Corporate Analysis

Capstone ProjectPresented by: Team “B” - Synergy Scott, Irene, April, Simplicious

ContentsClick section to jump throughout document

Executive Summary 1Garmin Company Description 2Technological Innovations 3Marketing Strategy 3

Product 3Price 4Place 5

Promotion 5PEST Analysis 6

Political 6Economic 7

Social 7Technological 8

SWOT Analysis 9Strengths 9

Weaknesses 9Opportunities 9

Threats 9Competitive Analysis 10

Target Markets 10Market Segments 10

Porter’s Five Forces 11Financial Ratio Analysis 13Critical Success Factors 14Evaluation 14

AppendixIncome Statement A1

Balance Sheet A2Cash Flow A3

Other Financials A4

SourcesCorporate Overview Sources S1

Technological Innovations & Marketing Strategy Sources S1

PEST Analysis Sources S1SWOT Analysis Sources S2

Competitive Analysis Sources S3Critical Success Factors Sources S3

Executive Summary

Garmin was founded in 1990 by two electrical engineers, Gary

Burrell and Dr. Min Kao.

They are headquartered in Olathe, Kansas.

Produces over 100 products in aviation, marine, outdoor, fitness, automatic, mobile, and OEM markets

Continual focus on innovation by extending product lines, to include nüvifone

Garmin is reliant upon satellite technology which is outside of their control

Competition comes from TomTom, iPhone, Blackberry, L-3 Avionics System and Rockwell Collins

Risk stems from new entrants in cell-phone GPS unit market and market saturation

The use of GPS technology across all age groups is a significant opportunity, as well as possible strategic partnership with Google

Garmin’s financial position is strong, although they have been impacted by the economic situation that has reduced their YoY revenue growth

The company's stronger gross margins in the second quarter were helped by currency fluctuations, product mix, stable prices and raw material cost reductions.

Garmin is betting on the nüvifone smartphone to boost its position in the hyper-competitive mobile market.

An Analysis of GARMIN – Team Synergy -- 1

Garmin Company Description

Creating navigation and communication devices that enrich their customer’s lives is what Garmin is all about. One year after a brainstorming session around a card table with a small group of engineers, Garmin launched its first product in 1990. The GPS 100, a panel-mounted receiver intended for the marine market, debuted at the 1990 International Marine Technology Exposition in Chicago.1

Garmin’s next product was a handheld GPS receiver used by military personnel serving during the first Gulf War in 1991. The company expanded industry application of these devices for the fitness and sports industries next. One of their most popular product lines is the eTrek series of handheld GPS devices. The eTrek product line continues today.2

Garmin’s focus on continual innovation, along with a desire to meet their loyal customer’s expectations, has fueled an ever-growing list of products. Today, application of Garmin’s products span a wide range of industries to include automotive, aviation, marine, fitness, outdoor recreation, and wireless. 3

The company designs, manufactures, markets, and sells its own products. Garmin employees are also responsible for live-use testing of their products. This gives them a significant competitive advantage because they live and breathe their solutions. Research and development is paramount to Garmin’s long-term success. This enables Garmin to remain focused on continual improvement of their products.4

Garmin sells over 100 products and most recently announced the launch of a smartphone, the nüvifone, which is intended to compete with smartphones on the market. 5

Source: http://gpsdock.com/blogs/2008/01/31/garmin-nuvifone-to-compete-with-iphone/

An Analysis of GARMIN – Team Synergy -- 2

Technological Innovations

Garmin pioneered the standalone portable navigation device market. The market for stand-alone GPS devices is fast-growing and increasingly competitive as multi-capability devices, such as smartphones, are gaining market share. GPS technology moved onto cell phones a few years ago and is a fast-growing feature on the devices. Some 77 million GPS-equipped smartphones will ship worldwide in 2009, up 35% from last year. (Garmin, 2008)

One of the key strategic initiatives of the company for its future growth is continuous innovation, development, and introduction of new products. Garmin benefits greatly from the consistently expanding aviation, marine and fitness segments. Product development for these segments accounts for nearly 30% of Garmin's sales and approximately 45% of its operational earnings. (Kiley, 2009)

Garmin leverages its GPS expertise to deliver navigation devices for anything that moves. Garmin also distinguishes itself from competitors through rapid research-and-development (R&D) cycles that deliver product refreshes quickly.

Marketing Strategy

Garmin's primary marketing strategy is to "provide a quality product at an affordable price." The overarching mission of this strategy is: “to enrich the lives of customers, suppliers, distributors, associates and stockholders by designing, manufacturing and selling navigation and communication products that provide superior quality, safety and operational features, lower cost of manufacturing and ownership, and sufficient profits to support desired company growth.” (Garmin, 2007)

Product

Garmin designs, manufactures, markets and sells over 100 products worldwide for consumer, business and military applications. As customer demands have evolved - Garmin has launched new products. Their communication and navigation products serve the aviation, marine, outdoor, fitness, automotive, mobile and OEM markets.

As the navigation component of its devices becomes more commoditized, Garmin is branching out into services and new devices such as the nüvifone to sustain its market share and competing with mobile phone manufacturers. The navigation is integrated into the nüvifone as a prominent feature rather than an after-thought.

Garmin's focus on R&D ensures the latest features are brought to market quickly through product refreshes.

