I am not sure I agree.
With over 70% of sales in the automotive, marine and aviation already under siege, I believe these declines were to be expected. Just like AutoNation, or even Ford, et al., when we sink down to a 9 million auto unit market and the big 3 are sucking wind, then the spending on navigation upgrades are obviously going to get hit. The spread of the economic malaise to the consumers in emerging markets also would indicate that spending on PND's would be cut back.
I mean, how ironic is it, that all of these analysts have already called Garmin half dead because of the cell phones, yet still have these heady profit expectations?
Trying to be logical about it:
1. TomTom's loss and Garmin's profit just widens the gap.
2. Retailers reducing inventory hurts TomTom (and others) way more than Garmin.
3. Magellan and host of other bit players are exiting the market.
4. Garmin continues to develop new products and bring them on line.
5. Given current consumer reticence, I am happy that they are delaying the introduction of the nuviphone. It could be strategic, looking for a window where they can be more confident about hitting their numbers upon introduction.
6. If they are able to reduce CAPEX, reduce inventories further, continue to produce a healthy cash flow, then when the spending trends pick back up, the ramp up should mean some very good numbers for Garmin.
Where is TomTom going to get the cash to introduce new models and invest in inventory ramp up given their current sickly state? After all, they still produced $48 million in earnings for a PND device that all the analysts are saying has been made irrelevant by cell phone maps. However, all of the analysts are convinced that the cell phone maps have made the PND device obsolete, and until Garmin can rebut that image with sales growth, the stock will be stuck.
And they are not going to get an opportunity to grow in marine and aviation and cell phones given the current worldwide consumer pullback. It looks like it will just be negative news until Garmin can put up the numbers, and that looks like mid-to-late 2010 at best. But as long as they are making a profit and have no debt and continue to innovate, I believe they can make it happen.
Time will tell, I guess.
I am not sure I agree.