Garmin 2007 Annual Report Download - page 50

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Failure to manage our growth and expansion effectively could adversely impact our business.
Our ability to successfully offer our products and implement our business plan in a rapidly evolving market
requires an effective planning and management process. We continue to increase the scope of our operations
domestically and internationally and have grown our shipments and headcount substantially. This growth has
placed, and our anticipated growth in future operations will continue to place, a significant strain on our
management systems and resources.
Our business may suffer if we are not able to hire and retain sufficient qualified personnel or if we lose our
key personnel.
Our future success depends partly on the continued contribution of our key executive, engineering, sales,
marketing, manufacturing and administrative personnel. We currently do not have employment agreements with
any of our key executive officers. We do not have key man life insurance on any of our key executive officers and
do not currently intend to obtain such insurance. The loss of the services of any of our senior level management, or
other key employees, could harm our business. Recruiting and retaining the skilled personnel we require to maintain
and grow our market position may be difficult. For example, in some recent years there has been a nationwide
shortage of qualified electrical engineers and software engineers who are necessary for us to design and develop new
products, and therefore, it has sometimes been challenging to recruit such personnel. If we fail to hire and retain
qualified employees, we may not be able to maintain and expand our business.
Gross margins for our products may fluctuate or erode.
Gross margins on our automotive/mobile products have been declining due to price reductions in the
increasingly competitive market for personal navigation devices (PNDs). We expect that gross margins on
automotive/mobile products will continue to erode. In addition, our overall gross margin may fluctuate from period
to period due to a number of factors, including product mix, competition and unit volumes. In particular, the
average selling prices of a specific product tend to decrease over that product’s life. To offset such decreases, we
intend to rely primarily on component cost reduction, obtaining yield improvements and corresponding cost
reductions in the manufacture of existing products and on introducing new products that incorporate advanced
features and therefore can be sold at higher average selling prices. However, there can be no assurance that we will
be able to obtain any such yield improvements or cost reductions or introduce any such new products in the future.
To the extent that such cost reductions and new product introductions do not occur in a timely manner or our
products do not achieve market acceptance, our business, financial condition and results of operations could be
materially adversely affected.
Our quarterly operating results are subject to fluctuations and seasonality and may be negatively affected by
weakness in the economy.
Our operating results are difficult to predict. Our future quarterly operating results may fluctuate
significantly. If such operating results decline, the price of our stock would likely decline. As we expand our
operations, our operating expenses, particularly our advertising and research and development costs, may increase as
a percentage of our sales. If revenues decrease and we are unable to reduce those costs rapidly, our operating results
would be negatively affected.
Historically, our revenues have usually been weaker in the first and third quarters of each fiscal year and
have, from time to time, been lower than the preceding quarter. Our devices are highly consumer-oriented, and
consumer buying is traditionally lower in these quarters. Sales of certain of our marine and automotive products
tend to be higher in our second fiscal quarter due to increased consumer spending for such products during the
recreational marine, fishing, and travel season. Sales of our automotive/mobile products also have been higher in
our fourth fiscal quarter due to increased consumer spending patterns on electronic devices during the holiday
season. In addition, we attempt to time our new product releases to coincide with relatively higher consumer
spending in the second and fourth fiscal quarters, which contributes to these seasonal variations.