Garmin 2008 Annual Report Download - page 41

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19
Item 1A. Risk Factors
The risks described below are not the only ones facing our company. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also impair our business operations. If any
of the following risks occur, our business, financial condition or operating results could be materially adversely
affected.
Risks Related to the Company
Economic conditions and uncertainty could adversely affect our revenue and margins
Global financial market downturns increased significantly during the fourth quarter of 2008. Falling equity
market values, depressed housing markets, credit market constraints, weakened consumer confidence and increased
unemployment have created fears of a severe recession. Our revenue and margins depend significantly on general
economic conditions and the demand for products in the markets in which we compete. The current economic
weakness and constrained consumer and business spending has resulted, and may result in the future, in decreased
revenue, margins, earnings or growth rates and problems with our ability to manage inventory levels and collect
customer receivables. In addition, financial difficulties experienced by our retailer and OEM customers have
resulted, and could result in the future, in significant bad debt write-offs and additions to reserves in our receivables
and could have an adverse affect on our results of operations. The current economic recession also may lead to
restructuring actions and associated expenses.
Our financial results are highly dependent on the automotive/mobile segment, which now represents over
70% of our revenues and may be maturing leading to lesser growth than we have experienced in the past.
We have experienced substantial growth in the automotive/mobile segment of our business in recent years
as the products have become mass-market consumer electronics in both Europe and North America. This market
growth may now be slowing as penetration rates increase and competing technologies emerge. Slowing growth,
along with the significant price reductions that have occurred during the past two years, could result in lower
revenues. As margins have also declined in this segment, slowing growth may also result in lower earnings per
share.
The demand for personal navigation devices (PNDs) may be eroded by replacement technologies becoming
available on mobile handsets and factory-installed systems in new autos.
We have experienced substantial growth in the automotive/mobile segment which has resulted in
GPS/navigation technologies being incorporated into competing devices such as mobile handsets and new
automobiles through factory-installed systems. Mobile handsets are frequently GPS-enabled and many companies
are now offering navigation software for mobile devices. The acceptance of this technology by consumers could
slow our growth and further reduce margins. Navigation systems are becoming more prevalent as optional
equipment on new automobiles. Increased navigation penetration on new automobiles could slow our growth and
further reduce margins.
Best Buy is a significant customer, representing over 10% of net sales. Accordingly, our revenues and
profitability will be adversely impacted if Best Buy’s business declines or if Best Buy is unable to pay timely.
Best Buy is our largest customer and accounted for 12.0% of our total net sales in 2008. If Best Buy’s
business declines due to the economic conditions, market share losses or other factors, our revenues and profitability
will be adversely impacted. In addition, if Best Buy’s liquidity erodes for any of the reasons discussed above or a
tightening in the credit markets and they are unwilling or unable to pay timely, our profitability will be adversely
impacted.