Garmin's Got a Rough Road Ahead

SAN FRANCISCO -- In the past year, a leading maker of navigational gear has headed decidedly south.

Last year, GPS-based navigation systems maker Garmin(GRMN Quote) was flying high. The company's products consistently ranked at the top of electronics retail best-seller lists, it was highly profitable, and Wall Street took notice. Garmin's stock ended 2007 nearly 74% higher, while the Nasdaq Composite Index rose 9.5%.

But the company is facing a skeptical audience as it gets ready to report its second-quarter results Wednesday. Investors and analysts wonder whether it is able to differentiate itself in a highly competitive market and keep healthy margins in face of increased pricing pressure as customers clamor for cheaper devices.

No longer Wall Street's favorite, Garmin's stock is down nearly 50% since the beginning of the year, while the Nasdaq has fallen about 11%. Shares of Garmin closed down 88 cents, or 1.9%, to $45.96 Monday.

While analysts widely expect Garmin to beat estimates for the second quarter as demand for navigation devices remains strong, the company's margins and comments on pricing will be under the spotlight.

Last week, Garmin's biggest rival TomTom reported better-than- expected results. Sales rose 19% to 453.4 million euros ($713.6 million), and it had established a market share of 45% to 50% in Europe in the quarter and more than 20% in North America.

TomTom's strong results bode well for Garmin, as investors have been worried about the impact of the weakening economy in the U.S. and Europe on the sales of electronic devices.