Garmin is betting on the nüvifone to help it stay relevant as GPS functionality becomes pervasive on cell phones. This stride comes with significant execution risk in a competitive industry.

Adoption of GPS service by wireless carriers could cannibalize sales of Garmin's personal navigation devices.

An Analysis of GARMIN – Team Synergy -- 3

Price

According to Pricegrabber.com, Garmin produces seven of the top ten most popular GPS products. In 2008, Garmin’s GPS products sold for an average of $467. Overall, the non-Garmin GPS products on the list had an average price of $307, priced 34% lower than Garmin GPS products. (Pricegrabber, 2008)

Garmin ranked highest in a list of average price ranges for all GPS products by manufacturer: $500 average price range - Garmin $400 average price range - TomTom, Magellan, and Lowrance $200 average price range - Mio and ViaMichelin

Another study performed by PriceGrabber in 2007, reported a continuing downward trend in GPS prices, despite new introductions of high-end products, like the Garmin Nüvi 660. The lower-end products and the introduction of value-oriented products introduce stiff competition around the $200 price range.

*Pricing based on average monthly price of all GPS products

Source: Market Reporter Pricegrabber.com, 2007

Despite this downward trend - Garmin continues to employ a niche product pricing strategy because the standalone GPS market is still considered a niche market. Garmin’s pricing is geared toward the higher-income consumer.

Average sale prices for Garmin's navigation devices continue to fall as competition increases which adversely affects their market share.

Garmin recently benefited from lower input costs affecting their ability to remain competitively priced. (Pricegrabber, 2008)

An Analysis of GARMIN – Team Synergy -- 4

Place

Garmin products are available in a variety of retail channels on three continents: North America, Europe and Asia. As consumer demand for GPS technology increases, especially in the automotive market, Garmin has opportunities to meet the needs of consumers in more key markets.

Garmin also has relationships with many original equipment manufacturers. The consumer product distributors of the company include giants such as Chrysler/Mopar, Toyota, Harley-Davidson, BMW Motorrad, and Honda Motorcycle.

In 2008, Stan Brajer, director of fitness sales and marketing for Garmin, announced that they wanted to focus more on specialty markets as part of their goal to win back independent bicycle dealers. (Norman, 2009)

Garmin’s distribution network includes 3,000+ independent dealers and the largest electronics retailers.

Garmin's consumer products are marketed through local distributors who resell to dealers. Garmin's distribution reach diminishes as retailers such as Circuit City close stores.

Promotion

Garmin utilizes an in-house advertising agency that handles all of the company's promotional and communication needs. In 2008, they also became an exclusive navigation supplier to Kenwood’s new 2008 lineup of in-dash automotive electronics. Garmin aligned with Kenwood on print, radio and online advertising in addition to a dedicated internet site and point-of-purchase materials to inform customers. (Garmin, 2007)

The company's focus is on increased consumer awareness of the Garmin name. Efforts include typical media placements (periodical ad space, billboard, radio)

An Analysis of GARMIN – Team Synergy -- 5

PEST Analysis

POLITICAL:

GPS devices are rendered useless without a satellite system to support them. Global Navigation Satellite System (GNSS) is the standard generic term for satellite navigation systems that provide autonomous geo-spatial positioning with global coverage.1 Currently, the U.S. has the only operational GNSS in the world referred to as the NAVSTAR Global Positioning System (GPS). The EU is currently working on the Galileo project, expected to launch in 2013. Russia’s GLONASS and China’s Beidou are similar projects underway, but neither will deploy until after 2013.

The European Union (EU) began to develop GNSS in order to have an independent system they can rely upon in times of war or political disagreement. Presently, the U.S. and/or Russia could disable EU’s access to GPS through encryption. The U.S. was successful in its request that the EU leverage a different frequency for Galileo GPS, thereby ensuring any jamming of their GNSS system would not affect the US system.3

Until 2000, the U.S. had at their disposal a capability on the satellites called Selective Availability (SA), which allowed them to render locations incorrectly on the GPS. The EU felt that civil infrastructure using the GPS was vulnerable and, as a result, believed an independent system was needed. In 2000, President Clinton disabled SA and committed that future satellites wouldn’t include the SA capability.4

China is currently the third largest export market for U.S. goods. China is part of the World Trade Organization. Prior to their accession in 2001 to the WTO, China severely limited imports by imposing high tariffs and taxes. China’s post-WTO accession tariff rates are “bound,” meaning that China cannot raise them above the bound rates without “compensating” WTO trading partners. China’s most important revenue source is the Value Added Tax, which ranges between 13 and 17 percent and continues to be uneven. Importers from a wide range of sectors report that, because taxes on imported goods are reliably collected at the border, they are sometimes subject to application of a VAT that their domestic competitors often fail to pay. 5

EU countries, collectively, ranked second in the U.S. goods export market in 2007. Notwithstanding the existence of customs laws that govern all EU Member States, the EU does not administer its laws through a single customs administration. This makes uniform application of decisions impossible, thereby increasing costs for appeals. The U.S has continued to raise serious concerns both bilaterally with the EU and in the WTO ITA Committee in Geneva about a series of EU measures that have the effect of no longer providing or guaranteeing duty free treatment for certain information technology products, to include smartphones with GPS. The EU is applying new duties as high as 14 percent on imports of these products. 6

