Updated from 2:50 p.m. EDT
SAN FRANCISCO -- A revenue warning from its chipset supplier SiRF Technology (SIRF) may not be enough to slow down personal navigation devices manufacturer Garmin (GRMN - Get Report).
Fears of weak demand for Garmin's products may be overblown as the company gains market share at the expense of its smaller rivals and remains on course to post strong first-quarter earnings, two Wall Street analysts say.
GPS-enabled chip set maker SiRF Technology (SIRF) offered a reduced revenue outlook early Tuesday that cited greater-than-expected weakness in product demand from its personal navigation devices (PND) customers. The announcement has investors worried that growth may be slowing at device manufacturers including Garmin, which buy their chipsets from SiRF.
But SiRF problems may not entirely reflect Garmin's performance and the impact of the revenue warning on Garmin could be minimal.Garmin's products are on top of the bestseller charts and the company's position as the market leader could be forcing smaller device makers to run for cover and cut their demand for chipsets leading to SiRF's warning, analysts from Oppenheimer and Wedbush Morgan say. SiRF has indicated that most of its demand shortfall came from smaller PND vendors, leading two analysts to say this could mean that players such as Mio and Magellan may have been affected more than others. Garmin, TomTom and Magellan are the top three in the North American consumer GPS market, followed by Navigon, a private GPS maker with its U.S. headquarters in Chicago, Ill. Taiwanese brand Mio ranked fifth in market share in the U.S. last month. SiRF said early Tuesday it expects revenue to range between $60 million to $62 million, down from its earlier forecast of $71 million to $77 million. Investors feared that Garmin, which is a SiRF customer, could have been feeling the pain with a slowdown in demand for its products leading Garmin to cut its orders for chipsets from SiRF. "We think this