Garmin Gains on GPS Growth

The shares climbed Wednesday as the navigation-device maker reported a sharp increase in profit

Even when you're selling navigation devices, figuring out where to go next isn't easy; the competition in that industry has been heating up lately. But Garmin Ltd (GRMN) said Feb. 14 that its profits have more than doubled, as recent efforts to keep inventing newer products pay off so far.

The Cayman Islands based company earned $180 million during the three months ended Dec. 30, 107% more compared to the same period last year. "Our strategy effectively positions us to take advantage of the growing demand for portable navigation devices both in the U.S. and in Europe," CEO Min Kao said in a press release Feb. 14.

Others are tapping into the same demand. Garmin rivals range from the European company TomTom to the telecom Sprint (S). Navigation devices of all shapes and sizes have been cropping up - some for use in handhelds, others that come as displays that you mount on your dashboard - and their manufacturers have been grabbing customers by notching down the prices. For example, Garmin's pocket-sized Nuvi 350 personal navigator lists for $642, but you can easily find it for $200 less (see, 1/29/07, "Easy Ways To Find Your Way").

CEO Min Kao has been fighting that problem by taking steps like introducing new products -- more than 70 in 2006. Garmin makes a wide range of navigation, communications and information devices for both the aviation and consumer markets (see, 6/20/06, "Time to Home In On Garmin")(see, 06/20/2006, "Time to Home In On Garmin.") The company is also increasing the ante on its ad spending. Total revenue was $611 million during the quarter, up 92% year over year.

"Leverage from higher revenues and what we believe was a strong sell-through of GRMN's higher priced personal navigation device products offset increased price competition," Standard & Poor's equity analyst James Peters said in a research note. (S&P, like, is owned by The McGraw-Hill Companies.)

Now Garman says it expects revenue to exceed $2.5 billion and earnings per share to exceed $2.70 in 2007, assuming an effective tax rate of around 15%. The mean analyst forecast had been for $2.2 billion revenue and $2.38 EPS in 2007, according to the San Francisco research firm StarMine, which aggregates data from Thomson Financial.

Investors bid up the stock by 6.2% to $56 per share in early afternoon trading on the Nasdaq Feb. 14.

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