If an earnings report drops in the forest, and there's no one around to hear, does it make a sound? It's a question I bet a lot of Garmin (Nasdaq: GRMN) shareholders are asking this week, as the stock flatlines even after Wednesday's earnings report. Seems no one out there was listening.

But maybe they should have, because news isn't the only thing dropping at Garmin. The company closed out 2010 with a 21% decline in sales and a near-50% drop in profits, putting a cap on a year of 9% sales declines and a 16% slide in profits. So while the stock certainly looks cheap enough at less than nine times free cash flow, the real question isn't whether Garmin is making money today, but whether it's going to be around to make any money for investors tomorrow.

So far, Wall Street thinks it will be. 2010's abysmal results notwithstanding, the dozen or so analysts who still follow this stock still believe Garmin will manage to grow earnings at close to 9% per year over the next five years. Me, I'm not so sure.

Wall Street looks lost
Consider: The biggest names in mobile devices today are Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG). After years of betting on Research In Motion (Nasdaq: RIMM) to make Applesauce, Garmin finally has a mapping app out for iPhone, and can make some profits off of that. Google, however, built its own maps and gives 'em away for free, with its Android software. While Garmin does offer apps for Android, I have to wonder how well they'll sell when any cell phone maker out there -- Motorola (NYSE: MMI), LG, Samsung, you name it -- can safely ignore Garmin's existence, and still offer its customers a perfectly serviceable on-phone GPS capability.

Sure, Garmin still has automotive partners like Ford (NYSE: F) and Honda (NYSE: HMC), and emphasized such "auto OEM" companies as key to its future in this week's report. But here too I wonder how long the automakers will resist the temptation of free maps from Google?

Foolish takeaway
Fools, a company doesn't attract 19% short interest by accident. Management itself forecasts no improvement in gross margins for 2011, and perhaps a 10% decline in revenues. So yes, Garmin looks pretty profitable for the price today. But unless it figures out a way to overcome the challenge of competing against "free," that won't be true forever.

Fool contributor Rich Smith owns shares of Google. Check out his latest stock recommendations on Motley Fool CAPS. The Motley Fool has a disclosure policy.

Google is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers recommendation. Apple and Ford Motor are Motley Fool Stock Advisor picks. The Fool has written puts on Apple. The Fool owns shares of Apple, Ford Motor, and Google.

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