GPS leader navigates through tight market

"That's been amazingly helpful," Staggs said, planning for an upcoming 150-mile ride between Kansas City and Sedalia, Mo. "I'm going to ride the route and when I'm done, the Garmin will have plotted the course and we can send that out to the participants."

But it's the driving segment that has really taken off for Garmin, pushing sales past $1 billion last year for the first time. While Rauckman said all of the company's market segments will see double-digit revenue increases this year, driving-related units now make up half of sales.

U.S. drivers have embraced the technology as devices have become more sophisticated with color screens, audio turn-by-turn directions and better user interfaces. Newer units now include weather and traffic information and future models could provide ratings of nearby restaurants and hotels or offer satellite radio and MP3 players.

"There's increased room for innovation in the years ahead," said Ross Rubin, director of industry analysis at the NPD Group. As an example, he expects systems to direct drivers by landmarks, not just street names.

It also helps that prices are falling. Rubin noted that the average GPS unit sold for more than $800 last year but is now down to $664. Amazon.com Inc. and Wal-Mart Stores Inc. are selling a stripped-down Garmin for $200. Sony entered the market with a more bare-bones unit that sells for about $440.

Garmin also teamed up last year with Sprint Nextel Corp. to provide subscribers turn-by-turn directions over their cell phones.

Strategy Analytics researchers suggest those kinds of applications could lead to a drop-off in demand for standalone navigation units like Garmin's.

Rubin disagreed, saying there's still plenty of room in the industry. In either case, he said, Garmin appears well-equipped to deal with changes in customer demand.

He noted that when European GPS leader TomTom International BV launched a smaller and easier-to-use product last year, Garmin came out with the StreetPilot c300 series, selling for between $600 and $400, which "has become the most popular GPS unit in the marketplace."

Wall Street has noticed, almost doubling Garmin's stock price in the past year to around $100 a share. Shareholders have approved an August stock split.

"Garmin continues to grow faster than the market and has accelerated for the last two months," analyst Jeff Evanson of Dougherty & Co. wrote in a recent research note.

Looking ahead, Garmin officials see the next big challenge isn't new competitors but breaking more into the European market, where it has a little more than 10 percent share. Rauckman said the market is different from the U.S. because Europeans have had more experience with GPS technology and need it more because of the sometimes chaotic road systems there. In addition, Europe lacks ubiquitous retailers like Best Buy or Wal-Mart, forcing the company to focus on individual outlets in each country.

"We have sold 15 million units over the life of the company," Rauckman said. "We haven't arrived. Garmin still has a lot more market growth opportunities in the future."

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