Friday, December 01, 2006

Calls of Note Part 4

Thomas Weisel notes says their checks with 40 retailers indicate that Garmin (NASDAQ:GRMN) has dropped retail prices across the automotive line by $50-100, with rebates given for existing unsold inventory at wholesalers. The early discounting highlights just how competitive the category is becoming. For example, the Nuvi 350, which had been selling for $799 at Best Buy in June, is now available for $699.99, with another $100 coming off the price with the current round of discounting.

Firm's sources indicate that in response to Garmin's move, TomTom is going to double its $50 rebate to $100 and extend the rebate period to January 7, 2007, from December 3, 2006. Customer support at TomTom has confirmed that the discount is being increased, but did not specify the new rebate amount. The discount is apparently for all TomTom products and brings the price of TomTom One down to $399.99 from $499.99. Firm expects the new rebate to be available in stores over the next seven days.

Firm views the discounting by Garmin primarily as an aggressive stance to protect market share, and not a sign of overall weak demand. Their post-Thanksgiving checks of 45 U.S. retailers indicated that demand for personal navigation devices (PNDs) was robust, with promotional Thanksgiving items selling out quickly, and Garmin products, particularly the c340 and Nuvi 660 the top sellers. Our checks also indicate that the low-cost TomTom One appears to be gaining traction at retailers, as the attractive price point and $50 rebates appear to have hit the mark. Checks also indicate a higher return rate for the TomTom One, however, due to a software glitch that leads to non-responsive systems.

Notablecalls: Good to hear about the demand, not so good to hear about the rebates. Overall, see it as net neutral, so labeling it not actionable but good to know.

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