Amsterdam, Netherland: Garmin, a global leader in portable navigation, communication and sonar devices, will decide over the next couple of quarters the future of its struggling smartphone unit and is ready to exit the business if it does not achieve success, according to the company’s Chief Financial Officer (CFO) Kevin Rauckman.
Rauckman said that nuvifone handsets had missed the company’s expectations so far. “Garmin smartphone sales totalled USD 27 million in the second quarter. We’re pragmatic. If we end up ultimately not successful with units, we’ll have to sit back and evaluate that and consider making the best decision for our business.”
“We’ll have to make decisions within the next couple of quarters — whether we continue to invest or we pull back,” Rauckman said in an interview with Reuters.
Analysts expect Garmin, which makes its phones in partnership with Taiwan’s Asustek, would have to sell about a million smartphones a year to make a business out of the cut-throat smartphone market. But, the PND or personal navigation device industry has been hit by competition from navigation-enabled smartphones and in-dash navigation devices. Even, Garmin’s business model and that of its main competitor TomTom have come under pressure since Google Inc and Nokia started offering free turn-by-turn navigation, starting in late 2009.
Shares of Garmin and TomTom have been tumbling as well. Garmin shares have declined 21 per cent in the last six months.
After hitting a peak in 2008, global PND shipments declined in 2009 and are expected to continue the downward spiral. Garmin does not expect demand for PNDs to return to the peak levels of 2008, and market sales volumes will decline 5 per cent a year over the next couple of years, Rauckman said.