Is Garmin Doomed?

What do you say now, Garmin (Nasdaq: GRMN  ) insiders? Are you still bullish after watching your chief competitor, TomTom, bring its $99 GPS software to Apple's (Nasdaq: AAPL  ) iPhone App Store?

How could you be? Software is already making smartphones smarter than they've ever been, and Intel (Nasdaq: INTC  ) , Advanced Micro Devices (NYSE: AMD  ) , and NVIDIA (Nasdaq: NVDA  ) are making more and better brain-boosters for small devices.

A market of smarter smartphones means that stand-alone GPS devices could soon go the way of the print server. TomTom's software brings you and the rest of us one step closer to those dog days.

That's annoying. CAPS All-Star catoismymotor explains why:

Despite the reservations and the $99 price tag, the TomTom app for the U.S. and Canada was already the No. 2 most popular paid GPS application in the App Store as of Monday afternoon, and it's only a matter of time before TomTom starts releasing updates to iron out the kinks.

You're supposed to be the unquestioned leader in this market, Garmin; the company who saw this coming so long ago, you announced plans for a smartphone of your own. You have GPS software for Research In Motion's (Nasdaq: RIMM  ) BlackBerry. You've teamed with Nokia (NYSE: NOK  ) , owner of your primary digital map keeper (and one-time Motley Fool Stock Advisor selection) Navteq. Your GPS software is everywhere -- except on the iPhone.

What's that? It doesn't matter, you say? Prove it. Buy more shares, Garmin insiders. Show us you've a plan to keep your core business from dying a very slow, painful death. TomTom and Apple have their hands at your throat, and they're squeezing.

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Apple, Garmin, and NVIDIA are Stock Advisor selections. Intel and Nokia are Inside Value picks. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned stock and options positions in Apple and a stock position in Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is trying to locate a good jelly doughnut.


Read/Post Comments (14) | Recommend This Article (18)

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  • Report this Comment On August 19, 2009, at 3:53 PM, longgonegator wrote:

    So where did you learn how to write? Tom Thumb is so far in debt they may not make it for another year. Apple is not going to sell many apps at $99. The Nuvi is coming and will probably push Apple aside. Think about it genius

  • Report this Comment On August 19, 2009, at 3:58 PM, kamuirei wrote:

    $99 for Tom

    $0 for Google maps.

    ...

  • Report this Comment On August 19, 2009, at 4:26 PM, DefunctAcct wrote:

    Garmin is slow to react and does not know how to respond to the likes of iPhone. It is not doomed, it still has its niche.

    Garmin not having a software offering on iPhone is not necessarily bad, just giving up a presence.

    Garmin offer devices well beyond just in-town, on-road navigation. Its devices, especially those with short-range direct-sight radio capabilities, are popular amongst outdoor enthusiasts. They allow mutual tracking and coordination and the GPS tracking is impressive even in mountain valleys. The devices are rugged and reliable and very useful. I do wish they could make one with a larger screen.

    I cannot see myself using the iPhone or the Pre on a mountain slope. Where is the radio capability when we must communicate with our team 1000-ft below? How do we track a team coming up to our camp? How do we coordinate our movement when mountain is shrouded in mist or clouds? I have also trained my fingers to feel the buttons on my Garmin units through my gloves. I can talk and keep my eyes on target, cannot do that with a Pre or iPhone like device.

    So unless Garmin really screws up, it is not doomed. It has a niche that iPhone and Pre and RIMM and NOkia cannot replace easily.

  • Report this Comment On August 19, 2009, at 4:35 PM, TMFMileHigh wrote:

    Hello longgonegator,

    >>Apple is not going to sell many apps at $99. The Nuvi is coming and will probably push Apple aside.

    TomTom the 37th most popular paid app in the App Store as I write this. Most expensive app among the other 36 is Doom: Resurrection at $6.99.

    Thanks for writing and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On August 19, 2009, at 4:37 PM, dwatson102 wrote:

    Garmin dominates general aviation, with new products rolling out both up and down the price/performance scale. All heavily leveraged off a platform design with consistent user interfaces that reduce pilot training costs for operators.

    They have become the Microsoft of avionics from the lowest end up through turboprops and business jets.

    While aviation is currently suffering it will come back and the new federal requiremements for new position reporting capabilities will drive continuing modernization of avionics in all airplanes. Garmin also has the dominant position in GPS recreation and sports and is expanding in marine adding radar and autopilots to their GPS and fish finder devices. And, like aviation they integrate all into a very usable system on common displays reducing panel clutter.

    Given their superior fuctionality and reliability I don't see Apple taking these markets anytime soon. And with the PE at 1/3 Apples they look like a better investment to me. I own them both.

  • Report this Comment On August 19, 2009, at 4:47 PM, TMFMarlowe wrote:

    silivalley, I'm an outdoor enthusiast too, and with an Otterbox Defender case ($30ish) and a $2.99 app (MotionX GPS) my iPhone and I can do an awful lot of what your Garmin can do. Check it out.