Canada is currently the largest export market for U.S. goods. If NAFTA (North American Free Trade Agreement) expired, Garmin could face significant costs related to tariffs and taxes. 7

An Analysis of GARMIN – Team Synergy -- 6

ECONOMIC:

While economic pressures have severely affected consumer discretionary spending, shipments of GPS-enabled cell phones will increase 6.4% from 2008. It is expected that nine out of every 10 smartphones will contain GPS capability by 2014, as compared to one in three in 2008.8 Shipment of GPS handsets, though, is expected to drop four to five percent in 2009. With the dollar weakening and Garmin manufacturing overseas - they must endure the negative impact of losing money on the conversion. During the dollar’s continuing decline, they might benefit greatly from a shift to manufacturing a portion of their products in the U.S.

The current economic crisis will likely last through the end of 2010. Recent news, published by Bloomberg, indicates the world’s largest economy (US) shrank at a .7% annual rate from April through June.9 Europe’s economy contracted more than estimated in the second quarter as consumer spending was weaker than earlier reported. 10 In late 2009, China announced an enormous fiscal stimulus package. Since then the Shanghai Composite Index has rallied some 90 percent. Despite this fact, questions remain over their ability to sustain over the longer-term as the stimulus goes away.11

Given the state of the economy, businesses around the world are concerned about the impact inflationary pressures could have on their businesses. One consequence of selling into international markets is an exposure to movements in currency exchange rates. Tax rates, such as repatriated earnings taxes, can have a significant impact upon the company. In 2008, Taiwan increased these taxes to 19% from 12%, resulting in a loss of .30c per share that year alone. 12

The state of several major economies, as of September 30, 2009:

Country Interest Rate

Growth Rate

Inflation Rate

Jobless Rate

Exchange Rate

U.S. .25% -3.8% -1.5% 9.8% 77.0450

EU 1.00% 4.8% -.20% 9.6% 1.4732

China 5.31% 7.9% -1.2% 4.3% 6.8255

Source: http://www.tradingeconomics.com

SOCIAL:

Telecom Times reports that by 2015, the expected number of GPS subscribers will reach 160 million, which translates to a 33.7% compound annual growth rate. U.S. and Japan subscribers are opting for mobile devices in large numbers, whereas the EU is seeing a more gradual replacement of personal navigation devices.13

More than 40 percent of all smartphone owners use their mobile devices to get turn-by-turn directions, according to Compete, a web analytics firm. For iPhone users, that number is more than double. As these phones enhance their GPS capabilities, it may continue to pressure personal navigation device makers. One person interviewed recently, summed up the general sentiment of desiring one device when he said, “The simplicity of having one device and not needing to pull the Garmin out of my glove compartment is enough. I want to get into my car and do as few things as possible.” 14

An Analysis of GARMIN – Team Synergy -- 7

The EU has implemented several environmental regulations in the past few years, one of which is the RoHS (restriction of hazardous substances) Directive. This directive bans new electrical and electronic equipment containing more than permissible levels of hazardous substances on the EU market after July 1, 2006. Since then, other countries have adopted the RoHS directive. Garmin has expended considerable effort and resources to ensure compliance with the directive, although not all of its products are RoHS compliant. 15

TECHNOLOGICAL:

Although China is a large potential market for GPS makers, there were questions as to the state of their infrastructure in 2007. In an article found in the EETimes Asia, there was a lack of an industrial standard and supervision for GPS operations in China. Since that time, China has made significant strides to address the infrastructure shortcomings. China and the EU have joined forces to work toward Information and Communications Technologies (ICT) standards. 16

Source: Cellular News, July 12th, 2009 http://www.cellular-news.com/story/38484.php?s=h

Of additional concern, the US Air Force is seeking comments from receiver manufacturers regarding an SVN-49 signal anomaly that is causing signal distortions. This involves the GPS IIR-20(M) spacecraft launched in early 2009, but not yet operational. Due to the number of manufacturers, it is impossible for the Air Force to work through this matter on their own. This highlights a vulnerability of Garmin’s product, as it is completely dependent upon properly functioning satellites. These anomalies could impact service levels, and brand confidence would be significantly affected. 17

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SWOT ANALYSIS1

STRENGTHS Core competency of Garmin is its ability to leverage GPS technologies and in-house manufacturing

to create trendy but useful products for high growth markets. Provides efficient after sales services and superior customer support in areas like repairs, technical

support and warranties services. Manufacturing their products in-house reduces mishaps and ensures quality products. The company owns its manufacturing facilities in Taiwan and receives tax incentives from the

Taiwanese government slated to end in 2011. Cheap labor allows the company to keep its operating costs low.

Garmin produces quality products that are ISO certified and further approved for use in aviation by the FAA.

WEAKNESSES GPS devices (inherent product weakness) are accurate to within 15 meters and certain atmospheric

and weather factors may affect their accuracy. This has allowed competitors like NavSync Ltd and Ekahau Inc. to differentiate their products. These companies have developed Wi-Fi-based Real Time Location Systems that boost GPS accuracy and have created new products like NavTrac Wi-Fi-enabled GPS devices that support asset and inventory tracking from inside buildings to around the world.

GPS satellites are monitored and controlled by the U.S Department of Defense, potentially limiting sales to certain clients (i.e. foreign governments).

