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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.

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The Business of Being Garmin

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  1. The Business of Being Garmin FRS 142: Where’s Waldo? The Science and Application of the GPS System 4/12/2004 Jonathan Lew

  2. “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 GPS Industry • $4.7 billion market for GPS receivers in North America • Expected to double by 2008 • Military origins • Civilian GPS users outnumber military 100-to-1

  3. Garmin – The History • 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

  4. Garmin – Now • 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

  5. Products Galore!

  6. Automotive GPS • Unprecedented potential • Dominates the $170 million business for aftermarket GPS receivers • But automakers are building receivers into dashboards

  7. Aviation GPS • Controls an 80% share of the civil avionics business • G1000 – integrated avionics system • ADS-B: Automatic Dependent Surveillance – Broadcast • Most profitable

  8. Market Leader • Consumers bought 2 million GPS handhelds in 2002, more than half were Garmin made • Introduced 22 new products • Brand name recognition • Financials!

  9. Market Leader - Finances • 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

  10. tangent: $(grmn)$ • 2003: shares rose 86% • Strong financials • $.50-per-share annual dividend • Price? – P/E ratio: 26.41

  11. Competition • Traditionally: Magellan, Cobra Electronics • Big names entering the market: Sony, Toshiba • SiRF Technology • Dropping prices • Reduced margins

  12. Fighting Back • Barriers to entry • Purchasing UPS Aviation • Market niches: iQue • Using its market position and brand name • Research and Development

  13. Plans for 2004 • 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

  14. Garmin in the News • Mar 25th - “Garmin Offers Anglers a Boatload of New Lake Maps” • Feb 12th - “Garmin Unveils the Foretrex 201 – a Hands-Free GPS Device” • Feb 24th - “Garmin’s G1000 Integrated Avionics System Aboard the Hondajet”

  15. Implications • Competition is good for the industry • Lower prices • More innovation • More efficiency • Who will shape the GPS industry of the future?

  16. References • 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

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