Reuters: Global Markets: Garmin profit beats on fitness products sales

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Garmin profit beats on fitness products sales May 2nd 2012, 14:49 Wed May 2, 2012 10:49am EDT (Reuters) - Garmin Ltd's (GRMN.O) quarterly profit beat estimates as demand jumped for its outdoor and fitness GPS products and it posted a surprise increase in sales of its personal navigation devices. Shares of the company rose 7 percent to a near-four-year high of $50.67 early on Wednesday morning on the Nasdaq. They were up 2 percent at $48.60 later in the morning. Garmin has outperformed the broader Dow Jones US Technology Hardware & Equipment Index .DJUSTQ in the past year â€" Garmin's stock rose 39 pct in that period while the index rose 22 pct. Shares of the company's Dutch rival TomTom (TOM2.AS) fell 46 percent in that same period. Revenue from Garmin's automotive/mobile business, traditionally known for its personal navigation devices (PND), rose 6 percent to $280 million as the company sold more units and grabbed market share from rivals. While reporting fourth-quarter results in February, Garmin had said it expected PND revenue to fall 7 percent to 10 percent and unit deliveries to continue to decline in 2012. PNDs, once a must-have gadget and Garmin's mainstay till a couple of years ago, has seen slowing demand as consumers switch to GPS-enabled smartphones that offer turn-by-turn navigation. The drop in the popularity of PNDs forced Garmin to look for new areas of growth and focus on fitness products. Gross margin rose 4 percentage points to 51 percent, largely aided by strong auto/mobile segment margin â€" indicating improved PND pricing â€" that offset a decline in margin at the marine segment. The company also bundles its PNDs with its high-margin mapping services â€" a strategy that is not expected to boost profit till the end of 2012 due to its deferred revenue model. The impact from the deferred revenue will be a tailwind in 2012 and allow the company to beat profit expectations for 2012, Wedbush Securities analyst Scott Sutherland said. "We believe the Street is underestimating the impact of deferred revenue tied to Lifetime Maps," said Sutherland, who has a "neutral" rating on Garmin's stock. The company has been seeing strong demand for its fitness products over the past few quarters, as athletes and joggers spend more on watches with GPS sensors, golfing accessories with preloaded courses and fitness apps. Revenue at its outdoor and fitness segments, which together account for about a quarter of total revenue, rose 20 percent to $148 million. TomTom posted a first-quarter loss last week on weaker car sales, the European debt crisis and a product bug that made it necessary to increase the number of customer service agents. Garmin's European business, however, reported a 16 percent rise in revenue. Total revenue rose 10 percent to $556.6 million. Net income fell to $86.9 million, or 44 cents per share, from $95.5 million, or 49 cents per share, a year ago. (Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das) Link this Share this Digg this Email Reprints

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