Endures a low sales cycle during the first half of the year versus the latter half of the year as consumers plan annual trips and marine activity.

Owning manufacturing facilities and their related costs can be considered a weakness when sales volumes decline.

OPPORTUNITIES A brand awareness drive to increase visibility in the world, in Europe they sponsored the English

Premier League football club at Middlesbrough and “Garmin-Slipstream” cycling team. The use of GPS technology within varying age groups is rising and there are increased opportunities

to provide cutting-edge applications of the technology. The need for all-in-one devices and the shift by most electronic and manufacturing companies

toward consolidated products and applications provides continued opportunity. Garmin could capitalize/invest in the technology of applications such as Google-Maps such as street-

level images and specialty routing options.

THREATS Increase of new entrants offering personal navigation devices consolidated into mobile devices like

the iPhone and Blackberry. GPS satellites may become inoperable due to decaying gravity; over time, they will be pulled into

Earth’s atmosphere. There is a risk of market saturation of GPS devices because of their long life cycles and usability,

hence reducing non-recurring sales/revenues coming to the company.

An Analysis of GARMIN – Team Synergy -- 9

COMPETITIVE ANALYSIS2:

TARGET MARKETS

Garmin’s target markets are currently broken down into four main segments:

1. Automotive/mobile

2. Outdoor/fitness

3. Marine

4. Aviation

Source: GARMIN-LTD-10K-Annual-Reports-20090225

MARKET SEGMENTS

1. Mobile cellular device owners, through the company’s new Nüvifone

2. Car owners without in-built GPS systems in their cars.

3. Nature and trail tracking enthusiasts, including joggers.

4. Auto rental companies, to provide GPS devices as an option to their fleet of cars, for example Enterprise and Budget car rental companies.

5. Resell companies that buy in bulk and resell their products i.e. Best Buy and Wal-Mart.

6. Auto companies like Toyota and Ford that offer the product in their cars.

7. Marine enthusiasts and for navigating Oceans, lakes and rivers.

8. Aviation industry for air planes through aircraft companies like Raytheon and Cessna.

An Analysis of GARMIN – Team Synergy -- 10

PORTER’S FIVE FORCES: (Measurement scale: Very Weak, Weak, Medium, Strong and Very Strong)

DEGREE OF RIVALRY/COMPETITION – Very Strong

Garmin’s primary competitor is TomTom with 25% market share; Garmin holds 50% (Newsweek.com) of the Personal Navigation Device market (PND) including GPS consumer products for automotive navigation. They also have stiff competition from their aviation-centered products from L-3 Avionics Systems and Rockwell Collins. Another source of rivalry is the mobile industry that has incorporated low cost GPS navigation services into mobile phones and PDA’s using 3G, EDGE and wireless internet technology as a base to download interactive maps. The iPhone and Blackberry are the strongest competition in regards to their personal GPS navigation line as GPS devices have proliferated the market. Garmin has swiftly replied to this threat by releasing the nüvifone with downloaded maps.

THREAT OF SUBSTITUTES - Weak

Garmin is at the forefront of providing directional information. The only substitute to the GPS navigation system offered by Garmin are maps that are periodically updated, printed and sold in local book and corner stores. Another option to obtain directional information is the use of online map and locations services such as Google Maps and MapQuest, which allow you to route a journey, print it, and follow the provided directions to your final destination.

The threat of substitutes is weak is because the GPS based technology has been bundled with features like route mappings, frequently updated maps, voice turn-by-turn command and location based services (i.e. gas stations, weather information, traffic and entertainment information). These bundled services give Garmin an edge and give consumers greater benefit.

SUPPLIER POWER- Strong for data supplier and Weak for manufacturing

Garmin has a single supplier Navteq for its data to digital mapping services. There is only one other possible supplier (Tele Atlas NV) for the same services but were outbidded by rival TomTom for their services thus making Navteq a powerful supplier as bundled services are what create the added value to Garmin products. The same is true in regards to a strong supplier power when it comes to SiRF Technology Holdings, Inc. who as of 2005 provides an architecture on which Garmin devices are built. (SiRF Architecture.)

In respect to suppliers for product components, Garmin has a select number of suppliers that individually provide sub components to their factories. The individual and separate suppliers with whom Garmin has arrangements for component supplies have little power.

An Analysis of GARMIN – Team Synergy -- 11

BUYER POWER – Medium

By the end of 2008, Best Buy accounted for 10% of Garmin’s total sales as per the 2008 Annual report. In the U.S consumer product sales channeled through Garmin’s network of dealers and distributors.

Major retailers carrying Garmin products (Garmin, 2008 Annual Report):

Best Buy—one of the largest U.S. and Canadian electronics retailers; Amazon.com—internet retailer; Costco—an international chain of membership warehouses that carry quality, brand name

merchandise; Halford’s—a large European retailer specializing in car parts and accessories; Petra—a large distributor who sells to such dealers as Costco and Amazon.com; Target— one of the nation’s largest general merchandise retailers; Wal-Mart—the world’s largest mass retailer; and Wynit—a large distributor who sells to such dealers as Radio Shack and Amazon.com.

