Standalone vs. handheld
TomTom, Europe’s largest maker of satnav devices, last week reported a drop in quarterly profits of 83 percent YOY (year-on-year), due to competitive price cuts.
TomTom made a net profit of just €7.3M ($11.4M) this quarter compared to €44M ($66.2M) a year ago as average retail process of its products plummeted.
TomTom in fact shipped 50 percent more devices than it did a year ago. ‘We have seen price declines in the first three or four years of the existence of personal navigation devices,’ said TomTom CEO Harold Goddijn. ‘But the price declines will slow down and the market growth will continue.’
The profit figures dented the rise in TomTom shares following unconfirmed news that the company would win unconditional EU approval to buy Tele Atlas, its main map supplier, for €2.7B ($4.2B). Tele Atlas lost nearly €15 million in the last quarter.
‘This is very important technology,’ said Goddijn. ‘There are only two map databases in the world that can do what is needed, and it is important for TomTom to make better maps at lower cost, expand geographically further and put ourselves at the heart of the navigation and mapping industry.’
At the front of Goddijn’s mind will be the fact that Nokia has agreed a deal to acquire Navteq, the other leading global map maker.
For TomTom to survive, it not only has to overcome the challenges of commoditisation, but also it also needs to convince people who already have satnav functionality in their handheld device that they need a separate, standalone unit.
