Nov 19, 2020 in Analysis

Garmin Analysis
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Garmin Analysis: Following the Business Decisions

Garmin Ltd is a company leader in means of navigation. The range of production includes road, water and air technical devices built to improve travelling to different places on the planet. For the last five years, the company experiences a slight decline in sales as the new generation of smart electronic technology starts to develop rapidly.

 

The world's largest maker of navigation devices Garmin reported on the results of the fourth quarter and the whole year 2012. In addition, the company announced forecast for the current year which was lower than the market. This has led to a 10 % drop in shares. So, the company trends to the falling of the actions if the situation remains the same in 2013.

Following the period from October to December 2012 Garmin net income has decreased by 22 % compared to the last year and amounted to 129.3 million dollars or 66 cents per share, opposite to 165.6 million dollars or 85 cents per one security a year earlier. Sales have fallen 16 % and amounted to 768.5 million dollars, which is not up to analytical assessment in 833,400,000 dollars.

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The company has earned 437 million US dollars selling the automotive/mobile navigation, which is up 25 % compared to the fourth quarter of 2011. Revenue from sales of marine navigators has decreased by 9 % to $ 39 million. The segment of the outdoor navigation devices has brought to the budget of the US vendor 119 million dollars, which corresponds to the 2 percent decline for the year. Only the implementation of gadgets designed for sports enthusiasts and fitness in particular has been in positive territory. Garmin revenue in this segment has risen by 10 % to 104 million dollars.

The company's revenue in the United States in the last quarter comprised $ 445 million compared to 537 million dollars received in 2011. In the EMEA (Europe, Middle East and Africa) sales fell 16 % to 253 million dollars. Asia-Pacific revenues provided the company $ 71 million (-1 % yoy). For the entire 2012 Garmin rescued 2,720,000,000 dollars short of the 2011 figure of 2%. Net income was equal to U.S. $ 542.4 million or $ 2.78 per diluted earnings per share, contrary to 521 million dollars in 2011.

Garmin plans to finish 2013 year with a gain in the range of 2.5-2.6 billion while analysts expect the figure at 2.76 billion dollars. Pacific Crest Securities analyst James Faucette notes that sales of personal navigation devices (PND), which in 2012 have accounted for about 55% of Garmin revenues, are falling because of the popularity of smart phones with a GPS- modules and equipment of cars built in navigation.

Experts have predicted that in 2012 the market for PND-devices would shrink by 10%, and in subsequent years this negative indicator will be added another 3-4 percentage points.

Navigators are no longer welcome gifts for the holidays. This results into the lack of seasonal rise in the market in the New Year period, concludes the analyst Richard Valera of Needham & Co.

 
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The cash flow of Garmin Company can be identified as flat, rather than decadent. A reduction in the percentage of sales devoted to cost of goods sold from 51.48% to 47.80% was a key component in the bottom line growth in the face of flat revenues. From 2009 to 2012 the net income of the company decreased from 704 millions of US Dollars to 542.4 millions of US Dollar. At the first half of 2013, the company saw significant opportunities as it enlarged the spectrum of production and provided Android applications on the Google Play store.

The reason of sales failure is that new smart phones with automatically embedded GPS navigation systems start to expel Garmins production. As lots of smart phones industry spins up and have a great variety of functions it is hard to surprise anyone with GPS navigation. The market wants more and only companies providing innovations will satisfy the market demands. According to the fall of Garmin sale numbers the company has been in need of innovations.

In 2009 Garmin and Asus announced a strategic alliance which was aimed to provide the joint development of mobile phones that can replace the GPS-navigator. Other companies, including ASUS, used to practice this for a long time, but in cooperation with Garmin, which specialized in satellite navigation systems, it was possible to release more functional in terms of the decision. Hence, the Garmin-ASUS smart phone was developed. The Garmin Company failed to consider that it proposed expensive options, while smart phones provided free applications. As the result, such innovation did not become prosperous and had no positive recommendations from users.

However, people are not aware that the wide range of Garmin production has a number of advantages being oriented specially for navigation and not expanded for media functions. Consumers can not be ensured that the multifunctional device would work after falling in water. The Garmins products will work.

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At the end of 2012 Garmin provided the cooperation with Google and Android, which lead to the increasing of the shares and satisfying the consumers. Garmin takes into account that innovation is a mother of evolution. Thus, this year the factors of revenue position are forecasted to grow on at least 6% and the margins are to improve as the company enters more seasonally robust period.

To conclude, the main problem of the rise and fall of Garmin is that few years ago the company has failed to react fast and provide the line of new gadgets, responding to the time requirements. Hence, the market indicators have fallen to the 2012. In 2013 the situation has all opportunities to improve. However, it would be appropriate for the company to stay in the same fit and not to loose the position. The development of products is the main factor of future prosperity.

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