  • Report this Comment On August 19, 2009, at 8:43 PM, jdubbau wrote:

    Garmin creates products in a number of diverse areas, including aviation, marine, auto, personal/outdoor.

    So taking the long view, not having an app isn't going to bring down the house.

    On the other hand, how are your margins on a smartphone device vs a software app on someone else's smartphone device? Even with a low sale price ($49 anybody?) I have to think they're still better.

    So I agree, it's missing a niche.

  • Report this Comment On August 19, 2009, at 9:55 PM, DefunctAcct wrote:

    Hi TMFMarlowe: Thanks for the pointer to MotionX GPS. Unfortunately, MotionX addresses a different problem space than what I was describing.

    The Garmin Rino 530 Hcx is what we use. When we lead a large group of novice backpackers out into the Sierras, every team leader has one of these Garmin units. We are registered to use GMRS legally so there is up to 5W of transmission power to use. In the mountains where we can often find clear line-of-sight, we can easily radio each other over long distances, the longest we have experienced was 4 miles line-of-sight.

    Each unit can also act as a repeater so that our signals can be repeated to other units down range.

    Each unit also receives NOAA warnings, an important safety consideration doing what we do. We used to have to carry a radio on the side, added bulk and weight. Now we have the Garmin unit strapped to our pack with a headset feed into our ears and it does all of what we need. Our hands are free and we can focus on safety of our teams.

    Most importantly, no cell tower needed.

    In "tracking", the units automatically poll each other with GPS coordinates so that as my team hikes along one flank, I can easily see the location of the other team in front, in the rear or up the side on the detailed topo map on my unit. So can other teams see me. We have used this successfully up in the Minarets out to a distance of 2 miles. In Death Valley, it was good out to 4 miles. So we are constantly aware of each other's position within those radii until we are blocked by a valley or a gorge or a canyon. Then we have the last known position, so it is easy to extrapolate the next checkpoint so teams know how to move to open area for radio and position sync-up. This is real-time positioning tracking amongst multiple teams.

    In GPS accuracy, I have seen it accurate to 13-ft. In the mountains, average is 18-ft. It receives information from 12 satellites, thus the increase in accuracy.

    My only gripe is the small scree size. If Garmin could make one that has a bigger screen, it would really help my old eyes :).

    Until iPhone or Pre or Nokia or RIMM can come up with something that can do all these, Garmin basically "owns" us by offering these extremely useful functions. Garmin is not doomed as long as it can offer these functions.

    Hope this clarify how we use our Garmin devices.

  • Report this Comment On August 20, 2009, at 1:13 AM, wangster2549 wrote:

    We visited Mt Rainier national park last week. I wanted to look up some information and direction from iPhone map, but there was no signal on my iPhone. Luckily I had my trusty Nuvi with me. I have both iPhone and Nuvi, but when it comes to direction and turn by turn, I still use the Nuvi.

    I don't need the Nuvi around town since I know my way around. iPhone comes in handy to look up google map. But when we travel on vacation, we still pack our Nuvi with us. I don't know if the place we are going to has good cell phone reception or not. I can't count on iPhone having signal all the time, but I sure can count on Nuvi taking me to where I want to go.

    I am sure I am not the only one who experience no signal with iPhone in some area. iPhones are great, and so are Nuvi.... we need something that has both!

    Garmin.. are you listening? Nuvi + iPhone?? soon??

  • Report this Comment On August 20, 2009, at 8:58 AM, mattncsu03 wrote:

    I agree with with the above commenters that not having an iphone app means doom for Garmin. I have tried the Garmin app for Blackberry along with VZ Navigator, and some other over-the-air navigation apps and none can compete with my years old Mio C310x in the areas of speed (routing/rerouting/moving around the map) and usability. Perhaps if I had never owned a standalone GPS or never planned to leave areas of network coverage then I could see using one of these over-the-air nav apps. With smartphones coming with 8-32gb of onboard storage, the game changer in this segment will be the navigation app that is fully resident on the phone's storage card and does not require a network connection.

    I also share the viewpoint that the real money is to be made in the general aviation arena. I learned to fly with Garmin's G1000 glass cockpit and it is simply amazing. If I were buying a small plane, I would not think twice about paying the approximately $50,000 cost to have it on board. For pilots with glass-cockpit envy and an older plane, there is the new G600 ($30,000) or G500 ($15,000) which has many of the same features but is certified for installation in older airplanes. Garmin faces very few competitors in this market.

  • Report this Comment On August 20, 2009, at 12:57 PM, todayfearorgreed wrote:

    This is a common negative shot at Garmin. Essentially, as smart phones evolve the PND (personal navigation device) will become an antique. Or as written: “A market of smarter smartphones means that stand-alone GPS devices could soon go the way of the print server.” And from that argument we are suppose believe Garmin shares will drop, as Goldman Sacks analyst believe. “Show us you've a plan to keep your core business from dying a very slow, painful death.”

