Garmin - Min Kao Navigates A Winner
Investor's Business DailyMin Kao Navigates A WinnerWednesday October 3, 7:00 pm ET Patrick Seitz Min Kao followed his convictions and risked his life savings when he started GPS device maker Garmin (NasdaqGS:GRMN - News) with business partner Gary Burrell in October 1989. Kao knew in his gut that satellite navigation products would be a big deal for consumers, not just for the military.Kao, Garmin's chairman and chief executive, built the Olathe, Kan., company into an industry leader by focusing on technology innovation and customer needs.Kao runs Garmin with a conservative approach that centers on hiring great engineers and investing heavily in research and development.Garmin also does practically everything in-house, from product design and manufacturing to distribution and advertising.Kao, 58, is not one to rest on his laurels. He's always on the lookout for the next big idea, and he keeps a close eye on the competition."Min is one of the most committed, highly successful CEOs I've ever met," Jeff Evanson, an equity analyst with Dougherty & Co., told IBD. "He absolutely is always thinking about how to build a better company at Garmin."Kao is a humble, down-to-earth man who avoids the limelight and social scene. He's committed to growing Garmin into a world-class tech products company and providing a good living for his employees."It's his strategic and technological vision that has really guided this company," Evanson said. "Garmin is a true American story of where some very bright guys had a vision for building a company and they've executed near to perfection."Set SaleGarmin last year posted sales of nearly $1.8 billion and is targeting more than $2.8 billion this year. It earned $2.35 a share last year and expects earnings per share of more than $3.15 this year. In the first six months of the year, sales were up 64% and earnings per share were up 82%. Garmin's stock was at an all-time high last week before fallout from Nokia's (NYSE:NOK - News) offer to buy Navteq (NYSE:NVT - News), Garmin's main map supplier.Kao and Burrell got the idea to start Garmin over dinner in 1989, according to a 2003 story in Forbes magazine. The two were frustrated that their employer, a unit of AlliedSignal, was squeezing research funds for GPS products.Kao, a Taiwanese engineer who developed the first GPS receiver certified for use in planes, asked Burrell if he wanted to start their own company. The two men saw a huge opportunity in transferring GPS technology from the aviation market to the marine, automotive, outdoor and fitness markets."They came from a company that was very bureaucratic and not very innovative," Jonathan Braatz, an equity analyst with Kansas City Capital Associates, told IBD. AlliedSignal missed the boat with the GPS opportunity, and Kao and Burrell were determined not to let the same lack of foresight befall their new company."They've got that in the back of their minds," Braatz said. "You'll never see this company fall behind anybody in terms of being at the cutting edge."The experience taught Kao to invest in R&D and keep an open mind about new business opportunities, Braatz says. The resources Garmin commits to R&D are second to none in the industry, he says."He's the type of person who is open to new ideas," said Gene Betts, chief financial officer of Embarq Corp. and a Garmin board member. (NYSE:EQ - News) "People probably feel uninhibited to suggest something, not worried about him saying, 'That was a silly idea.' He would be the type of person to encourage creative thinking and ideas."He empowers his employees and gives them room to run, Betts says.Kao and Burrell left Allied within months of each other in 1989. They soon raised $4 million by emptying their savings accounts and tapping investment bankers and Kao's family and friends, according to Forbes.At the time, the Defense Department was still building the Global Positioning System. GPS uses radio signals transmitted from satellites in orbit to determine the location of receivers on the ground.Positions are expressed in latitude and longitude and can be plotted on a digital map.The more satellites a receiver detects, the more accurate its fix. The satellite signals are free to anyone in the world who wants to use them.Kao and Burrell hired a dozen engineers in Lenexa, Kan., to design and build their first product, a GPS product for boaters. The $2,500 device was an instant hit and generated a 5,000-unit backlog after its debut at a trade show, Forbes reported.Kao, who emigrated from Taiwan in 1976, told the Kansas City Star in May that Garmin's success "is beyond my wildest expectations."As of June 30, Garmin had 6,400 employees globally and had shipped 22 million products. Burrell retired from Garmin in 2004 after serving as co-chairman with Kao.Garmin is the No. 1 maker of navigation gear in the U.S., with a market share of more than 50%. In Europe, Garmin is second behind its biggest rival, Netherlands-based TomTom.Over the past couple of years, Garmin has raised its profile. It's been increasing its advertising as the market for portable navigation devices has taken off.With his background in engineering, Kao understands the products Garmin makes from the ground up, Betts says. The CEO has a Bachelor of Science degree in electrical engineering from National Taiwan University, and M.S. and Ph.D. degrees in electrical engineering from the University of Tennessee.That helped give him confidence to do most work in-house. Other firms often outsource manufacturing, analysts say."Rather than invest in others, we like to create jobs that are performed by the highest quality of people who love what they do," Kao told the Business Journal of Kansas City in 2004.Kao told the publication that his upbringing in the small Taiwanese town of Chu Shan gave him the foundation to succeed. "I'm very fortunate that I grew up in a place where hard work, high morals and family values were a norm," he said. "As I reflect on Garmin's good fortune, I see the importance of things like hard work ability, academic development and commitment to continuous development. I also see the importance of attracting and retaining people of strong moral condition, who put the needs of others ahead of their own gain."All For OneKao emphasizes teamwork."He's very effective at building a strong team and letting people downstream contribute," Betts said. "He's very good at delegating."Another key to success is keeping customers in mind when developing products, Kao says. "We have a strong desire to delight our customers, whether it is safety features or convenience or usefulness," he told the Kansas City Star. "It is the core part of why Garmin is different from most other companies."Garmin prides itself in being a technology-driven firm and will continue to invest heavily in R&D, Kao told Wall Street analysts in a conference call in February. "Innovation, ease of use and rich content are keys to continued success," he said.