April 30 (Bloomberg) -- Garmin Ltd., the largest U.S. maker of car-navigation devices, reported first-quarter profit and sales that missed analysts' estimates as competition with TomTom NV intensified, driving down prices. The shares fell the most in almost 18 months on the Nasdaq.

Net income rose 5.7 percent to $147.8 million, or 67 cents a share, from $139.9 million, or 64 cents, a year earlier, the George Town, Grand Cayman-based company said today. That's the smallest increase in three years and less than the 73-cent average estimate in a Bloomberg survey of analysts.

Prices probably fell by about a third as Garmin fended off competition from Amsterdam-based TomTom and tried to lure drivers who don't already own navigation devices, said Oppenheimer & Co. analyst Yair Reiner. Chief Executive Officer Min Kao is bringing out devices that provide movie times and gas prices and double as televisions in a bid to prop up prices and profit margins.

``Garmin has to keep on differentiating its products and investing in its brand to fight TomTom,'' New York-based Reiner said in an interview today. ``TomTom is establishing itself as a strong challenger in the U.S.'' Reiner advises investors to hold on to the stock and doesn't own the shares.

Garmin fell $5.54, or 12 percent, to $40.90 at 4 p.m. New York time in Nasdaq Stock Market trading, the biggest decline since November 2006. The stock has lost 58 percent this year, making it the second-worst performer on the Nasdaq 100 Index.

Growth Slows

Sales growth slowed from last year's 79 percent rate because people who don't already own navigation devices are choosing less expensive machines with basic functions. Mobile-phone makers including Nokia Oyj are also selling devices with navigation features, adding to competition.

Revenue rose 35 percent to $663.8 million last quarter, trailing the $705.7 million average analyst estimate. Sales at Garmin's car-navigation unit experienced the fastest growth of the company's businesses, rising 43 percent to $452 million.

Garmin will probably forecast full-year sales lower than what it predicted in February, Reiner said. Garmin said it will update its 2008 projections after it reports second-quarter earnings. In February, the company said full-year sales would probably climb at least 42 percent to more than $4.5 billion.

`Risks'

The full-year forecasts ``now include risks'' because of the slowing U.S. economy, Chief Financial Officer Kevin Rauckman said on a conference call today. Prices for navigation devices will drop 25 percent this year, cutting into profit, he said. In February, Garmin projected a price drop of 20 percent this year.

In the first quarter, average prices probably declined to about $208 from the $310 a year earlier, Reiner estimates. Garmin didn't provide prices for specific products.

TomTom said last week that first-quarter profit fell to the lowest since it sold its first navigation device in 2004 as retailers reduced inventory and the company cut prices before introducing new models.

In the fourth quarter, Garmin controlled 47 percent of the U.S. market, which was the fastest-growing region for its products, according to Reading, England-based researcher Canalys. European market leader TomTom was second in the U.S. with 21 percent.

TomTom said it expects to increase its U.S. market share to 30 percent this year. The company slashed its average selling price to 117 euros ($182) in the first quarter, down 43 percent from a year earlier.

Nokia in Third

In Europe, Espoo, Finland-based Nokia already ranks as the No. 3 seller of navigation devices, behind TomTom and Garmin, Canalys says. Phones equipped with global positioning system technology make up the fastest-growing segment of the navigation- device market, according to Canalys.

Nokia agreed last year to buy Navteq Corp., a provider of digital maps to companies including Garmin, for $8.1 billion, while TomTom said it would take over Tele Atlas NV, a Navteq rival, for 2.9 billion euros.

Navteq, based in Chicago, said today that first-quarter profit rose 8.7 percent to $32.9 million, or 32 cents a share, as sales jumped 39 percent to $208.8 million.

To compete with the phone-makers, Garmin plans to start selling a touch-screen ``nuvifone'' this year, Dan Bartel, a Garmin vice president, said last month. The mobile handset, which lets users find their way and surf the Web, is scheduled to go on sale in the fourth quarter, the company said today.

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: April 30, 2008 16:31 EDT