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

$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

“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

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

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

Unprecedented potential

Dominates the $170 million business for aftermarket GPS receivers

But automakers are building receivers into dashboards

Aviation GPS

Controls an 80% share of the civil avionics business

G1000 – integrated avionics system

ADS-B: Automatic Dependent Surveillance – Broadcast

Most profitable

Market Leader

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

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: $(grmn)$

2003: shares rose 86% Strong financials $.50-per-share annual

dividend Price? – P/E ratio:

26.41

Competition

Traditionally: Magellan, Cobra Electronics

Big names entering the market: Sony, Toshiba

SiRF Technology Dropping prices Reduced margins

Fighting Back

Barriers to entry Purchasing UPS

Aviation Market niches: iQue Using its market

position and brand name

Research and Development

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

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”

Implications

Competition is good for the industry

– Lower prices– More innovation– More efficiency

Who will shape the GPS industry of the future?

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