Even tougher times ahead for Rakon?

GPS component manufacturer Rakon announced a big drop in earnings this week. Can it recover though, even if the recession ends?
Written by Juha Saarinen, Contributor

Rakon is a comparatively rare animal on the New Zealand tech scene, being a maker of crystal oscillators for global positioning systems (GPS). While it's been successful on the world stage, Rakon isn't immune to the global recession.

Today the company reported a 59 per cent drop in earnings, and profit down from NZ$10.9 million for last year to NZ$4.5 million this year.

Slack demand for consumer GPS is said to be the main reason for sales shrinking a fifth to NZ$139.5 million, but rising operating expenses seem to eat into Rakon's profitability as well.

The bad figures come after a hard 2008 for Rakon when the company's share price fell by two-thirds, so layoffs and a one-fifth eight-week production reduction between February and April were introduced in response to the tough times.

Now Rakon is pinning its hopes on outsourcing manufacturing to China and India, which should cut costs at the expense of workers and staff in existing facilities being laid off.

It's true that location-based services for handheld devices are becoming increasingly popular, but it may not mean we'll all have GPS phones. As anyone who has used a GPS-enabled phone, getting a fix on a satellite can be slow and difficult, not to mention impossible indoors. Plus, leaving the GPS on eats the battery life. Assisted GPS via cell-towers takes care of those problems, but Rakon is up against giants like Qualcomm in that field.

Perhaps the focus on GPS is too narrow for Rakon?

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