Garmin (Nasdaq: GRMN) reported Q4 earnings this morning, and panicked sellers have already dropped the stock 7% in response to the news. They couldn't be more wrong.

The premier name in GPS hardware grew its operating profit margin 500 basis points year over year in Q4, driving per-share profits up 77% to $1.38 per share. Relative to the doomsday scenarios being put forth by Wall Street, the company's pro forma profits "beat" estimates by a simply enormous margin -- 50%. Nearly as surprising -- for all that we're hearing that stand-alone GPS is dead, that free navigation software from Google (Nasdaq: GOOG) and Nokia (NYSE: NOK) will suck the oxygen out of this market, Garmin still managed to eke out a 1% increase in revenue.

On the other hand, Garmin also warns that this year, personal navigation device [PND] revenues will be flat to slightly down, with profit margins probably falling. This could squeeze profits -- just not as much as feared. Overall, Garmin expects revenues to rise up to 5% in 2010, and to beat Street profit estimates handily, turning in $2.95 per share in GAAP earnings. How will Garmin grow its business if its core PND market is shrinking? In large part, I expect, by doing the stuff the other guys aren't: Putting GPS in automobiles, planes, boats, and outdoor, walk-around devices.

The perils of stupid smartphones ...
Garmin's facing pressure from cell-phone makers, which have eaten deep into its core PND business. And to be perfectly honest, I think Garmin's plan to try to go head-to-head with smartphone titans Research In Motion (Nasdaq: RIMM) and Apple (and Motorola (NYSE: MOT), Dell, HTC, and my crazy Aunt Edna -- seems everybody's hawking a smartphone these days) is stupid in the extreme. Even smartphone pioneer Palm (Nasdaq: PALM) can't make a profit in the cellular business. Garmin should know better than to meddle where it's not wanted (and make rookie mistakes).

... and of blind forecasters
And yet, I have to wonder whether the folks selling off Garmin today are suffering from tunnel vision.

Consider: What is the likelihood that Nokia and Apple are going to steal market share from Garmin in the original equipment manufacturing automotive business, where Garmin GPS technology gets built into the cars at the manufacturer? And do you truly believe there will come a day when Apple is integrating iPhones into Cessnas, or making headway in the cockpits of motorboats? I just don't see that happening. For all the trouble AT&T's (NYSE: T) network experiences on land, I hear its cell phone reception is even worse in the middle of the Pacific.

Why, in the one place I'd fear that Apple and other electronics mavens could challenge Garmin's non-traditional PND wares -- the outdoor/fitness segment, with its legions of loyal armband-wearing iPod people -- Garmin produced a stunning 24% increase in revenues last quarter.

Foolish takeaway
Contrary to popular opinion, Garmin's no one-trick pony. Don't send this one to the glue factory just yet.

Fools debate Garmin's future:

  • Does Garmin face fierce competition? Yes.
  • But is Garmin smart enough to find its way back home? Also yes.

Fool contributor Rich Smith doesn’t own shares of any company mentioned. Nokia is a Motley Fool Inside Valuerecommendation. Google is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.