Oppenheimer & Co, adding that the targets seemed well within the company’s reach.

Garmin, which has been facing inventory issues, said it was taking steps to reduce the levels by about $150 million by the end of the year.

“I think, as they try to reduce inventory they will have some pressure on the margins and overall business,” Wedbush Morgan Securities analyst Scott Sutherland said.

The company, which has already repurchased 8.2 million shares, also said it would buy back shares worth $300 million through December 2009.

Garmin’s shares were up 4 percent at $22.38 in afternoon trade on Nasdaq. Before Wednesday’s gains, they had lost more than 80 percent of their value since touching a 52-week high of $124.75 in October last year.


Garmin, the largest maker of navigation devices in the United States, said nuvifone - which has already been delayed twice due to carrier issues - was on track for launch in the first half of 2009.

The company said it has signed letters of intent or agreements with certain carriers and expects to test the phone on their networks in early 2009. Market chatter is that the company has been talking to AT&T (T.N) for nuvifone.

The company is looking to sell one million nuvifones in 12 months after its launch and expects gross margin of 30 percent to 35 percent from the phone business.

In a highly competitive smartphone market, Garmin will have to face longer established players such as Nokia NOK1V.HE, Research In Motion Ltd’s RIM.TO BlackBerry, Apple’s (AAPL.O) iPhone and newly-launched G1 phone by HTC Corp (2498.TW).


For the third quarter, Garmin topped market estimates by 4 cents a share, before items, and its revenue rose 19 percent to $870 million.

“The Street had clearly been girding for the possibility of a meaningful shortfall,” Reiner said in a research note. “This slight beat may therefore feel like a big victory.”

Revenue grew across the board, except for the marine segment, which fell 8 percent. Total revenue grew in North America and Europe but fell 21 percent in Asia.

“Surprisingly, they did well in North America, where you think macro impact was worst,” Wedbush Morgan Securities analyst Sutherland said.

The results also indicated that pricing pressures eased in the third quarter, but the industry rivals Garmin and TomTom may again resort to lowering prices in the fourth quarter as they try to boost volume in the critical holiday season.

Garmin still sees PND prices falling about 25 percent in 2008.

Shares of TomTom closed up at 5.70 euros on the Amsterdam exchange. (Editing by Anil D’Silva, Amitha Rajan)

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