In the last few days short interest on Garmin (GRMN) has been on the decline. So is its stock price over a month (down 21.6%) and three months (down 10.28%) periods. It has almost most the gains made during May –July period. How does its outlook seem?

Genesis of Garmin and PND market

Garmin's genesis was at a brainstorming session of a handful of engineers around a card table in 1989 to create navigation and communication devices (personal navigation device or PND) that enrich users' experience. Until 2003 it was the up-and-coming navigation company. A policy change that made civilian signals more accurate saw the birth of an industry around in-car navigation. Automakers started building sophisticated nav systems into dashboards, and that companies like Garmin and TomTom, Magellan, and others sought to compete in the aftermarket, and even jockeyed for the attention of Detroit. Garmin and TomTom made paper maps all but obsolete with their devices. Wireless carrier-based services quickly rose after that to challenge them. And now, both are being challenged by Google and its free phone-based offering. Garmin's management was once sure of holding on to the crown, but now they are, rightly, paranoid.

Is PND dead?

The personal navigation device (PND) market growth could be anemic over the next several years, due to the increasing amount of phones with built-in global positioning satellite (GPS) navigation systems. Recent developments in the mobile application space are likely to negatively affect the PND market, and I doubt whether PNDs and Garmin  will be able to co-exist with smart phones going forward. While the naysayers claim that growth in the PND market is dead, others believe that personal navigation devices can be like the digital camera -- whereby digital cameras are in virtually every phone but the digital camera market continues to grow.

Can smart phones and PND devises co-exist?

By 2011 GPS will be ubiquitous in smart phones. According to iSuppli, by 2014 navigation-enabled smart phones will reach 305 million units compared to 128 million PNDs. While the mobile phone navigation market is expected to take share from the PND market, I believe there are a number of advantages when looking at stand-alone personal navigation devices. Those who prefer simple GPS devices will rely on smart phones while those who need advance devices will continue to use PNDs. Moreover, PNDs are easier and more convenient to use.

Garmin's entry into smart phone late but critical

I believe Garmin's entry into the smart phone market with its nuvifone platform is critical to the franchise, as it represents the future growth potential of its largest business, the auto segment.