TomTom shares fall 14% following profit warning

Darren

TomTom's share price fell 14% today following their first quarter results and an announcement of a revised profit forecast for the year. TomTom has revised its sales annual sales forecast down from a February estimate of €2.2 billion to €1.8 - €2.0 billion.

Despite huge market growth TomTom blamed their weak results on reduced inventory levels at their European retailers and reduced unit prices ahead of new product launched which happened earlier than expected.

Although TomTom continues to grow this news will cause investors to take stock, even with TomTom's strong market position it is clear that they are unable to control the declining street selling prices and margins are falling as a direct result.

TomTom still expects to ship 2.0 million PND's in Q1 2008 but this will generate revenue of €260 million - €270 million, lower than Q1 2007 with an operating margin falling to a single digit. The acquisition of TeleAtlas will doubtless further impact profit margins once it is cleared by the European Commission.
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Darren Griffin

mow · Posted: Wed Apr 09, 2008 7:38 am Post subject:

This profit prediction comes as no surprise as product and indeed company life cycles become shorter and shorter. Tom Tom are now entering the maturity stage. The race to launch new product and functionality on a monthly basis has of course driven down retail prices of “out of date” units and customers will be reluctant to invest in such products and that don’t work correctly. This policy has, in my opinion, shortened the Company’s growth stage.
The issue now will be how the Company reacts to the inevitable next stages. In most cases cost cutting will now occur. Let’s hope Customer Support will be spared, indeed strengthened to get current products to actually work as promised, and product innovation will slow to a manageable pace that both the Company and Customers can cope with.
However the norm will be cut costs to protect the bottom line, and then watch the Company move into decline.

DennisN · Posted: Wed Apr 09, 2008 11:03 am Post subject:

So my best course of action is to buy back my GO700 which I sold to son-in-law (or swap him for my 920), update it to Navcore 7, buy the 715 map and revert to reliable performance before TomTom go belly up!!
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Dennis

If it tastes good - it's fattening.

Two of them are obesiting!!

bedbug · Posted: Thu Apr 10, 2008 1:27 am Post subject:

After all their excellent customer support, continued commitment and loyalty to the platform that I invested in, my heart bleeds, it really does.

Hey TomTom, remember way back when I mentioned you couldn't treat us so badly and expect us to just accept it? The customer is always right... eventually.

RIP

Premature, but I thought I'd get it in a bit early! Wink

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iPhone 4/4S (iOS 5.1.1); TomTom Western Europe (1.10)/USA & Canada (1.10); CoPilot for iPhone (8), UK mapping, Mac OS 10.8/XP Pro/Win7; Tongue firmly in cheek!

Darren · Posted: Thu Apr 10, 2008 9:30 am Post subject:

To bring a sense of balance here, TomTom have shown a darn sight more loyalty to their older products that most other brands! You can still update your original GO Classic to the latest v7 firmware after all, most brands dump older hardware as soon as a replacement is launched.

The PocketPC issue is different I accept but that is due more to the peculiarities of PocketPC than TomTom, CoPilot are the only other Tier One brand who author for PocketPC which does indicate that either the market segment is complicated to code for or that the entire segment is dying.

I'm not a TomTom apologist but some of the comments are rather silly. This downturn is simply a reflection of the recent market changes, you can guarantee that Garmin will have been similarly affected when they release their figures, TT still achieved 100% growth in the US and they're finances are still very healthy.
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Darren Griffin

MaFt · Posted: Thu Apr 10, 2008 9:37 am Post subject:

indeed - the go classic was updated to version 7 and has map share, doesn't it? how's THAT for keeping old products going and updated?!

if they were really as bad as people make out then they would have been out of business a long long time ago - remember they're not saying they're making a loss, just making a more realistic prediction of their expected profits...

MaFt

bedbug · Posted: Fri Apr 11, 2008 10:39 am Post subject:

Darren · Posted: Fri Apr 11, 2008 10:47 am Post subject:

No offence caused whatsoever, as I say, I'm not a TomTom apologist and you make valid points.

I was simply clarifying that none of the major players have a big presence in the PDA market any more with Palm even more isolated and that TomTom have offered a measure of support for older devices far ahead of some other brands.
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Darren Griffin

aj2052 · Posted: Sat Apr 12, 2008 12:52 am Post subject:

Didnt TomTom originally build up their business on the back of the palm ??? many years ago.

bedbug · Posted: Sat Apr 12, 2008 1:30 am Post subject:

Darren · Posted: Sat Apr 12, 2008 9:33 am Post subject:

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