GRMN

[Leonidas]

I looked at GRMN briefly about 7-8 years ago and quickly decided it was not for me. And my experiences while shopping for car GPS devices over the last several years have made me believe that the market is saturated and the darn things are just about a commodity.

Smartphones with GPS apps would seem to be a major impediment to stand alone GPS device manufacturers being very profitable in the future. (My oldest son's iPhone with Google Maps and "look out - speed trap ahead" app is pretty darn cool.)

But, I've decided that this is the year to get back into running (mostly triathlons) and it's time to buy a new heart rate monitor for training. While shopping around online, I stumbled across GRMN products and was amazed at the stuff they have now. It's an extensive line up of devices and applications for not just play around runners like me, but for serious athletes as well.

I was aware that they had made devices for aircraft, but my first look at those a few years ago was not very encouraging from either a user or an investor viewpoint. But it looks like they are making some very serious and capable avionics devices now.

They have also expanded the applications on car GPS devices to include performance monitors for the performance oriented as well as those concerned about efficiency. And they have a number of devices aimed toward boating and fishing with something that is supposed to mimic navigation charts including some pretty cool stuff like aerial view, something called "fish eye view" and animated currents.

So, I'm not touting the stock (and do not presently, nor have I ever, owned any GRMN), but it's on my list of "to research further" as a potential investment.

Comments?

 

[RonBoyd]

Yeah, GPS units are everywhere -- and, as I have said before, is in the top five inventions in my lifetime.

I have a Garmin Nuvi 765t (and a Nuvi 680) that I would not be without. While a cell phone is good if you are walking around or are stationary, they are not something that makes for safe driving. (The Garmin units, with a four inch screen is borderline actually.)

On the other hand, I have four Apps loaded on my Blackberry Storm that I use constantly.

BlackBerry - PDA GPS - BlackBerry Maps at BlackBerry.com

Google Maps for mobile

Traffic Reports and Alerts | Real Time Traffic | Road Conditions | Delays :: Traffic.com

and for getting the coordinates of our current location and/or tracking our movements:

Blackstar Navigation - A free geocaching hiking and navigational utility for BlackBerry devices

The cell phone apps are better for hiking, jogging/walking, Geocaching, etc but, again, not very useful in a vehicle going 65 MPH.

Now, having said all that, my opinion is that Garmin (and Tom Tom, for that matter) is a growth company. GPS is so much a part of our (everyone) lives and Garmin has a firm foothold at the forefront of this technology -- albeit, as you point out, not a very wide moat.

 

[RonBoyd]

Oh! I forgot to mention this:

Garmin-Asus M10 smartphone

They seem to be covering all the bases. (Now, if they just stick to their core business -- navigation -- and don't have delusions of becoming a communication company.)

 

[Leonidas]

Here’s my thinking on GRMN after doing my research:

Business concept: As I said in the thread-starter, PNDs are like a commodity and the competition is going to be very strong from the smart phones. GRMN does seem to be making some smart moves and some stupid moves in response.

Among the smart moves are aggressively moving into specialized markets (marine, aviation, runners/triathletes, performance/efficiency enthusiasts, and even geocaching). I don’t see smart phones ever being the go-to device for many of these uses. They are also going hard at share in emerging markets. I want to say that is a big gamble because those are places where people are big on phones as do-all devices that have a lot of capabilities, and would not necessarily be interested in (or willing to spend money on) more specialized gadgets like PNDs. Increased accuracy of satellites vs cell towers and the utility and "coolness" of apps could be the win-em-over factors here.

Among the stupid moves are abominations like the Nuvi Phone – it’s an over-priced dumb phone with integrated GPS functions. Everything I’ve read on it says it sucks. GRMN should either make a really great smart phone, or a heck of an app for smart phones. Their subsidiary Digital Cyclone does sell a couple of iPhone apps for weather, one of which is designed for pilots. It will even allow flight plan filing through the phone – and it is fully integrated with Garmin avionics goodies.

The Numbers: GRMN screams value – no debt, EPS growth rate of more than 30% during the last decade, positive cash flow, and ROE and ROA that cream most of the rest of the companies in the sector. But their last full year report was not all that rosy, with every business except the running/sports segment showing lowered sales (total company sales down 15+%). And still they managed to make a profit, which makes me appreciate the fact that they have decent management. But how long can they keep that up?

And that’s the issue I have with GRMN that will probably keep me from tossing any money at it – at least at its current price $38/share. Until it is clear where the company is going to be able to take their technology in the future the risks are a little too high to pay this much money. The specialty markets are really exciting from a gadget viewpoint, but how much money can they make with that is my concern. It seems limited to people who have the disposable income to buy boats and planes, or are so into running that they will spend $300 on a Tanita scale that "talks" to their $200-500 Garmin devices, which then downloads wirelessly to their PC. Simultaneously, the competition for their past bread and butter business of PNDs seems almost insurmountable. I see a lot of lost market share there, or GRMN will have to significantly reduce prices on their PNDs.

If the stock price were a few dollars less I probably would buy, but at $38/share it seems like a hold rather than a buy.