Garmin's Big Troubles Just Get Bigger

Analysts were also disappointed by Garmin's announcement that it would postpone the roll-out of its all-in-one Nuvifone handset until the first half of next year. For analysts like Sue, the success of the Nuvifone seems less likely with each passing day.

"The handset market moves incredibly quickly and it has now been over nine months since the Nuvifone was first announced and will be at least 15 months before it is available," Sue says. "Battery life and call reliability remain the hurdles in getting the product to market, but we are concerned about the limited market size for navigation-centric smartphones and that the competition may have erased any lead that Garmin had."

For instance, Nokia (NOK Quote), which acquired digital mapmaker Navteq earlier this year for $8.1 billion, should offer strong competition to a Nuvifone once it integrates the technology, while Apple's (AAPL Quote) iPhone 3G and the new G1 handset with Google's (GOOG Quote) Android operating system already provide navigation help.

Of course, handset makers have run into their own problems as well, and that doesn't bode well for Garmin. Sony Ericsson, the joint venture between Sony (SNE Quote) and Ericsson (ERIC Quote), has said that challenging market conditions "are expected to prevail for at least the rest of 2008, and in particular for the third quarter." Motorola (MOT Quote) has also reporter soft sales of its handsets.

"While not directly applicable, we believe there is some correlation with PND devices," writes JB Groh, analyst with D.A. Davidson, in a research note. "Additionally, weak economic data suggests to us that the consumer will be thriftier during the important holiday season."