Garmin depends on their automotive/mobile segment for 70% of their revenues but because of the maturing nature of this segment of their business, there is less growth. (Garmin, 2008 Annual report)

BARRIERS TO ENTRY - Medium

First-mover companies like Garmin and its competitors (i.e. “Cobra, Lowrance, Thales, Navman, Raymarine, Mitac, TomTom, Honeywell, Dell, Hewlett-Packard, and PalmOne”), have invested heavily in GPS technology-based infrastructure and have intellectual property rights protecting their businesses making it difficult for new entrants. New entrants’ stake claim by creating add-on services sold either to the GPS market competitors.

It is important to note that there is vigorous price competition among the competitors. Gone are the days when TomTom and Garmin used to charge $500 for GPS navigation units. Garmin has gone down to as much as $150 a unit and that does not include the cheaper bundled GPS models bundled with mobile cellular devices that have recently hit the market in the last 1 ½ years.

The telecommunications industry is heavily regulated by the FCC, the same is true for the company’s operations in Europe where they are subject to regulation and certification for each product they bring to market. Thus, any loss in certification or delay in attaining these credentials may lead to loss of market share.

An Analysis of GARMIN – Team Synergy -- 12

Financial Ratio Analysis Garmin Ltd (GRMN)

Garmin had fantastic growth year in FY07 in which it grew revenues 79%. In FY08, however Garmin has grown revenue to $3.5B at a conservative 9% rate. FY08 was a challenging year for Garmin which saw its profits rise slightly by 6% behind the 9% revenue growth but this was misleading because its net income fell significantly as a percentage of revenue by 3% due mainly to an increase in R&D, SG&A and COGS. Net Income fell to $732 million from $855 million in FY07.

Garmin has outperformed the S&P500 on profit margin but is only slightly trailing the industry by 1%. Total Profit margin for FY08 was 22% but decreased 5% from FY07. Return on Assets has declined 1% and Return on Equity declined 3% to 33% from 36%. Clearly, high expectations and slowing economy have had an impact on Garmin’s capability to maintain this level of performance.

Garmin has apparently not become more efficient because of its growth as evident by its declining operating income and a decrease in inventory turnover.). Inventory as a percentage of revenue has grown significantly which may either be a temporary condition due to the slowing economy and missed forecasts or a lesser efficient model. The Quick Ratio or “acid test” of Garmin’s financial health shows that Garmin has 3.8 times assets in short-term investments (cash flow, A/R and short-term investments) versus liability. Cost of Sales rose to 55% as a percentage of revenue, which is up 2% from FY07. Likewise, R&D rose .9% to 5.9% as a percentage of revenue and SG&A rose 1% to 13% as a percentage of revenue.

If we compare Garmin’s liquidity to TomTom NV a $2.3B competitor, we find that TomTom carries much more debt and risk with a Current Ratio of .35. This means that TomTom carries .35 cents in assets for every $1 in liability compared to Garmin, which carries $4 of assets to $1 liability. If Garmin were able to increase its inventory turnover even further and maximize its use of cash store it may be able to put more pressure on a struggling competitor like TomTom with either a leveraged buy-out or increasing pricing pressure.

One area the company has improved upon is in decreasing the average days of A/R by reducing a total of 38 days by moving A/R from 121 days to 83 days. The potential use of this cash was offset by the increase in COGS.

Garmin is healthy financially although less efficient over the last 2 years. The current equity return and profit margin is above the S&P 500 average however, Garmin has to deal with managing costs as a percentage of revenue. Garmin carries almost no risk to solvency and its ability to cover its liabilities as the Current Ratio shows it has more than 4.5 times assets to liabilities. Garmin carries no debt. Many investors can construe this as a lack of innovation, efficient use of capital, vision and capacity for expansion. Garmin’s growth trend has slowed significantly and it will need to become more efficient and expand its revenue base either through a better use of cash or a reduction of inventory for a better return on capital.

See Appendix for financial statements and charts.

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Critical Success Factors

1. Leverage use of cash and control expenses

Garmin has the strength afforded a company with significant assets and no long-term debt. Garmin could put price pressure on smaller competitors by becoming even more efficient with its own expenses and use of inventory and build up a stronger cash position in order to reduce prices or use the cash for purchase into a marketplace through its competitors or incentives to partners.

2. Diversify Product Line

The popularity of smartphones and online mapping software is a risk to Garmin’s business model as there will be less desire to purchase stand-alone navigation devices. Garmin must either diversify its product line or find a new way to collaborate with auto and boat manufacturers. Of course, Garmin can continue to compete in the phone space or expand nüvifone partnerships. The risk is the margins of these businesses are typically much less and have greater competition.

Garmin has sufficient cash to purchase its way into IP or diversify in the phone market or buyout a smaller competitor that has valuable IP such as TOMTOM.

Evaluation

Garmin Ltd is a financially healthy, market leading company that supplies navigational products which finds itself in 2010 on the verge of a paradigm shift. If Garmin wishes to remain a market leader in the years to come, it should leverage its assets and capability to diversify and re-examine how it delivers these services and respond to a very real market shift as consumers embrace alternative platforms.

