Selling GPS navigation systems to the car owners and makers right now is like selling snow cones to polar bears. It shows in Garmin's
The story behind the story, though, is Garmin's sizeable increase in free cash flow. The first quarter saw a gain of 72%, to a total of $286 million in free cash flow -- plumping the company's balance sheet with cash and marketable securities to $1.2 billion at quarter's end. The cause: the company managed its inventories and receivables better.
Still, Garmin and its gadgetry peers have fallen on hard times as consumers back away slowly, clutching their wallets tightly. It doesn't help much that nobody is buying cars anymore -- the automotive market is still Garmin's biggest revenue generator with 59% of this quarter's net sales. And one of Garmin's biggest wins in that industry was a factory-install contract for the 2011 Jeep Grand Cherokee, produced by the bankrupt Chrysler. Talk about timing.
The company did manage to grow sales in one division, though. Outdoor and fitness location devices grew 13% over last year, to $80 million in sales, making it Garmin's second-largest segment. CEO Min Kao hopes to ride that pony to improved sales and profits in the coming quarters. "We continue to build on the strength of our brand in this category and a growing base of loyal customers and are planning exciting new product introductions in the second quarter," said Dr. Kao.
That sounds like a plan, and it's always nice to have a second horse ready for re-saddling if your main trotter jumps off a cliff, as the auto sector has done. But the personal location segment can be tricky to, er, navigate. Competition is fierce, because any decent smartphone such as the Apple
But Garmin's near-term fortunes largely lie with the ebbs and tides of Ford
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