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6 August 2020

Garmin Takes A Vicious Wall Street Hammering, Nuviphone Delayed Until 2009

income statement Garmin Takes A Vicious Wall Street Hammering, Nuviphone Delayed Until 2009

Like GPS chipmaker SiRF, Garmin seems to be taking a battering in a tough global economy.  The company’s Q2 earnings call today showed revenue increases virtually across the board in every sector except the marine category thanks to high fuel prices.  And despite double-digit growth in both revenues and shipments year-to-year and quarter-to-quarter, Garmin still fell a bit short of Wall Street estimates and have downgraded their outlook for the remainder of 2008.  Year-to-year, the PND maker posted revenues of $3.98 billion and profits before a one-time gain of $3.86/share.  Wall Street expected revenues of $4.13 billion and profits of $4/share.  Quarter-to-quarter, Garmin took in $912 million before expenses resulting in profits of $0.93/share compared to Wall Street’s forecast of $956 million and $4/share.

And so despite impressive growth in a tanked economy, Garmin’s stock fell.  But it wasn’t just the missed earnings estimates which took their toll.  Garmin also announced today that the company’s entrance into the mobile phone market, also known as the nuviphone, would be delayed until early 2009.  This is a far cry from the nuviphone release originally slated for this quarter and the third delay overall.

The company says that the issue now is in meeting carrier-specific requirements.  Exactly what those requirements are is unknown as are the carrier’s that’ll carry the Garmin nuviphone in the United States.  It’s widely believed AT&T will carry the GPS-enabled mobile phone, but rumors also have T-Mobile as a possible partner despite the fact that the wireless provider doesn’t yet provide 3G coverage across the entire nation.

At the close of trading today, the combination of announcements resulted in a closing price of $35.19, down almost $10 or 22% in regular trading.  That’s another 52-week low for the company spurring on all kinds of conversation regarding the intelligence in purchasing Garmin stock over the next couple of days.  Despite the fact the remainder of 2008 looks weak for Garmin, that’s a function of the economy rather than an issue with company strategy or management.  I think if earnings estimates are adjusted in accordance with today’s announcement, we’ll see the stock rise again and smart investors will find themselves very happy.

What we are beginning to wonder though, is whether or not focusing on releasing a branded handset is the best way to go for Garmin.  Can the nuviphone compete with the iPhone’s of the world?  We don’t particularly think so.  Would Garmin be better off focusing on developing software and applications for existing mobile manufacturers?  We think so, but what we really want to know is what you think?

Update: It looks like T-Mobile will be going 3G nationwide October 1.

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