(Reuters) - Garmin Ltd forecast full-year results below analysts’ estimates suggesting a market share gain from smaller rivals could no longer offset a lack of demand for its GPS-enabled handheld navigation devices.
Shares of Garmin, whose quarterly profit also fell short of market estimates, dropped 9 percent before the bell.
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.
Analysts had expected the strategy of including valuable mapping software with hardware to boost sales by the end of 2012.
The drop in the popularity of personal navigation devices has forced Garmin and its Dutch rival TomTom 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 car sales 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.
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 struggling automotive/mobile business, which makes navigation devices for cars and accounted for nearly half of the company’s total revenue in the fourth quarter, 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’s shares, which closed at $39.24 on the Nasdaq on Tuesday, fell to $35.65 before the bell.
Additional reporting by Savio D'Souza in Bangalore; Editing by Supriya Kurane