    As many of the rspondents write, Garmin is much more than a PND manufacturer. If you eliminate their entire Auto / Mobile operations, the company’s P/E ratio would be about 18. But the author is not talking about eliminating those operations. In fact, the author seems to think management is making all the right moves, except providing software for the iphone. “…. the company who saw this coming so long ago, you announced plans for a smartphone of your own. You have GPS software for Research In Motion's (Nasdaq: RIMM) BlackBerry. You've teamed with Nokia (NYSE: NOK), owner of your primary digital map keeper (and one-time Motley Fool Stock Advisor selection) Navteq”.

    Five years ago, or six, or seven, nobody had a PND. What people did have was a GPS and they used them for hiking, sailing, flying, etc. I own a blackberry and it is convenient to use for directions, but it will never take the place of my GPS. I also own both Garmin stock and Apple stock with no intention today of selling either, especially for reasons cited by the author or the recommendations from Goldman Sacks.

  • Report this Comment On August 20, 2009, at 2:08 PM, lcavanaugh666 wrote:

    Okay people. Has anyone considered that Garmin may have a few tricks up it's sleeve that the public isn't privy to? As a Garmin employee I won't go on and on here as I am obviously biased. I will say....Garmin is not resting on its laurals. We are not currently developing products that you know about, we are developing the next best thing...always. And you won't know about it until its been tested and introduced. But these posts are quite entertaining. And please, do whatever you can to drive down the price of our stock. That will only make me richer when our products make the Iphone app obsolete and once again the tech rags declare "Garmin is the premium navigational leader" regardless of how we happen to be delivering these directions. We are constantly moving forward to meet the needs of the market. While developing our own phones and insuring that they are tested and ready for the market I don't see where a Garmin Iphone app would be appropriate. When the phone is released what will the articles read when comparing a phone with an app that relies on a cell tower signal verses a phone with stand alone GPS and no dependence on said tower? I beleive it will once agian make "our" Garmin shine.

  • Report this Comment On August 21, 2009, at 1:58 AM, llama726 wrote:

    It's interesting to me that Garmin is "doomed" when it has markets in Outdoors, Marine, Aviation, and Fitness, just to name a few. As far as the PND market being "doomed," well, there is a good chunk of the population who simply do not want a smartphone. There are still tons of people who want a phone by itself.

    Smartphones have yet to vanquish the mp3 player market, the laptop or mobile computer market, or the digital camera / camcorder market. Why will PNDs be SOOOO much different? I don't like that this is all about the iPhone - is Garmin doomed for not releasing an iPhone app? I bet TomTom's app, if even as successful as they could ever dream, won't sell more than 1.2 million copies. That's a lot of copies. That's more than I think they're capable of selling. How much of the money do they have to spend to support the app, and how much of that money do they have to spend to cut Apple in on the profits? No doubt TomTom will profit off this, but it's just silly to think that Garmin will die if they don't get on the iPhone. Not silly. Self-centered. When you write a piece like this, you sound like you're just mad at Garmin for not worshipping the iPhone.

    I'm surprised (and a bit amused) at this article for acting as though TomTom is going to smash Garmin to bits, because generally, this site is good at doing a little research into company history and financial health before making such bold statements. Observe this:

    Garmin has over $1 billion in free cash flow. (1,074,000,000ish, if I recall).

    TomTom has $953 million of debt - a gap of a scant $2 billion separates these companies. Clearly, Garmin has been making ALL the wrong moves, right? Assuming there is no overhead cost to the app at all and they profit 100% of each app sold, TomTom will have to sell over 9.6 million copies of the app to get out of debt. They'd have to sell 10 million more to reach the cash level that Garmin has.

    For some reason, I don't see them moving 19.6 million copies of that application. Maybe it's just me.

    And you know what? Garmin is releasing it's own device. Why sell themselves down the river with an iPhone app? They're partnered with ASUS and they're in the open handset alliance (read: Android phone in the future). The nuvifone G60 looks like it'll be out soon and even if it's a marginal success (70,000 - 90,000 units sold would be a pretty big success for Garmin in a North America launch over a quarter), it's important to remember that Garmin doesn't want to hurt themselves in this investment - so why have an iPhone app?

    As the article mentions, Garmin handily defeated TomTom when it came to Mobile navigation with an app for Blackberry and an app for Windows Mobile, Palm, and Symbian. At this point, Garmin is the primary non-carrier-pushed app for navigation on all of those models. So why should they subject themselves to Apple's ridiculous app store policies?

    The iPhone is not the only smartphone in the world. While they are neat devices, they are not the only choice. Which leads me back to the point about PNDs - 92% of people over the age of 45 do not own or want an iPhone, and only 20% of people between 35 and 45 own or want one, so that leaves a HUGE chunk of market being completely neglected by your piece (notwithstanding the other areas Garmin has). People may want convergence, but there's a backlash against the convergence movement, and those people want simple devices that are good for what they use them for.

  • Report this Comment On August 27, 2009, at 1:47 PM, forumcomments wrote:

    Watch this and see how bad TomTom app on iPhone is:

    http://www.youtube.com/watch?v=sHFtUhDh71s

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