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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




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

SiRF's warning will still have a clear impact on Garmin and TomTom," says Jonathan Goldberg, an analyst with Deutsche Bank in a research note.

"We began the year with significant Mio and Magellan inventory in the channel," says Goldberg. "Even if Garmin has done a better job of forecasting, at some point competitive inventories indicate either a plateau in demand or they signal weak pricing conditions ahead." Deutsche Bank makes a market in Garmin shares.

Garmin shares fell $2.37, or 3.8%, to $60.01 in recent trading.

Garmin investors have been anxious about the decline in the stock. After soaring nearly 125% last year to touch a high of $125.68, the stock started spiraling downwards as Garmin battled to stay ahead of its competitors and its gross margins started to shrink. Shares have been down nearly 35% since the beginning of the year

Yet sales of Garmin's products seem strong as the company's product ranks high on bestseller lists of big retailers including




The company's portable GPS navigator, nuvi 660, is currently No. 2 on's


electronics bestseller list, ahead of digital cameras and




Despite the growing competition and SiRF's announcement, Garmin could do better than its peers, says Scott Sutherland, an analyst with Wedbush Morgan.

Increasing competition has squeezed smaller device manufacturers and allowed Garmin to gain market share, Sutherland says in a research note.

"Garmin manufacturers its own PND devices, so it should have a better grip on inventory levels and should not have inventory building," he says.

Instead, Sutherland blames SiRF for a first-quarter guidance that was not conservative enough to start with and subsequently forced it to cut its outlook to adjust to market realities.

SiRF's original first-quarter guidance only expected a 23% to 29% decline in revenue in the first quarter from the fourth quarter whereas its new guidance expects a 38% to 40% decline over the same period.

Sutherland says his projections call for a decrease of 51% in the number of devices sold by Garmin in the first quarter compared to the fourth-quarter holiday season and a 40% revenue decline. He says those numbers are conservative enough to fall in line with Street expectations.

It also means the current weakness in Garmin based on SiRF's warning may not be as high as perceived. For the first quarter, analysts expect Garmin to report EPS of 77 cents on revenue of $733.3 million, compared with EPS of 64 cents on revenue of $492.1 million in the year-ago quarter.

For the full fiscal year, Garmin is expected to earn $4.51 on revenue of $4.47 billion, higher than EPS of $3.89 on revenue of $3.18 billion a year ago, according to Thomson First Call.

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