Entranced by pocket-size gadgets that offered directions, played music and even answered cell-phone calls, consumers by the millions fell in love with the Global Positioning System.
No company felt that love more than Garmin, the nation’s leader in navigation devices. By midyear, the Olathe company found itself exceeding even its own wildest expectations.
By June 30, Garmin had put $1.2 billion in sales on the books, more business than the company had done in all of 2005.
The GPS wave continued to surge through 2007, leaving Garmin awash in profits and showered in the admiration of investors. The value of shares doubled, and continued to rise, briefly cresting at $125 a share.
Wall Street, of course, loved the tale.
Until it didn’t anymore.
This is that story.
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For Garmin, 2006 was a heck of a year.
Sales jumped almost 75 percent as Garmin sold 5 million products, most of them navigation devices designed for cars, trucks and even motorcycles. The growing popularity of its Nuvi line of navigators led the company to $1.77 billion in sales, a $514 million profit and the No. 1 spot in last year’s Star 50.
So it was no surprise when CFO Kevin Rauckman’s voice didn’t quaver on Valentine’s Day as he projected an even sweeter 2007 — at least $2.5 billion in sales.
Garmin already was six weeks into its best first quarter ever.
“We saw very early in the year that 2007 was going to be a blockbuster,” Cliff Pemble, Garmin’s president and chief operating officer, recalled during a recent interview.
By early May, it was clear something special was happening.
On May 2, Garmin CEO Min Kao and Rauckman told investors that sales were even better than expected. The company put $492 million on the books during the often slow first quarter and watched as the sale of automotive devices jumped by more than 100 percent.
Garmin shares, which had been hovering in the mid- to high-$50s, closed just under $57 that day.
But Wall Street didn’t really take notice until later that month, when economic news began to brighten. Words such as “soft landing” and “modest inflation” buoyed investors who had fretted about the unfolding subprime lending crisis.
Around Memorial Day, Garmin shares began a climb that left the major stock indexes in the dust and tracked with — and occasionally bettered — iPhone- and iPod-rich Apple.
On Aug. 1, Garmin reported a $742 million second quarter, up 72 percent from a year earlier. Rauckman raised guidance, telling Wall Street to expect $2.8 billion in sales from Garmin in 2007.
By Labor Day, Garmin was a $100 stock.
Investors couldn’t get enough of the good news story.
A week before Halloween, shares hit an eye-popping $125 and change. The company’s value on Wall Street passed $26 billion.
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As Garmin shares rose, pivotal events were taking place elsewhere in the GPS industry.
TomTom, the Netherlands-based European leader in automotive navigation, bid $2.8 billion in July for Tele Atlas, the No. 2 digital mapping company. Maps are among the most expensive components in a navigation device. Although that deal had little impact on Garmin, an announcement three months later did.
On Oct. 1, Nokia OYJ bid $8.1 billion for Navteq Corp., the No. 1 mapping company and Garmin’s principal map supplier.
The unexpected move by the Finnish phone manufacturer led analysts to question what Garmin would do if it was cut off from digital map suppliers by competitors who had purchased the world’s two primary digital mapmakers.
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