Transcript The Business of Being Garmin

The Business of Being Garmin
FRS 142: Where’s Waldo? The Science and
Application of the GPS System
4/12/2004
Jonathan Lew
GPS Industry
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$4.7 billion market for
GPS receivers in North
America
Expected to double by
2008
Military origins
Civilian GPS users
outnumber military 100to-1
“In the coming years, every car
may use GPS, while handhelds
and cell phones are moving in that
direction, too. GPS isn’t just for
boats, planes, and hikers
anymore.” – The Motley Fool
Garmin – The History
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Two employees fed up
with their company
1989: founded ProNav
1990: GPS 100
Operation Desert Storm
1991: GPS 100 AVD
1994: 19 different
receivers, including
handhelds
Garmin – Now
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2021 employees
More than 120 different
products
“Built and sold millions”
of GPS receivers
Market value at $4.6
billion
Outsources little
Listed on nasdaq: grmn
Products Galore!
Automotive GPS
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Unprecedented
potential
Dominates the $170
million business for
aftermarket GPS
receivers
But automakers are
building receivers into
dashboards
Aviation GPS
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Controls an 80% share
of the civil avionics
business
G1000 – integrated
avionics system
ADS-B: Automatic
Dependent Surveillance
– Broadcast
Most profitable
Market Leader
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Consumers bought 2
million GPS handhelds
in 2002, more than half
were Garmin made
Introduced 22 new
products
Brand name recognition
Financials!
Market Leader - Finances
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Profitable since first product in 1991
Incredible 40% operating margins and 32%
net profit margins
Cash and investment hoard: $525 million
Growth: 2002 sales revenue up 31% in
Europe, 51% in Asia
Employment in the face of downturn
tangent: $(grmn)$
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2003: shares rose 86%
Strong financials
$.50-per-share annual
dividend
Price? – P/E ratio:
26.41
Competition
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Traditionally: Magellan,
Cobra Electronics
Big names entering the
market: Sony, Toshiba
SiRF Technology
Dropping prices
Reduced margins
Fighting Back
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Barriers to entry
Purchasing UPS
Aviation
Market niches: iQue
Using its market
position and brand
name
Research and
Development
Plans for 2004
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Continue its customer-driven focus
GPS integrated units: iQue 3600
Automotive Navigation: technology
Marine Products: color, price, maps
Handheld Receivers: pricing, entry-level
users
Wireless: mobile phones
Garmin in the News
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Mar 25th - “Garmin Offers Anglers a Boatload
of New Lake Maps”
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Feb 12th - “Garmin Unveils the Foretrex 201
– a Hands-Free GPS Device”
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Feb 24th - “Garmin’s G1000 Integrated
Avionics System Aboard the Hondajet”
Implications
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Competition is good for
the industry
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Lower prices
More innovation
More efficiency
Who will shape the
GPS industry of the
future?
References
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http://www.garmin.com
http://www.fool.com
“Taking the World by Hand; Garmin rules the hot GPS business. But
for how long?” – Arik Hesseldahl, Forbes, 2003, 172(9)
“For those on the run” – Angela Forgeron, National Post, 27 December
2003
“Garmin” – Datamonitor Company Profiles, 2003, 3 March
“Tech Trader: Will Garmin Lose its Way?” – Bill Alpert, Barron’s, 8
March 2004
“Garmin shares may fall, hit by rivals” – Total Telecom, 8 March 2004