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TomTom Needs To Diversify Faster
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Darren
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PostPosted: Fri Sep 30, 2011 3:38 pm    Post subject: TomTom Needs To Diversify Faster Reply with quote

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TomTom Chief Executive, Harold Goddijn has admitted that TomTom's diversification strategy isn't happening as fast as desired.

In an interview with CNBC today he said, ""We need to get through the transition. It's not going fast enough, but in the meantime the underlying fundamentals are OK."

TomTom has been working hard to increase its presence in the automotive and service sectors and has made inroads into the car market signing partnerships with Renault and Fiat but the markets need to see more progress into new markets if TomTom's share price is to recover.

PND sales are at an all time low with consumers opting for cheaper smartphone based solutions. Corinne Vigreux, TomTom MD, said that the decline was expected to stabilise soon.

TomTom has seen its share price fall from a high of €70 per share in 2007 and is now hovering at around €3 following market concern over the balance sheet following the Tele Atlas purchase.

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PostPosted: Fri Sep 30, 2011 3:52 pm    Post subject: Re: TomTom Needs To Diversify Faster Reply with quote

News Team wrote:
TomTom Chief Executive, Harold Goddijn has admitted that TomTom's diversification strategy isn't happening as fast as desired.

In an interview with CNBC today he said, "We need to get through the transition. It's not going fast enough, but in the meantime the underlying fundamentals are OK."
Are they? Does he not read his forum?
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PostPosted: Fri Sep 30, 2011 4:47 pm    Post subject: Reply with quote

Here's the interview
http://video.cnbc.com/gallery/?video=3000048433
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PostPosted: Fri Sep 30, 2011 6:49 pm    Post subject: Reply with quote

I wonder if this means that investment in the Tele atlas side of the business will suffer, I expect it will. Couple this with the news that Nokia is not investing in Navteq and you are looking at some serious issues in the maintenance of the digital maps.

This is pretty much along the lines that I was predicting some time ago with the current user expectations of getting free navigation and relying on open street mapping or google maps to provide it. This forces others into providing free or reduced price services and eventually these companies go out of business leaving us with no data provider...

I know we are not quite that far down the line yet, but the writing is on the wall!
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PostPosted: Sat Oct 01, 2011 8:28 am    Post subject: Reply with quote

Definitely - this is why we should all subscribe to the mapping updates for our units, whatever they are and what form they come in to support the data services we rely upon

In return, we should be guaranteed minimum levels for accuracy and where both services could easily improve upon is reaction to customer feedback on mapping errors

That way, we could all be happy!
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PostPosted: Sat Oct 01, 2011 9:32 am    Post subject: Reply with quote

Sure. And whilst you're all out there buying stuff from TomTom to keep them in healthy profit, at the same time you can start giving me deliveries to keep me in holiday money! Rolling Eyes

I buy from TT because they've got something I want, not to keep them in business. It's up to them to keep offering what the public wants, and the recent (and ongoing) fiasco over HD Traffic service and reduced functionality of the latest models are NOT the ways to do that.
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PostPosted: Sat Oct 01, 2011 10:31 am    Post subject: Reply with quote

Yes exactly - improved map accuracy and in particular quick correction of multiple user-reported map errors is our benefit. That would be the deal

I think a subscription model for units (ie. cost to cover hardware to buy, monthly subscription of say £5 to include all updates) would be something I would love

That way they wouldn't have to rely so much on creating new units to woo us all, a subscription including software updates, map and HD traffic would be ideal
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PostPosted: Sat Oct 01, 2011 11:30 am    Post subject: Reply with quote

For far too long TomTom has lived on marketing hype and innovative ideas that seem great when released. Sadly all too often these innovative ideas turn in to nothing more than a damp squib. This continual poor experience that customers experience will force them to shop around, brand loyalty is one thing but not if the brand has already left a soured taste.

Take MapShare. What a great idea, why then do so few user changes make it in to the map? What's worse is that user changes don't even stay on the device when the map is updated, leaving a user to re-enter all their hard work time and time again.

Speech control, why bother with it? Entering anything using this system takes longer than tapping the screen, it does nothing more than frustrate me when I have tried it, but still its played out as a major selling point.

Dumbed down user interface and less options available on the newer products will cause established customers to look for alternate brands.
Dropping itinerary planning from the newer models being one such example, adding a four point via system in lieu of true itinerary mode is poor form and shows a lack of understanding as to what end users expect from a nav. unit.

