Poor financial results cause Garmin shares to fall sharply [The Kansas City Star]

(Kansas City Star (MO) Via Acquire Media NewsEdge) Feb. 20--Shoppers passed over Garmin's Nuvi GPS devices more than expected during the holidays, cutting company revenue late last year and sending its stock price to new lows on Wednesday.

The Olathe-based maker of handheld navigation devices and products for use in cars, boats, airplanes and sports has steadily lost GPS device sales with the emergence of cellphone apps that help drivers find their way.

The decline in business during the fourth quarter also showed that Garmin's traditional year-end bump in business seems to be waning.

"We'll have some seasonality due to the holiday season, but the numbers won't be as significant as they've been in the last three or four years," chief executive Cliff Pemble told analysts during a conference call.

Garmin's stock price fell 9.4 percent after the morning financial report. Shares lost $3.70 and finished the trading day at $35.54. During morning trading, shares fell to $34.65, the lowest price in more than 52 weeks.

Garmin continues to invest in new Nuvi products but is focusing more research and development among its other product lines as the market for personal navigation devices declines.

As that revenue declines, Garmin is "carefully managing" hiring, said chief financial officer Kevin Rauckman, but it has no plans for layoffs.

"That's proven to be a pretty smart move in the past," analyst Jonathan Ho at William Blair & Co. said. "The other businesses have significant opportunities, and they want to keep a lot of the good engineers." Sales in Garmin's fitness product lines increased in the fourth quarter when compared with a year earlier, but sales fell in its aviation, marine and outdoor products.

Total revenue fell 16 percent from a year ago to $769 million in the fourth quarter. For all of 2012, Garmin's revenue declined 2 percent to $2.7 billion.

The company's principal rival, European-based TomTom, said its revenue fell 19 percent in the fourth quarter and 17 percent for the year.

One challenge Garmin faces is how quickly its sales of personal navigation devices decline. The business still generates a lot of cash that Garmin uses to develop new products, particularly for built-in Garmin devices in its growth areas.

"The future of Gamin is in dashboards for planes, boats, cars and devices for sports enthusiasts," said analyst John Bright at AvondalePartners LLC.

Garmin said it expects revenue to fall again this year to between $2.5 billion and $2.6 billion. The slide will come principally from its personal devices business. It forecast increases in revenue for its other business lines.

Sales in its aviation line, principally navigation devices built into the dashboards of business jets, should be the strongest at between 10 and 15 percent this year. The others should increase between 5 and 10 percent, it forecast.

Rauckman said these other areas should produce more than half the company's revenue this year. Its automotive and personal device group, which generated 57 percent of 2012 revenue, probably will slip to 48 percent of 2013 sales.

Garmin said its marine division, which makes boating and fishing products, is being hampered by a late rollout of products for the coming season. Goods should be on shelves now but aren't, as the company needed extra time to deal with technological complexity and achieve the high quality that consumers expect.

Sales also have suffered from Europe's economic woes, with many nations there in a recession. Pemble told analysts that the European market may not improve much this year but "we've probably hit kind of a bottom there." Falling revenue led to a 21.9 percent drop in fourth-quarter earnings to $129.3 million, or 66 cents a share, compared with $165.6 million, or 85 cents a share, a year earlier.

For all of 2012, earnings rose to $542.4 million, or $2.76 a share, compared with $520.9 million, or $2.67 a share, in 2011.

This year's profits should be between $2.30 and $2.40 a share, the company said.

___ (c)2013 The Kansas City Star (Kansas City, Mo.) Visit The Kansas City Star (Kansas City, Mo.) at www.kansascity.com Distributed by MCT Information Services

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