An Analysis of GARMIN – Team Synergy -- 14

APPENDIX

1Income Statement Garmin Ltd (GRMN) in thousands U.S. Dollars

PERIOD ENDING 27-Dec-08 29-Dec-07 30-Dec-06

Total Revenue 3,494,077 3,180,319 1,774,000

Cost of Revenue 1,940,562 1,717,064 891,614

Gross Profit 1,553,515 1,463,255 882,386

Operating Expenses

Research Development 206,109 159,406 113,314

Selling General and Administrative 485,389 396,498 214,513

Non Recurring - - -

Others - - -

Total Operating Expenses - - -

Operating Income or Loss 862,017 907,351 554,559

Income from Continuing Operations

Total Other Income/Expenses Net 52,956 71,129 40,036

Earnings Before Interest And Taxes 914,973 978,480 594,595

Interest Expense 607 207 41

Income Before Tax 914,366 978,273 594,554

Income Tax Expense 181,518 123,262 80,431

Minority Interest - - -

Net Income From Continuing Ops 732,848 855,011 514,123

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 732,848 855,011 514,123

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $732,848 $855,011 $514,123

1 A1

Balance Sheet Garmin Ltd (GRMN)PERIOD ENDING

27-Dec-08 29-Dec-07 30-Dec-06

Assets

Current Assets

Cash And Cash Equivalents 696,335 707,689 337,321

Short Term Investments 12,886 37,551 73,033

Net Receivables 791,146 1,059,889 459,520

Inventory 425,312 505,467 271,008

Other Current Assets 58,746 22,179 28,202

Total Current Assets 1,984,425 2,332,775 1,169,084

Long Term Investments 262,009 386,954 407,843

Property Plant and Equipment 445,252 374,147 250,988

Goodwill - - -

Intangible Assets 230,954 196,030 67,580

Accumulated Amortization - - -

Other Assets 1,941 1,554 1,525

Deferred Long Term Asset Charges - - -

Total Assets 2,924,581 3,291,460 1,897,020

Liabilities

Current Liabilities

Accounts Payable 479,176 801,883 337,682

Short/Current Long Term Debt - - -

Other Current Liabilities - - -

Total Current Liabilities 479,176 801,883 337,682

Long Term Debt - - 248

Other Liabilities 215,481 127,028 -

Deferred Long Term Liability Charges 4,070 11,935 1,191

Minority Interest - - -

Negative Goodwill - - -

Total Liabilities 698,727 940,846 339,121

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 1,002 1,086 1,082

Retained Earnings 2,262,503 2,171,134 1,478,654

Treasury Stock - - -

Capital Surplus - 132,264 83,438

Other Stockholder Equity (37,651) 46,130 (5,275)

Total Stockholder Equity 2,225,854 2,350,614 1,557,899

Net Tangible Assets $1,994,900 $2,154,584 $1,490,319

A2

Cash Flow Garmin Ltd (GRMN)

PERIOD ENDING 27-Dec-08 29-Dec-07 30-Dec-06

Net Income 732,848 855,011 514,123

Operating Activities, Cash Flows Provided By or Used In

Depreciation 78,417 64,037 44,475

Adjustments To Net Income 111,702 (2,554) (3,076)

Changes In Accounts Receivables 206,101 (477,108) (230,111)

Changes In Liabilities (330,294) 484,238 136,459

Changes In Inventories 83,035 (224,180) (95,658)

Changes In Other Operating Activities (19,645) (17,356) (4,357)

Total Cash Flow From Operating Activities 862,164 682,088 361,855

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures (119,623) (156,777) (92,906)

Investments 130,744 112,775 (93,772)

Other Cashflows from Investing Activities (67,470) (131,693) (39,707)

Total Cash Flows From Investing Activities (56,349) (175,695) (226,385)

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid (150,251) (162,531) (107,923)

Sale Purchase of Stock (659,943) 9,228 (34,376)

Net Borrowings - (248) (11)

Other Cash Flows from Financing Activities 2,143 17,434 9,660

Total Cash Flows From Financing Activities (808,051) (136,117) (132,650)

Effect Of Exchange Rate Changes (9,118) 92 149

Change In Cash and Cash Equivalents ($11,354) $370,368 $2,969

A3

Other Financials

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Growth Rates % Company Industry S&P 500

