Garmin Ltd (GRMN.O) said it expects to sell fewer GPS-enabled navigation devices in 2013 and forecast full-year results below analysts' estimates, sending its shares down 12 percent to their lowest in more than a year.
Revenue from the company's struggling automotive mobile business, which makes hand-held and car-mounted navigation devices that account for about half of its sales, is expected to fall 15 to 20 percent in 2013, the company said on a conference call with analysts.
Garmin expects to sell about 20 percent fewer personal navigation devices in 2013, suggesting that the company is no longer able to compensate for the overall decline in demand for the gadgets by grabbing market share from smaller rivals.
The No. 1 U.S. navigation device maker has been trying to fight sluggish demand for these once must-have gadgets by bundling them with high-margin specialized mapping services as smartphones loaded with free mapping apps invade its market.
The drop in the popularity of personal navigation devices has forced Garmin, which reported fourth-quarter profit below market estimates on Wednesday, and its Dutch rival TomTom (TOM2.AS) to look for new areas of growth. While Garmin focused on its fitness and outdoor products, TomTom invested in software and apps.
TomTom said last week that earnings would halve this year because of weak sales of devices for cars and competition from providers of free maps.
Garmin shares have risen 3 percent since it reported third-quarter results on October 31, slightly better than the 2.5 percent rise in an index of 697 technology equipment makers globally tracked by Thomson Reuters. TomTom has fallen 5 percent in that time.
Garmin said it expects full-year profit of $2.30 to $2.40 per share, excluding items, and revenue of $2.5 billion to $2.6 billion.
Analysts on average were expecting adjusted income of $2.82 per share and revenue of $2.76 billion, according to Thomson Reuters I/B/E/S.
FOURTH-QUARTER RESULTS MISS
Net profit fell to $129.3 million, or 66 cents per share in the fourth quarter, from $165.6 million, or 85 cents per share, a year earlier.
Excluding items, the company earned 68 cents per share.
The Swiss company had said in October that greater-than-usual advertising expenses in the holiday season could be a drag on fourth-quarter profit.
Sales at Garmin's automotive/mobile business slipped to $437 million.
The company's outdoor business, which makes things like dog-tracking and golf gadgets, fell 2 percent to $119 million in the fourth quarter, while revenue from its fitness business that makes gadgets such as GPS-enabled watches to count calories and monitor heart beats, rose 10 percent to $104 million.
Total revenue fell 16 percent to $910 million.
Analysts on average had expected an adjusted profit of 73 cents per share, on revenue of $833.4 million.
Garmin shares were at $34.65 in midday trading on the Nasdaq.
(Additional reporting by Savio D'Souza in Bangalore; Editing by Supriya Kurane)