There are plenty of companies that could do that. Garmin does not own the GPS system, the government does, and as far as I know there is no cost to use it.
Yes, there are, however few can do it on the scale that Garmin can. They have acquired where it made sense (UPSAT, for example) and competed where it made sense (Lowrance). Here are some points for your consideration:
+ Garmin has a process of innovation, product investment, and research that blows most out of the water. 40.9% of their yearly R/D budget goes into Aviation; whereas aviation only makes up 13% of their net sales stream (and only has a 15.20% contribution rate to operating income [OI]). OI on the Aviation business alone is 36.2%, which is a substantial margin, but the contribution rate to the rest of the company is in line with the net sales allocation (although every point counts)
+ Garmin prices may be inflated due to supply chain issues. Garmin distributes through a many-retailer model, which can negatively impact price as the cost of holding such stock (which may not sell very quickly) drives up the net cost of the distributor doing business. While this may not have bearing on Garmin's business (I am unaware of how they finance units sold to the retailler), it is something to bear in mind from a price perspective
+ Garmin has a mature operating and delivery model. Garmin has built thier GPS line on a stable platform and has continually enabled optimization and feature delinization across the product line. Translated, they have a good code base and they enhance the product slowly, and especially through new models versus software updates. This enables them to drive upgrade performance and finance their R/D business. This is evidenced by the lowest SG&A (percentage wise), in terms of revenue: 8.6%
+ Garmin has a potential for significant product liability. Given the nature of the industry and the civil tort practices that are incumbent with modern aviation, Garmin is at risk for significant product liability claims. They hold 19.0% of revenue on hand as cash for operations. This cash isn't intrinsically a hedge, but a higher position than other firms.
+ Garmin's industry exposes them to a significant inventory impact at any given time. As of 12/30/06, Garmin had approx $271M in inventory within their supply chain, as parts, components, partially assembled products, and completed units. This is a tie-up of revenue dollars.
Anyways, GRMN is a strong company that has significant operational risks and, given their position as market leader, prices products appropriately and recieves a modest return for their overall work. This is a strong indication of a reasonably run company that can continue to compete and deliver into the future. You'll pay a premium for a good product, but one that is supported by a strong company with a strong commitment to what they deliver (from this armchair finance nerd's perspective, at least)
Cheers,
-Andrew