Sales (Qtr vs year ago qtr) -26.60 -12.60 -9.10

Net Income (YTD vs YTD) -47.90 -10.50 -5.00

Net Income (Qtr vs year ago qtr) -36.80 -38.60 -11.30

Sales (5-Year Annual Avg.) 43.56 23.69 13.14

Net Income (5-Year Annual Avg.) 32.62 18.72 12.74

Dividends (5-Year Annual Avg.) 24.57 3.18 11.70

Financial Condition Company Industry S&P 500

Debt/Equity Ratio 0.00 0.40 1.39

Current Ratio 4.5 3.3 1.5

Quick Ratio 3.8 2.5 1.2

Interest Coverage 21.4 61.6 23.4

Leverage Ratio 1.3 1.9 5.2

Book Value/Share 12.28 20.33 21.10

Investment Returns % Company Industry S&P 500

Return On Equity 22.6 9.7 15.7

Return On Assets 17.2 5.1 5.9

Return On Capital 20.9 6.4 8.2

Return On Equity (5-Year Avg.) 35.0 14.8 19.1

Return On Assets (5-Year Avg.) 27.4 7.8 7.9

Return On Capital (5-Year Avg.) 33.8 10.0 10.6

Management Efficiency Company Industry S&P 500

Income/Employee 60,469 19,667 56,806

Revenue/Employee 339,059 280,441 846,884

Receivable Turnover 5.0 5.7 13.1

Inventory Turnover 3.4 4.1 9.4

Asset Turnover 1.0 0.7 0.8

Profit Margins % Company Industry S&P 500

Gross Margin 45.1 46.8 38.1

Pre-Tax Margin 22.3 0.9 10.4

Net Profit Margin 17.8 5.1 7.1

5Yr Gross Margin (5-Year Avg.) 47.3 46.6 37.8

5Yr PreTax Margin (5-Year Avg.) 30.4 11.2 16.5

5Yr Net Profit Margin (5-Year Avg.) 25.6 8.5 11.5

SOURCES

Corporate Overview Sources:1 Garmin Company: About Us (2009).Retrieved September 25, 2009, from Garmin Website:http://www8.garmin.com/aboutGarmin2 Garmin Culture: Stories from the Inside (2009).Retrieved September 25, 2009, from Garmin Website:http://www8.garmin.com/careers/culture.html?activeBranchId=careers3 Wikipedia - The Free Encyclopedia: Garmin (Sept 18, 2009).Retrieved September 25, 2009, from Wikipedia Website:http://en.wikipedia.org/wiki/Garmin4 Wichita Business Journal: Report: Garmin smartphone will cost $500 (Sept 22, 2009).Retrieved September 25, 2009, from Wichita Business Journal Website:http://wichita.bizjournals.com/wichita/stories/2009/09/21/daily23.html5 Wall Street Journal: Garmin Tried to Find Ways Around Smartphone Threat (Sept 22, 2009).By Ben Charney; Retrieved September 25, 2009, from Wichita Business Journal Website: http://online.wsj.com/article/BT-CO-20090921-703769.html

Technological Innovations & Marketing Strategy Sources:1. Becky H. GPS brownout unlikely. Colorado Springs Business Journal (CO). n.d.;Available from: Regional Business News,

Ipswich, MA. Accessed September 25, 2009.2. Bertolucci J. Let a GPS Be Your Trail Guide. Kiplinger's Personal Finance. August 2009;63(8):p70.3. Event Brief of Q2 2009 Garmin Ltd. Earnings Conference Call - Final. Fair Disclosure Wire (Quarterly Earnings Reports).4. Garmin Signals The Worst Is Past. Wall Street Journal - Eastern Edition, August 6, 2009:pB5.5. Kiley D. THE RIGHT DIRECTION. BusinessWeek. September 28, 2009;(4148):p75.6. Mott G. Golf & GPS Technology. Cigar Aficionado. September 2009;17(6):pp81-85. Available from: Business Source Premier,

Ipswich, MA. Accessed October 1, 2009.7. Norman J. Garmin Changes Strategy to Focus on Specialty Bike Channel. Bicycle Retailer & Industry News. April 15,

2009;18(6):p10.8. http://electronics.pricegrabber.com/gps 9. http://finance.yahoo.com/q?s=GRMN 10. http://www.garmin.com 11. http://www10.giscafe.com/nbc/articles/view_article.php?articleid=493609 12. http://www.gpslodge.com 13. http://www.mobilewhack.com/garmin-and-tomtom-sold-over-10-million-pnds-in-2007/ 14. http://www.tomtom.com

PEST Analysis Sources: 1 Garmin Tries To Find Ways Around Smartphone Threat >GRMN (September 21, 2009) By Ben Charney; Retrieved September 25, 2009, from Wichita Business Journal Website: http://online.wsj.com/article/BT-CO-20090921-703769.html 2 Wikipedia - The Free Encyclopedia: Global Navigation Satellite System (Sept 18, 2009).Retrieved September 25, 2009, from Wikipedia Website:http://en.wikipedia.org/wiki/Global_Navigation_Satellite_System3, 4 Wikipedia - The Free Encyclopedia: Global Navigation Satellite System (September 19, 2009).Retrieved September 25, 2009, from Wikipedia Website:http://en.wikipedia.org/wiki/Galileo_positioning_system5 2008 National Trade Estimate Report on Foreign Trade Barriers – China (September 21, 2009) Released by US Trade Representative; Retrieved October 18, 2009, from government website: http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file930_14640.pdf6 2008 National Trade Estimate Report on Foreign Trade Barriers – European Union (September 21, 2009) Released by US Trade Representative; Retrieved October 18, 2009, from government website: http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file991_14650.pdf7 2008 National Trade Estimate Report on Foreign Trade Barriers – Canada (September 21, 2009) Released by US Trade Representative; Retrieved October 18, 2009, from government website: http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file165_14638.pdf8 GPS Enabled Handsets Expected Bypass Economic Downturn (January 23, 2009) GPS World Magazine; Retrieved September 23, 2009, from GPS World website:http://www.gpsworld.com/consumer-oem/news/gps-enabled-handsets-expected-bypass-economic-downturn-3109

