Harman International Industries (HAR) sells audio products such as speakers and amplifiers and car systems that provide GPS and traffic information. The company makes most of its revenue from major auto manufacturers. In 2007, audio and informational devices used in cars accounted for 70% of its net sales, ^[1] and the company's three largest clients (car makers all), accounted for 43% of net sales.^[2]

The company has benefited from growing demand for increasingly sophisticated information and entertainment devices (WiFi, Televisions, MP3 players, and GPS) in cars. This market is still largely in its infancy with penetration rates of less than 20% in Europe and less than 10% in the United States. However, the company's high exposure to auto manufacturers makes it subject to the cyclicality of the auto industry. The company is also faces pricing pressure from portable navigation devices. Portable navigational device prices have declined over the last several years, providing a cheap alternative to in-car navigational systems. As the cost of key components, such as semiconductor chips and LCD displays, drop, Text-to-voice, Bluetooth and other features which were once considered premium in nature are becoming standard. This has led to greater price competition. Adding to this pressure, Garmin (GRMN), the dominant GPS manufacturer in the U.S., entered the European market in the last few years.

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