Now look at the reduction in hardware quality, batteries that fail in a very short time when compared to the earlier products, built in flash memory that is slow in use and again prone to failure, all leaves users with little option but to bin the product.
Lack of a memory card slot which prevents users from purchasing alternate maps to cover holiday trips or recover a unit suffering from flash memory failure.
Even on the newer units running Navcore 10 that do have a memory card slot, it isn't enabled for use , I wouldn't hold my breath as to when they will turn it on.

Degraded mapping. If you purchased a device with full European mapping, and follow the recommended three monthly map update you will now have a zoned Euro map making pan-European travel with the device impossible without carting around a laptop.

The above is just a small summary as to some of the reasons their so called "transition" is causing sales to falter. They need to sit down and actually accept that they have got the current product range wrong - Mike
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PostPosted: Sat Oct 01, 2011 8:54 pm    Post subject: Reply with quote

In 20 years time I reckon TT will be held up by business schools as being a case study in how market leaders can become so complacent that they lose their way and their market.

IF they are still around then I suspect they they will probably be a small niche market player. [/b]
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PostPosted: Sat Oct 01, 2011 11:00 pm    Post subject: Reply with quote

MikeB wrote:
I wonder if this means that investment in the Tele atlas side of the business will suffer, I expect it will. Couple this with the news that Nokia is not investing in Navteq and you are looking at some serious issues in the maintenance of the digital maps.

This is pretty much along the lines that I was predicting some time ago with the current user expectations of getting free navigation and relying on open street mapping or google maps to provide it. This forces others into providing free or reduced price services and eventually these companies go out of business leaving us with no data provider...

I know we are not quite that far down the line yet, but the writing is on the wall!


Mike,

I don't think Navteq layoffs means that TeleAtlas will also lower their expenses. This year TomTom profit is expected to decrease, mainly because they do not want to lower their expenses in research, mapping and geographical expansions like these http://www.zigwheels.com/news-features/news/tomtom-launches-satellite-navigation-units-in-india/9771/1

All revenues apart from PND's are increasing. Especially the in-dash systems http://automotive.tomtom.com. But also HD traffic subscriptions, app sales and business solutions (fleet management) are growing.

The problem is PND sales declining at a pace that is too fast for the other growing parts to compensate. I'm trying to figure out at what point the non-PND activities are a bigger than PND sales and the company will grow again. My guess it will take about a year.
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PostPosted: Sun Oct 02, 2011 12:27 am    Post subject: Reply with quote

xtraseller wrote:
Yes exactly - improved map accuracy and in particular quick correction of multiple user-reported map errors is our benefit. That would be the deal

I think a subscription model for units (ie. cost to cover hardware to buy, monthly subscription of say £5 to include all updates) would be something I would love

That way they wouldn't have to rely so much on creating new units to woo us all, a subscription including software updates, map and HD traffic would be ideal


Totally agreed. I also told them this.

At this point there are a lot of customers, who never update their map. In their mind they pay for a piece of hardware. So maps feel very expensive for them. Also (partly because of Google maps) they think maps are something that has a low value. Even though they are quite expensive to maintain.

People not updating maps isn't beneficial for people trusting their GPS. Which is something TomTom should want to avoid, especially with HD traffic, where you want people to trust the adviced alternative route.

So if TomTom would lower the price of map updates and make it subscription based, including HD traffic and software updates, more people would use it. It would not only help covering expensed on map updates, but in general it would be beneficial for customer experience.
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PostPosted: Sun Oct 02, 2011 2:01 am    Post subject: Reply with quote

tomtom_shareholder wrote:
The problem is PND sales declining at a pace that is too fast for the other growing parts to compensate. I'm trying to figure out at what point the non-PND activities are a bigger than PND sales and the company will grow again. My guess it will take about a year.


Who is to say that these new market sectors will compensate or grow the company? TomTom invested in Tele Atlas and from the looks of the market they vastly overpriced it.

TomTom are no longer a private concern and have to make sustainable profits for their shareholders and protect the investments as best as they possibly can. With a shareprice crash over the last 4 years they are clearly not on track.

You mention Live service subscriptions as part of the growth, but I think that the majority of the live users are as a result of the free subscription from buying the device. I dont think the take-up for paid subscriptions is that good. In other areas they are producing apps but not exploiting the full potential of the market. There is nothing available for Android, Windows Phone, Nokia, RIM etc.

As for the in-car market it is still embryonic and as yet the business models are still being developed, but at some point we will understand the depth of the demand for these systems.

