Garmin Cuts Outlook; Exits Smartphones

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Update! Garmin said it is withdrawing resources from smartphones after disappointing sales in the category and is redirecting resources to other areas of its business including new apps for smartphones.

CEO Dr. Min Kao said in a statement, Garmin is “winding down our investment in mobile handset device development.” Resources are now going to other areas such as outdoor fitness, and OEM products for cars and boats, he said. “We have also begun development of mobile applications for the smartphone market.”

Fewer portable navigation device (PND) and GPS/phone sales caused Garmin to miss market estimates for its third quarter and reduce its full-year forecast, it said today.

Q3 revenue fell 11 percent to $692 million and pro forma earnings were 70 cents a share, while analysts had expected 75 cents a share for the period ending September 25, Reuters said.

Sales in Garmin’s automotive and mobile sector, which includes PNDs and phones, fell 19 percent over the period last year to $442 million. But sales in all other sectors including outdoor/fitness, aviation and marine saw an increase in sales ranging from 1 to 9 percent.

“While we are not satisfied with the overall results, the strong operating income performance in outdoor/fitness, aviation and marine are positive indicators for the long‐term profitability of Garmin,” said CEO Dr. Min Kao.

Because of weak sales in its GPS/mobile phone venture with Asustek, Kao said, “During the quarter, we thoroughly analyzed the rapidly changing dynamics of the smartphone market and concluded that we cannot reach the scale necessary to effectively compete in the industry.”

In terms of PNDs, Garmin noted that it was comparing sales against a strong quarter last year when many new models were introduced.

Unit sales of PNDs declined in the single digits for the quarter and Garmin was able to grow its market share in PNDs. Its OEM auto business also grew by triple digits for the quarter. The company expanded its presence in Chrysler 2011 vehicles and it is working on other OEM deals, it said.

Averaging selling prices in PNDs dropped 15 percent in Q3 compared to last year.

Source: Garmin and Reuters

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