Seeking Alpha
View as an RSS Feed

Paul Zimbardo  

View Paul Zimbardo's Comments BY TICKER:

Latest  |  Highest rated
  • Garmin: Poised to Stay on Top [View article]

    Welcome to SeekingAlpha and congratulations on your first article. Your analysis was initially sound but deteriorated by towards the middle of the article. A few points:

    1. “Expansion outside the traditional GPS market” is not a positive for Garmin. Once companies struggle to lead in their core competencies, they often diversify into uncorrelated segments and performance suffers. (Also, it is the Nuvifone, not the Nuvi Phone).

    2. Margins have been declining steadily for years, before the “industry change” that you discuss. Given its poor performance and deteriorating financials, I would not bet my money that Garmin will be able to “grab a hold of the reins in this Industry” when it previously had the reins and lost them.

    3. While Garmin may have a large cash reserve given its size, it pales in comparison to its competitors. From my article, Apple spent more than five times as much on R&D in 2008 and Research in Motion spent three times as much in the same year.

    4. Do you have any support for your extremely lofty price predictions? Any time frame? Did you perform a DCF or FCF analysis?

    With your “low prediction” of $50, Garmin would have to grow earnings at nine percent per year annually for the next five years and then experience stable growth at three percent going forward. Given the economy, increasing competition, and its already declining margins, this is an unachievable scenario.

    The scenario underlying $100 valuation is just preposterous: 17% annual earnings growth for eight years and four percent steady state growth.

    Going forward, I suggest utilizing DCF valuation techniques when making price predictions.


    The dividend is nice and appears to be safe for now, but this is not the industry to be looking for dividend income. If you are searching for a technology dividend payer may I suggest IBM which is yielding 2.2% and is an industry leader.
    Jul 14, 2009. 10:24 PM | Likes Like |Link to Comment
  • A Short Trip for Garmin? [View article]

    Thanks for the complement. I realized when writing the article that there was nothing really to time on this one, thus it is not a great short target. As you so aptly put it, the “writing is on the wall” and I hope that potential investors take heed of my advice.


    Thank you as well. I am glad to know that I aided you in some way. I will continue to post similar articles so stay tuned if you enjoy my style.


    Great questions and I will try my best to answer them.

    Garmin operates primarily in four segments: Automotive/Mobile, Marine, Aviation, and Outdoor/Fitness. As of the first quarter 2009, automotive/mobile accounted for 59.5% of Garmin’s revenues and the next closest was outdoor/fitness at 18.3%. All segments shrank except for outdoor/fitness (this would include the hunting, fishing, hiking/orienteering which you mentioned) which grew by thirteen percent. In that regard outdoor/fitness was a bright-spot and presents a growth opportunity going forward. The reason why I did not explicitly discuss these other segments is twofold. First of all, at almost 60%, automotive/mobile is the primarily business line and the others are more of niche markets. Garmin’s core competencies lie within this segment and I would not be as confident if management were to shift the focus to one of the other segments. Lastly, the technology underlying all of the segments and products is the same. Therefore, if Garmin is displaced as a leader in automotive/mobile, it is only a matter of time before its earnings and cash flows dry up and it is unable to fund research and development to compete in the other segments.

    As far as I know, Garmin does not have any significant military market.

    In regards to the geography question, I can only tell you that the largest market is the United States (60.6% of revenue), followed by Europe (33%), and Asia (6.4%). Based upon this, I do not believe they focus on any “less urban locals”.

    I did not mean to portray Garmin as a one-trick pony, but in my opinion, if its core business is compromised, its others will suffocate due to a lack of funding. Thanks again for the questions, I am happy to share my insights and help others.

    Jul 14, 2009. 09:55 PM | Likes Like |Link to Comment
  • Online Music and Video: Streaming Kills Piracy [View article]

    My point was that given how tenuous the viability of the established players, what will be the impact when Microsoft enters and pressures their margins even further?

    On Jul 14 10:59 AM brewer wrote:

    > Paul:
    > Why would anyone care what Microsoft's music scheme du jour is this
    > time around? None of the others made sense, or worked long term.
    > Did you miss them, or what?
    Jul 14, 2009. 03:11 PM | Likes Like |Link to Comment
  • Breaking with consensus, Bloomberg's Matthew Lynn thinks investors have no right to pry into Steve Jobs' health, or that of any CEO. "There are all sorts of things that can go wrong with a company. Shareholders can't be protected from every type of risk."  [View news story]
    I agree that CEOs should expect some degree of privacy related to their medical histories but that is not the issue with Apple and Mr. Jobs. The issue with Apple is whether the company made misleading disclosures regarding Mr. Jobs' health. If the company made no disclosure or full disclosure there most likely would not be any investigation.

    Jul 14, 2009. 02:04 PM | Likes Like |Link to Comment
  • Burger King: $1 Double Cheeseburger May Change the Game [View article]
    Consider the game unchanged. Franchisees voted against the proposed promotion.
    Jul 14, 2009. 12:45 PM | Likes Like |Link to Comment
  • Money manager Barry James says the worst is yet to come: "Corporate insiders, often the smartest money on Wall Street, have been voting with their pocketbook and selling. Further, Washington's growing interference in the marketplace is simply prolonging the problems the economy faces. We expect the market has not yet found its ultimate bottom."  [View news story]
    If interested in adding investor transaction data as another tool to guide your investments you must read this Investopedia article:

    In sum, there are many reasons for investors to sell stock but there is only one reason for them to buy. As the article points out, look for "clusters", "meaning groups of two, but preferably three or more insiders doing the same thing in order to identify a pattern". Based on this, Mr. James observations appear to be significant.

