Garmin's Got a Rough Road Ahead

"There is a widely-held belief that high PND (personal navigation device) margins and high market share will collapse," says Rob Sanderson, an analyst with the independent research firm American Technology Research, in a note. "Wireless handsets are also seen as an eventual PND-killer."

Garmin is holding strong in terms of market share. The company had a 55% share of the market in North America in the second quarter, compared with its rival TomTom's 18%, according to NPD, said a recent report in DigiTimes.

But the overall average selling price of the devices dropped to 33% to $236 in the quarter, while Garmin's average selling price for a device was down 38% to $250, said NPD.

That's exactly what growth-focused investors worried about increasing competition in the market are wary of. Garmin's Wednesday's results are likely to do little to quell those fears.

As Garmin heads into the holiday season, analysts and portfolio managers believe the company is likely to face increased pricing pressure as competitors try to offer cheaper products.

Garmin is likely to see prices for its devices fall 25% to 30% this year and at least 20% next year, estimated Jonathan Goldberg, analyst with Deutsche Bank earlier this month.

Investors will also closely be watching for comments about the company's plans to launch a smartphone called Nuvifone, which will be built around GPS-navigation.

Earlier this year, Garmin said it hopes to launch Nuvifone during the third quarter, and the company could offer a launch date Wednesday.

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