Garmin
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What started out in 1989 with a dinner conversation between Gary Burrell and Min Kao; Garmin Founders, regarding a great idea for a product, has grown into the Global Positioning System (GPS) leader. From the time Garmin’s first GPS handhelds supported the Coalition forces in the Gulf War to its current reputation as the first name in GPS innovation, Garmin has helped to take GPS to new heights by going beyond the ordinary features and performance found in typical GPS receivers. You may not always know where you are going, but Garmim will be able to tell you how to get there.
Today, Garmin has a diverse product line and distributors in virtually every part of the world. They have built and sold millions of GPS receivers. While their immediate success has resulted from developing innovative products for a variety of markets, their long-term success is based on commitment to support for customers after the sale. They are winning over their new customers with quality products, tremendous value, and superior service, and are working to turn them into loyal Garmin supporters for many years to come.
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Garmin strong pattern in the market place and company financial position is certainly a precursor for what one can expect of their stock performance. Gamin has been traded on the NASDAQ since December of 2000. Like all technology industry stock, Garmin has proven to be somewhat volatile. The Garmin good news is that they continue to show above average growth rate when compared to the industry. In addition to the superior growth rate, Garmin also has proven to encompass less risk than what is typically associated with this industry.
Given that this companies strengths out weighs its weakness and that the opportunities are favored over potential threats, one could conclude that the market domination, financial strength and favorable stock will continue into the next several years.
Garmin is a worldwide provider of navigation, communication and information devices that are primarily enabled by a Global Positioning System, or GPS technology. Garmin’s primary segments are the consumer at seventy-eight percent of 2004 revenues and aviation markets at twenty-two percent (Profile Data from Nancy pg 1). With each of these markets having their own special products and customers, they are managed separately. The consumer segment includes marine, recreation, land, and automotive applications sold in a retail environment. The aviation products are portable and panel-mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to retail outlets and certain aircraft manufacturers. (Garmin 10-K pg22)
Garmin’s major competitors are Magellan a division of Thales; Cobra, Motorola, and Dell for the consumer markets. The aviation market’s major competitors are Honeywell, Lowrance, and Rockwell Collins. Garmin’s approach to manufacturing varies significantly when compared with its competitors. Most of its competitors have their products built by contract manufacturers; Garmin is notable for vertically integrated manufacturing. No manufacturing is outsourced. Its main competitor, Magellan, outsourced manufacturing to Kinpo Electronics Inc., a contract manufacturer in Taiwan. Company founder and CEO of Garmin, will tell you how owning the manufacturing plants has helped Garmin capture a commanding market share in nearly every GPS product segment. The strategy has paid off with a gross margin above fifty percent and growing. (
Garmin, to date, has dominated the market in both their avionics and consumer segments. In many sectors, Garmin enjoys a seventy to ninety percent market share. Splitting the GPS equipment business into segments demonstrates Garmin’s dominant position. In the recreational handheld business, GPS receivers aimed at hikers and hunters, Garmin enjoys a seventy percent market share. Garmin has an astounding sixty percent share in the aftermarket automotive receivers, where it competes with Magellan, Tom-Tom, and Cobra. In the boating segment where Garmin competes with Lowrance and Nayman, Garmin enjoys a thirty to forty percent market share. Finally, in the aviation sector where Honeywell is Garmin’s only real competitor, Garmin has captured an overwhelming ninety percent market share. (same hyper link as above) In a highly competitive electronics industry, Garmin has laid claim to this niche market.
Currently there are no indications that this market will be slowing down any time soon. The main concerns for Garmin at this time are additional competition. When industries see large profits, many competitors are willing to jump on the band wagon and try to edge in on a profitable market. Garmin will want to be cognizant of this potential threat. The area where Garmin excels is in their approach to in-house manufacturing controls. This may be one of their most valuable tools when combating competition. It appears that this approach is helping control cost and quality. These are two very valuable tools for staying competitive and trustworthy.
What is Garmin’s financial position? The following financial ratios will help in understanding the financial strengths and weaknesses of Garmin. Each of these ratio’s refer to an economically importation relation (Larson, 685). In order to manage the information provided by the ratios, analysts ask themselves four key questions: (1) how liquidity is the firm, (2) is management generating adequate operating profits on the firm’s assets, (3) how is the firm financing its assets, and (4) is management providing a good return on the capital provided by the shareholders? There are four common standards for comparisons of the ratios given to answer the above questions: intracompany, competitor, industry, and guidelines. Industry standards were unavailable; therefore, we will look at the intracompany, guidelines, and the two major competitors of Garmin.
How liquid is the firm? There are different methods in measuring liquidity. Although computing the ratios to measure liquidity is relatively easy, interpreting the data given is not always as easy. Looking at the liquidity of a firm helps to determine the ability of the firm to meet its liabilities. That is, what resources are available to meet short-term cash requirements? In measuring the liquidity of a firm, we find if the company is utilizing its assets efficiently. If a company fails to meet its current obligations, its continued existence is doubtful. A lack of liquidity often precedes lower profitability and fewer opportunities (Larson, 685). What does this mean for Garmin?
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