Shares of navigation device maker Garmin (GRMN) dropped about 15 percent after the company's first-quarter results widely missed earnings expectations.
The company said net earnings fell 67 percent to $48.5 million, or 24 cents per share. Excluding times, Garmin's earnings totaled 25 cents per share. Sales fell 34 percent to $437 million. Analysts polled by Thomson Reuters expected a profit of 42 cents per share on revenue of $531.6 million.
Garmin's CEO Min Kao blamed a slowdown in discretionary spending for the decline. "The first quarter of 2009 represented Garmin's most challenging quarter since becoming a public company in December 2000," Kao said. "Macroeconomic factors have contributed to a significant slowdown in consumer discretionary spending which has been further exacerbated by ongoing channel inventory reductions by our retail partners in the PND industry."
With so many applications at consumers' disposal like MapQuest, Google Maps and Yahoo Maps, plus global positioning software on mobile devices like Apple's iPhone and Nokia smartphones, it's no wonder that this category is suffering during the recession. Many analysts have called for the death of personal navigation devices for some time but research shows that the personal navigation market will grow to more than 100 million units by 2011.
And at least Garmin is more diversified than some of its rivals. The company is also involved in avionics (electronics used in aerospace vehicles), mobile phones and is diving into the sports world.
During the second quarter, Kao is optimistic that cost cutting and new products, including a handheld designed specifically for the golfer, a device that offers increased accuracy in heart rate-based calorie computation and waterproof sports watches will help its results.
The tech world is also bracing for Garmin's "Nuvifone" in the coming months, which offers an all-in-one phone, browser and GPS system.