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Company Perspectives:
Technology that touches people. Our customers around the world are loyal and take pride in having "guidance by Garmin." Our dealers and employees are likewise devoted to designing, selling, and servicing our consumer electronics. Garmin's success is not due solely to the quality of our materials and end products. We are successful because we have a simple mission: to turn complicated technology into useful products that enhance people's lives. Garmin products ... add convenience and improve the daily lives of customers. We design, we build, and we dream of products through the eyes of people who need our technology though they may not understand it. All the more reason to make our products intuitive and fun to use. In the days when GPS (Global Positioning System) technology was still in its infancy, our company founders envisioned a wide range of products that would help consumers, pilots, mariners, and industry professionals pinpoint positions and navigate to destinations.
Garmin Ltd. is a leader in Global Positioning System (GPS) navigation products. Once found mostly in specialized equipment for aircraft and boats, GPS technology has been adapted for use in a variety of handheld and wristwatch units for users such as hikers, athletes, sportsmen, and automobile drivers. Garmin has sold five million units in its first dozen years. Its product line has proliferated into 50 different items marketed through a network of 2,500 dealers, distributors, and partners in 100 countries around the world. While the parent company is registered in the Cayman Islands, Garmin has manufacturing and sales operations in the United States (Kansas) and Taiwan and a marketing office in the United Kingdom.
Origins
The U.S. Department of Defense began developing the Global Positioning System (GPS) in the mid-1970s, eventually spending $15 billion to put two dozen satellites into orbit. GPS receivers could determine their coordinates by comparing signals from different satellites. Like the first computers, the first commercially available GPS units were large and expensive, costing up to $10,000.
Garmin Corporation was formed in Taiwan in January 1990 by two electrical engineers, Gary Burrell and Dr. Min Kao. (The company's name is derived from the first names of the founders.) Burrell and Kao had been employed by Kansas-based King Radio Corporation, a maker of radios and aircraft navigation equipment, which was acquired by Allied Corp. (later Allied Signal) in 1985. Burrell displayed in interest in integration early on and is credited with designing the first combination navigation/communications radio for general aviation while at King Radio.
Garmin introduced its first product, the GPS 100AVD, in January 1991. Aimed at boaters and pilots of small planes, it was about the size of a paperback book and sold for about $1,000. By 1992, GPS devices were a $100 million-a-year market.
Garmin subsequently introduced another GPS unit for pilots called the GPS 95. This one, which sold for $1,795, incorporated a display of the plane's position on a moving map, as well as nearby airports and radio beacons. It could also backup the aircraft's built-in instrumentation with groundspeed, heading, and altitude readings.
Sales reached $102 million in 1995, producing net income of $23 million. Garmin International, the U.S. unit, moved to a new $8 million, 100,000-square-foot headquarters in early 1996. Its offices had previously been housed in four separate buildings.
Locating Drivers in the Late 1990s
Garmin turned its attention to the automotive market in the late 1990s with two hand-held units. GPS III, introduced in late 1997, incorporated a map of major roads in the Americas. This device displayed the position of the driver and destination on the map. Garmin brought out the StreetPilot in March 1998. It retailed for $700 and replaced more detailed mapping programs requiring a laptop computer.
Garmin's next project was a waterproof mobile phone with a GPS receiver and map display built in called NavTalk. The company also expanded beyond GPS products in its aviation-related products, introducing a Mode C transponder (a device for communicating a plane's position to air traffic controllers) and an intercom. Sales were $232.6 million in 1999. The company soon doubled the size of its Kansas plant to 240,000 square feet. It also had manufacturing operations in Taiwan and a sales office in England.
Public in 2000
Through a process called Selective Availability, the Department of Defense limited the accuracy of commercial uses of GPS technology to prevent the devices from being used to guide weapons. However, this policy was cancelled in May 2000, improving the unit's accuracy from 100 meters to less than ten meters. This resulted in increased interest in GPS in time for Garmin's initial public offering (IPO).
Before the IPO, a Cayman Islands-based holding company called Garmin Ltd. was created in July 2000. Garmin Ltd. became a public company on December 8, 2000 with one of the best IPOs following the dot-com bust. The price of shares, offered at $14, rose 42 percent to $20 in the first day of trading. The offering raised $147 million, most of it earmarked to fund growth. Revenues rose almost 50 percent to $345.7 million in 2000, and Garmin's net margins were above 30 percent.
Flush with cash, the company continued to spend significantly on research and development and introduced two dozen new products in 2001. However, both the aviation market and the overall economy experienced a downturn following the September 11 terrorist attacks on the United States. Nevertheless, Garmin was able to open 2002 with its best first quarter results to date--net income of $26.8 million on revenues of $100.9 million.
Revenues rose 26 percent to $465.1 million for 2002 as a whole, while net income was up $38 million to $142.8 million. Consumer revenue brought in $350.6 million, while aviation revenue accounted for $114.5 million. The company's aviation business had fallen by 9 percent in the previous year due to the FAA's restrictions on private aircraft following 9/11.
Garmin's product line had expanded considerably in the previous dozen years. It targeted a variety of users, from fishermen to commercial pilots, and its units were priced from $100 to $10,000. Consumer products then accounted for three-quarters of sales; Garmin had a new agreement to have them distributed at Target and Circuit City stores in the United States.
International sales were also very important. Garmin's first major buyer of its NavTalk GSM cell phone, which featured a GPS receiver and map, was a Chinese firm, CEC Telecom Co. Garmin had had manufacturing facilities in Taiwan for several years.
The company had also patented its "Rino" walkie-talkies (Radios Integrated with Navigation for the Outdoors) with integrated map and GPS features, including the ability to report the position of other radios on each user's map.
Co-founder Gary Burrell retired as co-CEO on August 24, 2002, his sixty-fifth birthday; he remained co-chairman and a director of the company. The company then employed 1,400 people around the world, a little less than half of them at its operating headquarters in Olathe, Kansas. According to Investor's Business Daily, Garmin had a 50 percent or better market share in the consumer segment of the GPS market, which accounted for three-quarters of the company's revenues. It controlled 80 percent of the aviation market and was also quite popular among boaters and hikers.
GPS for the Masses in 2003
The Chicago-Sun Times reported that GPS began to hit the mass market, versus the gadget enthusiasts, in 2003. This was evidenced by new offerings from Cobra Electronics Inc., a company that did much to popularize CB radios. Established GPS rivals such as Motorola Inc. and Magellan Corp. continued to develop low-priced units, and they were finding acceptance at more and more big box retailers like Best Buy and Wal-Mart.
The next step saw the combining of a handheld personal digital assistant (PDA) with GPS technology, allowing users to receive turn-by-turn directions to contacts listed in their address books. The combined handheld unit, called the iQue 3600, used the popular Palm operating system and was introduced at a January 2003 trade show. The device had "voice guidance" to give users spoken directions while driving as well as a full color map. It retailed for less than $600 and also offered traditional palmtop features such as the ability to edit word processor and spreadsheet files.
At the same time, Garmin was rolling out its first under-$100 GPS device, the Geko 101. Garmin technology was also featured in a Timex athletic training watch, enabling speed and distance calculations for runners. Garmin brought out its own training watch, the Forerunner 201, in the fall of 2003. The Forerunner's GPS included altitude capabilities and retailed for about $160.
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