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9 Economy in U.S. Shrank 0.7%, Less Than Anticipated (January 30, 2009) By Shobhana Chandra; Retrieved September 25, 2009, from Bloomberg website:http://www.bloomberg.com/apps/news?pid=20601068&sid=a3g5lqDmy2N810 Eurpoean Economy Contracts More Than Estimated (July 30, 2009) By Simone Meier; Retrieved September 25, 2009, from Bloomberg website:http://www.bloomberg.com/apps/news?pid=20601068&sid=aGu9Z_GJCYoQ11 Chinese Economy May Be Headed Into an Iceberg (July 30, 2009) By Anna Fedec; Retrieved September 23, 2009, from Trading Economics website:http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=CNY12 Garmin Hit By The Tax Man (April 30, 2008) By Carl Gutierrez; Retrieved October 18, 2009, from Forbes website:http://www.forbes.com/2008/04/30/garmin-navigational-technology-markets-equity-cx_cg_0430markets17.html 13 Mobile navigation subscribers increase two-fold to reach 28 million (October 11, 2009) Telecom Tiger Magazine; Retrieved September 24, 2009, from TelecomTiger website:http://www.telecomtiger.com/fullstory.aspx?passfrom=vasstory&storyid=737114 Sendng GPS Devices the Way of the Tape Deck (July 7, 2009) By Jenna Wortham; Retrieved September 26, 2009, from New York TImes website:http://www.nytimes.com/2009/07/08/technology/08gps.html?scp=1&sq=needing%20to%20pull%20the%20Garmin%20out%20of%20my%20glove%20compartment%20is%20enough&st=cse 15 Garmin Company: Product Design (2009).Retrieved October 18, 2009, from Garmin Website:http://www8.garmin.com/aboutGarmin/environment/productdesign.html16 The Need to Redirect China’s GPS Market (September 24, 2007).Retrieved September 24, 2009, from Garmin Website:http://www.eetasia.com/ART_8800480860_499488_NT_8bbe4c58.HTM 17 Air Force Polls Receiver Makers for Solutions to Satellite Problems (June 30, 2009).GPS World Magazine; Retrieved September 26, 2009, from GPS World Website:http://www.gpsworld.com/gnss-system/receiver-design/news/air-force-polls-receiver-makers-solutions-satellite-problems-8487

1SWOT Analysis Sources Garmin Tries To Find Ways Around Smartphone Threat (September 21, 2009) By Ben Charny; Retrieved September 25th 2009 , from The Wall Street Journal :http://online.wsj.com/article/BT-CO-20090921-703769.htmlNew NavTrac Wi-Fi-enabled GPS Devices Support Asset and Inventory Tracking … (April 27, 2009)By Ekahau Inc.; Retrieved October 19, 2009, from Industrial Embeded Systems website:http://www.industrial-embedded.com/news/Contracts/16967US says GPS satellite coverage may fail soon (May 16, 2009)By J. Mark Lytle; Retrieved September 23, 2009, from TechRada: SATNAV News website:http://www.techradar.com/news/portable-devices/satnav/us-says-gps-satellite-coverage-may-fail-soon-599431Garmin to sponsor well known UK football club Middlesbrough (Jul 23rd 2007) By Ludovic Privat; Retrieved September 23, 2009 from GPS Business News,http://www.gpsbusinessnews.com/Garmin-to-sponsor-well-known-UK-football-club-Middlesbrough_a278.htmlGarmin in a Good Position (April 17, 2007) By Katy Marquardt; Retrieved Sep 23rd 2009, from Kiplinger.com website:http://www.kiplinger.com/columns/picks/archive/2007/pick0417.htmGarmin Company: Investor information; Retrieved September 25, 2009, from Garmin website:http://www8.garmin.com/aboutGarmin/invRelations/execBios.html?activeBranchId=investor

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2Competitive Analysis Sources:Setting a New Course (November 7, 2007) By Daniel McGinn; Retrieved October 4, 2009, from News Week Article:http://www.newsweek.com/id/68909Garmin hits iPhone directly with Nüvifone (January 30, 2009) Retrieved October 8, 2009, from Electronista website:http://www.electronista.com/articles/08/01/30/garmin.nüviphone/Garmin Limited (NASDAQ: GRMN) Retrieved October 4, 2009, from Forbes.com website:http://finapps.forbes.com/finapps/BuyHoldSellAnalysis.do?tkr=grmnGPS Devices and Systems Will Generate Revenues of $240 Billion by 2013 (April 28, 2009)Retrieved October 7, 2009, from ABIresearch website:http://www.abiresearch.com/press/1115-GPS+Devices+and+Systems+Will+Generate+Revenues+of+

%24240+Billion+by+2013Who Keeps Digital Maps Going in The Right Direction? (January 14, 2009) By Amol Sharma; Retrieved October 10, 2009, from The Wall Street Journal website:http://online.wsj.com/article/SB120027487946287479.htmlGarmin Company: Garmin Chooses SiRF as Supplier on Selected New Garmin Devices (August 30, 2005) Retrieved October 11, 2008, from Garmin Press Release:http://www8.garmin.com/pressroom/corporate/083005.htmlGarmin company: 10-K 2008 FilingRetrieved October 11, 2009, from Garmin company website:http://www8.garmin.com/aboutGarmin/invRelations/reports/10-K_2008.pdf

Critical Success Factors Sources MSN Money. (2009, 10 6). Retrieved from http://www.msn.com: http://moneycentral.msn.com/detail/stock_quote?

Symbol=GRMN%2C Press, A. (2009, September 9). http://online.wsj.com/article/SB12542356078994945. Retrieved from The Wall Street

Journal Online.

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