Certainly, no one is going to argue that GPS isn't needed these days. But it's a lot more than just little modules on a dashboard these days, and Garmin seems to be headed away from that direction.
Speaking at the Bank of America Merrill Lynch Technology Conference on Thursday, Garmin CFO Kevin Rauckman noted that automobile GPS products previously accounted for 61 percent of Garmin's profits, but now it is down to 39 percent. However, outdoor fitness products with integrated GPS capabilities have moved up to fill the void (at least somewhat) as the company's largest contributor to operating income.
Yet, fitness GPS products aren't exactly mainstream and are still considered more of a splurge item than just new running shoes. Nevertheless, Rauckman seems determined that diversification is the key to Garmin's future success, and fitness products (particularly those for running and cycling) are going to be a big part of that:
We believe that we can continue to see the growth because it's still really early on as the leader in this space with GPS-enabled sport watches.
You know, we've sold a little over a million units, which is definitely not a mass market at this point. We expect, and there's been an announced competition that the Nike brand, the Nike TomTom watch that is now out on the market. But all the trends point to the fact that the first couple of years in the fitness market, we were predominantly going after the high-end triathlete marathon runner.
And we intentionally tried to deliver products and segment the market, so that we're hitting all aspects of the market. So we're not just hitting the high-end market -- high-end person that wants to spend $300 or $400. We now have units that are down at the $200 price point, which we believe has helped expand the market for Garmin. And we do expect that that could continue 25% over the next couple of years.
Naturally, Garmin will be throwing in a social networking aspect to its expanding fitness business called Garmin Connect, which will track the user's workout statistics online.
Based on the fact that fitness GPS products are helping keep Garmin afloat more than its traditional car accessories, then obviously the right move is to focus on where the money is.
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