Garmin Ltd
(
GRMN
), the maker of portable navigation devices, has opened offices in
Shanghai, China; Stuttgart, Germany; and Yokohama, Japan. The idea
is to get closer to all the major auto manufacturing markets of the
world to sell built-in devices for automobiles including
navigation, telematics and infotainment.
Garmin has been the most celebrated supplier of personal
navigation devices (PND) that were largely used in automobiles.
However, the incorporation of navigation into smartphones started
to eat away its core market. Garmin tried to enter the smartphone
market itself, but given the stiff competition from stalwarts like
Apple
(
AAPL
),
Google
(
GOOG
) through devices from LG, HTC and Samsung, and
Research In Motion
(
RIMM
), Garmin could not create a niche for itself.
Others in the space were increasingly selling navigation as
software for smartphones and as in-dash solutions for automobiles,
but because of Garmin's initial push into smartphones, it fell
behind in this race.
But Garmin is a very well-run company with solid business in
several other segments, such as marine, running, cycling and
aviation. Despite the issues in the PND market, it remains the
number one player in the U.S. and number two in Europe. It also has
a growing presence in Asia. Thus, it continues to generate solid
cash flows.
The company is now using this cash to get back into the growth
segment of the auto market. It is expected that the new offices
will help it create customized solutions suitable for the region.
Moreover, the increased proximity to manufacturing destinations
will help it cement relationships with auto manufacturers,
translating into more wins for the company.
Garmin currently has agreements with several leaders in the
automotive segment, including BMW, Chrysler, Honda, Kenwood,
Panasonic, Suzuki and Toyota, among others. These partnerships may
be expected to expand and new ones added. We therefore feel
positive about the initiative.
Garmin shares currently bear a Zacks Rank of #2, implying a Hold
recommendation in the next 1-3 months. We also reiterate our
long-term (6-month) Outperform recommendation.
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GRMN
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RIMM
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