July 30 (Bloomberg) -- Garmin Ltd., the world's largest maker of car-navigation devices, fell the most in eight years in Nasdaq trading after cutting its sales forecast as competition with TomTom NV drives down prices.

Sales will rise 23 percent in 2008 to $3.9 billion, about half the 42 percent rate predicted in February, Garmin said in a statement today. The company also posted second-quarter earnings and sales that fell short of analysts' estimates.

Vying with TomTom forced Chief Executive Officer Min Kao, 59, to cut prices 25 percent from a year ago to keep unit sales growing as consumers curbed spending. Garmin also delayed the release of its Nuvifone mobile handset by as much as six months.

``Navigation devices are seeing decelerating growth and continued pricing pressure,'' said Needham & Co. analyst Richard Valera in New York, who has a ``hold'' rating for the stock and doesn't own it. ``They haven't come up enough with other stuff to offset those two factors, and the Nuvifone was supposed to help with that.''

Garmin, based in George Town, Grand Cayman, fell $9.87, or 22 percent, to $35.19 at 4 p.m. New York time in Nasdaq Stock Market trading. The drop was the largest since Garmin sold shares to the public in 2000. The stock, which almost doubled last year, has dropped 64 percent this year.

Profit, excluding a gain from a sale of Tele Atlas NV shares, was 94 cents a share, compared with the $1.01 average analyst estimate in a Bloomberg survey. Sales rose 23 percent to $911.7 million, falling short of the $959.1 million analysts had projected.

Nuvifone

Sales growth slowed from last year's 79 percent rate because the average selling price dropped. People who don't already own navigation devices are choosing less expensive ones with basic functions, according to Oppenheimer & Co. analyst Yair Reiner in New York. Mobile-phone makers such as Nokia Oyj also are selling handsets with navigation features.

The decline in prices probably will be about 25 percent for the full year, Chief Financial Officer Kevin Rauckman said on a conference call today. The Nuvi 200, one of Garmin's best-selling models, currently sells for $219.99.

Full-year earnings will be $4.13, which includes a 27-cent gain from a sale of a stake in map maker Tele Atlas, the company said today. Analysts had projected profit of $4.05 on sales of $4.15 billion.

Second-quarter net income rose to $256.1 million, or $1.19 a share, from $214.4 million, or 98 cents, a year earlier. The second-quarter results included a gain of 25 cents a share from the Tele Atlas sale.

TomTom's Results

TomTom this month said net income declined 24 percent to 51.6 million euros ($80.4 million). Sales rose 19 percent to 453.4 million euros. The company aims to lift its U.S. market share to 30 percent from about 20 percent, challenging Garmin, Chief Executive Officer Harold Goddijn said.

Second-quarter profit, excluding interest and taxes, fell to 26.2 percent of sales from 32.5 percent a year earlier, Garmin said. The company has added features that help its devices double as televisions, allowing it to charge more and potentially increase profit margins.

The company also is banking on the Nuvifone to boost margins. Garmin had expected that the product would account for as much as 10 percent of its fourth-quarter sales, Valera said. Garmin pushed the release back to the first half of 2009.

Garmin may have to settle for lower margins for the Nuvifone than expected because of competition from Apple Inc.'s $199 iPhone 3G, introduced this month, Valera said. Garmin probably aimed to sell the Nuvifone for at least $300 and may now need to drop the price to match that of the iPhone, he said.

``These two things will sit on the shelf next to each other,'' Valera said. ``The $199 price point is a very difficult thing for other smart phone makers including Garmin to deal with.'' Garmin spokesman Ted Gartner declined to comment on pricing.

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

Last Updated: July 30, 2008 16:09 EDT