Garmin strong Q3 fails to impress, shares slide

By Savio D'Souza

BANGALORE (Reuters) - No. 1 U.S. navigation device maker Garmin (GRMN.O: Quote, Profile, Research) posted a surprise rise in quarterly profit, but investors seemed skeptical about the company's long-term prospects with Google's recent march into the navigation space.

Shares of the company dropped as much as 10 percent to $28.21 in morning trading on Nasdaq. In pre-market trade they were up almost 10 percent.

"The beat, as impressive as it is, will likely do little to ease investor concerns about the sustainability of the PND (personal navigation device) business in a world of free Google mobile navigation. Against that backdrop, some holders may use any strength this morning as a pathway to a clean exit," analyst Yair Reiner of Oppenheimer & Co said.

Garmin's shares are usually volatile on the day it reports earnings, and the short interest on its stock is at about 9 percent of total float. In comparison, blue-chip technology stocks such as Google and Apple have a short interest position of below 2 percent.

Garmin's PND market has been hit by a slump in demand followed by a fall in selling prices -- as highlighted by Dutch rival TomTom (TOM2.AS: Quote, Profile, Research) -- and the advent of smartphones with built-in navigation capabilities.

Last week, Google (GOOG.O: Quote, Profile, Research) vaulted into the navigation market with plans to launch free software offering turn-by-turn directions for smartphones, exacerbating concerns of the long-term survival prospects of PNDs.

Phones such as Research In Motion's (RIM.TO: Quote, Profile, Research) BlackBerry, Apple's (AAPL.O: Quote, Profile, Research) iPhone and offerings from Palm (PALM.O: Quote, Profile, Research) and Nokia (NOK1V.HE: Quote, Profile, Research) are seen as able substitutes for PNDs.

STRONG Q3 RESULTS