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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

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

“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
garmin the history
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
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
automotive gps
Automotive GPS
  • Unprecedented potential
  • Dominates the $170 million business for aftermarket GPS receivers
  • But automakers are building receivers into dashboards
aviation gps
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
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
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
tangent: $(grmn)$
  • 2003: shares rose 86%
  • Strong financials
  • $.50-per-share annual dividend
  • Price? – P/E ratio: 26.41
competition
Competition
  • Traditionally: Magellan, Cobra Electronics
  • Big names entering the market: Sony, Toshiba
  • SiRF Technology
  • Dropping prices
  • Reduced margins
fighting back
Fighting Back
  • Barriers to entry
  • Purchasing UPS Aviation
  • Market niches: iQue
  • Using its market position and brand name
  • Research and Development
plans for 2004
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
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
Implications
  • Competition is good for the industry
    • Lower prices
    • More innovation
    • More efficiency
  • Who will shape the GPS industry of the future?
references
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