    Remember, insider transactions are just another metric to consider and you should not base your investment decisions solely on one indicator.
    Jul 14, 2009. 12:17 PM | Likes Like |Link to Comment
  • Jobs: Catch the App Store if You Can [View article]
    In a similar fashion to the iPod strategy, Jobs reveals once again that he is a student of Michael Porter's Five Forces Model, specifically the threats of substitution and entry of new competitors.

    By creating tremendous switching costs for customers (loss of applications, music, data, etc.) by switching, customers become locked into Apple's environment.

    Add in Apple's tremendous brand equity and unrivaled distribution paths and you have a company that is built to keep the enemies at the gates for a long time.
    Jul 14, 2009. 10:46 AM | 6 Likes Like |Link to Comment
  • Dow laggards: TRV -2.1%. AXP -1.9%. JPM -1.6%. HPQ -1.5%. BAC -1.1%.
    Dow leaders: GE +0.9%. JNJ +0.7%.  [View news story]
    GE is continuing its rally ahead of its earnings in a similar pattern as that of GS. GE is up almost 10% from the lows of the day on last Friday. It will be interesting to watch the performance of GE leading up to its reporting on Friday.

    Historically, companies tend to report more disappointing earnings toward the end of the week and later in the trading day. On the other hand, there is often "leakage" of earnings news before the official release, indicating that GE may have a positive surprise. Which trend (if any) will come to fruition this time?
    Jul 14, 2009. 10:31 AM | Likes Like |Link to Comment
  • Surprisingly, Bernstein's Craig Moffett thinks the iPhone (AAPL) is destroying AT&T's (T) wireless business. "With breathtaking swiftness,” he writes, the tech press has painted AT&T as the evil gatekeeper, even as iPhone users' voracious data appetites overtax its network.  [View news story]
    @User 357705

    No where in the article did AT&T give comment. The quote "voracious data appetites" is given by Bernstein Research analyst Craig Moffett.

    None of the wireless carriers, or even Apple, could have imagined that the iPhone would become so popular so quickly and tax their network so dramatically. I doubt that Verizon or T-Mobile's wireless networks are that more advanced than AT&Ts at this point in time. Even if Apple were to switch to another carrier I am sure that there would be growing pains.

    It is an interesting premise that AT&T has the worst performance overall because of the demand that the relatively few iPhone users place on the network. Impossible to prove, but interesting nonetheless.
    Jul 13, 2009. 04:45 PM | 1 Like Like |Link to Comment
  • Online Music and Video: Streaming Kills Piracy [View article]
    The related news article can be found here:

    On Jul 13 10:48 AM Paul Zimbardo wrote:

    > It will be interesting to see how the entrance of Microsoft into
    > the music streaming business will impact the established players.
    > As these types of services become more legitimate, they will likely
    > further reduce the amount of piracy.
    > The real question that has yet to be answered is whether these businesses
    > will be commercially viable over the long-term.
    Jul 13, 2009. 10:48 AM | Likes Like |Link to Comment
  • Online Music and Video: Streaming Kills Piracy [View article]
    It will be interesting to see how the entrance of Microsoft into the music streaming business will impact the established players. As these types of services become more legitimate, they will likely further reduce the amount of piracy.

    The real question that has yet to be answered is whether these businesses will be commercially viable over the long-term.
    Jul 13, 2009. 10:48 AM | Likes Like |Link to Comment
  • Walgreen's Dividend Hike Admirable in Such Difficult Times [View article]
    Did you just try and compare Rosa Parks battle against racism/segregation with Walgreen's management increasing its dividend?
    Jul 13, 2009. 10:29 AM | 1 Like Like |Link to Comment
  • The largest retail industry trade group launches an attack against Wal-Mart (WMT), saying it will "stand up for all retailers and come out swinging," after Wal-Mart throws its support behind a congressional plan requiring employers to help pay for health insurance.  [View news story]
    Wal-Mart cannot win the PR debate on this one:

    - When they support the government mandate, it is viewed as "troubling".
    - If they were to have opposed it, it would have been viewed as anti-competitive and uncooperative.
    - If they took no action, they would be scolded for a lack of leadership.

    It is lonely on the top.
    Jul 13, 2009. 09:26 AM | 1 Like Like |Link to Comment
  • Wall Street Breakfast: Must-Know News [View article]
    Another test for the Federal government and the FDIC: Is CIT too big/important/connected to fail? Or in the words of the Mark Calabria a director of financial regulation at the Cato Institute in Washington, is CIT "systemically important"? Based upon the early news, it appears as if CIT will just miss out on that "elite" classification.

    Nothing like the potential failure of an institution with over $75B in assets to kick of a trading week!
    Jul 13, 2009. 08:31 AM | 4 Likes Like |Link to Comment
  • Let CIT Fail: The Business Model Is Broken [View article]

    This is a difficult situation that will require constant monitoring over the weekend. Specifically, I would watch for any new information regarding the FDIC decision and also the bond pricing. From the WSJ article mentioned above, “CIT bonds that mature in February 2010 were trading at 83.5 cents on the dollar and yielding over 40%, indicating that debt investors think it is unlikely they will be repaid in full.”

    The decision is ultimately your own, but as a risk-averse investor, I would try to look for a more fundamentally sound company that has not retained bankruptcy counsel.

    Jul 11, 2009. 03:42 PM | 1 Like Like |Link to Comment