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What: Shares of Garmin (NASDAQ:GRMN) sank on Wednesday after the company came up slightly short of analyst expectations when it reported its fourth-quarter earnings, with weak guidance counteracting a dividend increase and a new share buyback program. After falling nearly 11% Wednesday morning, by 1 p.m. Garmin had recovered a bit, down about 9%.

So what: Fourth-quarter revenue rose 6% year-over-year, beating analyst estimates, but non-GAAP EPS of $0.77 came up short of analyst estimates by one cent. Garmin's largest segment, automotive and mobile, suffered an 11% sales decline during the quarter, with strong growth from fitness products more than making up for it.

The earnings miss was in part due to a big jump in advertising expense. During the fourth quarter, Garmin increased its advertising expense by 55%, leading the operating income to remain nearly flat year-over-year. This advertising was mostly for Garmin's fitness products, allowing the company to gain market share in the wearables market.

Now what: Garmin has been busy diversifying its business over the past few years, lowering its dependence on the automotive and mobile segment. In 2011, 58% of Garmin's revenue came from automotive and mobile products. In 2014, this percentage dropped to 43%,

Garmin's biggest success in 2014 was its fitness business, but the company faces a tremendous amount of competition. The company guided for $3.10 in 2015 EPS, below analyst estimates of $3.24, with heavy advertising expense for its fitness products likely playing a role. Garmin expects fitness revenue to grow by 25% during 2015, driven by both market share gains and new product categories.

With its largest segment shrinking and intense competition in the fitness segment, the market has punished Garmin for its lackluster guidance. Market share gains in the fitness segment aren't a guarantee, and heavy advertising will likely continue to be necessary to drive sales in 2015.

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