It caved in to reality. Garmin released paid GPS apps for iOS, Android and Windows Phone, as did TomTom. But Garmin looked further. It used its cash to acquire a number of complementary and competing businesses — Digital Cyclone (weather alert technology for mobile and aviation), Nautamatic Marine Systems (boat autopilots), Dynastream (personal monitoring sensors) and Navigon.
The company then used its newly acquired technology along with its own GPS expertise and actively targeted new markets instead of just banging its head against the smartphone juggernaut or making do with app revenue.
Garmin developed and marketed ruggedized GPS units for outdoor enthusiasts, marine GPS systems, boat automation systems and fish finders. It pushed hard into personal fitness with GPS watches that boast heart rate sensors and GPS-equipped devices aimed at bicyclists. It has even expanded into selling GPS units for tracking pets.
Garmin still sells personal GPS units and automotive units (including as OEM equipment for car manufacturers), but as those segments have continued shrinking, the company has found ways to innovate and explore niches where smartphones aren’t a direct competitor.
Once again, there are signs of danger on the horizon, this time in the form of wearable technology. A good chunk of Garmin’s revenue mix comes from its “Fitness” division, which currently accounts for 12% of Garmin revenues. Other devices like handheld GPS units and GPS devices aimed at outdoor enthusiasts are spread across other divisions.
All of these products could be threatened when Samsung (SSNLF), Apple (AAPL), Google, Microsoft (MSFT) and others begin to release their own smartwatches, which is virtually inevitable at this point. At the same time, Apple seems determined to force its way into becoming a major automotive systems player, with “iOS in the Car” being its latest initiative.
Garmin appears to be doing anything but sit still. A new heads-up display device that works with a smartphone running Garmin’s GPS app lets any driver experience the HUD technology typically found as an expensive option on a very expensive car — for only $129.
And recent news that the company is launching a line of GPS-equipped, high definition, ruggedized, wearable VIRB cameras (a la GoPro) has had analysts predicting Garmin will outperform expectations this year. Last week Dougherty & Co upgraded its price target on the stock to $50 on the news.
The company might have to weather the approaching smartwatch storm, but Garmin has proved that it’s a survivor, and it has cash on hand should it choose to buy its way into another niche. In the meantime, it could have a big holiday quarter thanks to those VIRB cameras.
After the stock’s recent pause (where it’s been more or less flat), GRMN definitely has the potential to continue its four-year climb.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.