Filed under: Earnings reports, Press releases, Products and services, Marketing and advertising, Garmin Ltd (GRMN)
Garmin Ltd. (NASDAQ: GRMN) shares are tanking today after the maker of personal navigation devices stated that its new nuvifone will be delayed by several months. I would avoid this fad stock for a while.
The device, which the company had originally hoped to be available for the fourth quarter holiday season, will not be launched until the first quarter, according to a statement from the Cayman Islands-based company. Of course, the company tried to put a positive spin one the announcement.
“While we’d hoped to have carrier launches in the fourth quarter, we have found that meeting some of the carrier specific stipulations will take longer than anticipated,” Garmin stated. “We remain pleased with carrier interest in the device and are working toward making necessary design changes to meet their stipulations. We expect launching the product during the first half of 2009.”
First half of 2009? Nothing like setting a vague target that can easily be changed. And the company’s problems don’t stop with new products. Fewer people are buying the old ones as well. Garmin anticipates 2008 revenue of $3.9 billion, down from a previous estimate of $4.5 billion. Earnings per share are seen at $4.13, below its previous forecast of $4.40.
While Garmin’s automotive/mobile, outdoor/fitness and aviation segments are expected to see double-digit revenue growth, the company’s marine segment will see flat sales growth this year. I wonder if this forecast, which has also been pared down, is too optimistic.
Although the company reported a 20% rise in second quarter profit, storm clouds continue to gather. The company’s SG&A expenses soared to $125 million in the second quarter from $95.3 million. Cost of goods sold hit $494.5 million from $367.8 million.
Investors are learning once again that fad stocks like Garmin eventually come crashing down to earth.
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