In the mean time as you rightly point out TomTom must spend money on R&D, they must also invest in their mapping and make improvements in other existing areas all with a limited amount of capital. At some point something must break.

I predicted this nearly 2 years ago when Nokia after buying Navteq announced free OVImaps ( http://www.pocketgpsworld.com/Nokia-announce-FREE-OVI-Maps-for-all-1107.php ). This was clearly not sustainable and now Navteq are feeling the pinch. How much longer will it be before TomTom are forced to do the same to Tele Atlas (sorry TomTom Maps).
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PostPosted: Sun Oct 02, 2011 8:44 am    Post subject: Reply with quote

MikeB wrote:
As for the in-car market it is still embryonic and as yet the business models are still being developed, but at some point we will understand the depth of the demand for these systems.

I have built in Carminat TomTom, with RDS-TMC. It came included in the price for my model (Kangoo van ML Plus range), but is not standard on the majority of models actually purchased for fleets or single users like me. As an optional extra (but now as a Live model), it costs £540, (with extra maps at about twice the price of downloadable maps) and there's no way I'd pay that much extra for it when a PND is a little over half the price and removable (bearing in mind with my high mileage I replace the van every two years). To get a good rate of success they need to get the pricing more realistic.
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PostPosted: Sun Oct 02, 2011 7:47 pm    Post subject: Reply with quote

DennisN wrote:
MikeB wrote:
As for the in-car market it is still embryonic and as yet the business models are still being developed, but at some point we will understand the depth of the demand for these systems.

I have built in Carminat TomTom, with RDS-TMC. It came included in the price for my model (Kangoo van ML Plus range), but is not standard on the majority of models actually purchased for fleets or single users like me. As an optional extra (but now as a Live model), it costs £540, (with extra maps at about twice the price of downloadable maps) and there's no way I'd pay that much extra for it when a PND is a little over half the price and removable (bearing in mind with my high mileage I replace the van every two years). To get a good rate of success they need to get the pricing more realistic.



As far as I know the TomTom Carminat LIVE system costs 500 euros (don't know how much pounds that is). With 150 euro's for a 3 year live subscription. At fiat the price is 300 euro's but the system is fitted a bit differently.

The average take rate is now 50%. Which is far above industry average. You can see it here per model. http://telematicsnews.info/2011/06/23/1-million-renault-vehicles-shipped-with-tomtom-navi-150000-with-live-services_jn2231/

TomTom sees PND sales slip 20% and in-dash systems sales grow 40-50% this year. By the end of this year I think PND will be 50% of total tomtom sales and automotive about 20%. So it will take a few years before in-dash and PND to represent an equally big proportion of tomtom's revenue.

This year tomtom automotive revenue is expected to increase from 180 million to above 250 million euros. This growth is expected to continue due to extended contract with Fiat, for the Panda model (280.000 production a year) and the Mazda3 & CX-5.

Also Fiat is pushing it's small cars in the US, mainly the Fiat500, which is well received. They use the dealer network of their acquired Chrysler. Also Fiat is fitting tomtom's in their Lancia's, Alfa Romeo's and Chryslers. Apart from that TomTom have gotten a tier1 supplier status within Toyota.

I also know that there are serious negotiations going on (or maybe contracts already signed) with other carmanufacturers. But time between contract signing, product development and a new car being presented to the press can take about two years. Carmanufacturers can be very secretive about specifications of their cars, so TomTom has to wait for them to bring out any news.

TomTom expects the in-dash revenue to be able to double within a few years. At that point revenue from automotive will be about equally high as the PND. Offcourse it's also very important to see what the take up of separate live subscriptions will be.

I also believe that - with anti-glare rear view mirrors being equally expensive as a tomtom system on the options list, many people will buy one. I think it will become almost a standard in every car.

PS
It will also be interesting to see where PND sales will bottom. I think they will keep on decreasing for some time to come, but it won't disappear as a form factor. There will be 2nd time buyers, who rather opt for PND's than smartphone apps. Interesting to see already, that against all market trends, sales of PND's with live services and 5" screens are increasing. Possibly because the screen size sets them apart from phones, and live services don't make them look 'dumb' compared to the 'smart' phone.
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PostPosted: Sun Oct 02, 2011 11:01 pm    Post subject: Reply with quote

MikeB wrote:
tomtom_shareholder wrote:
The problem is PND sales declining at a pace that is too fast for the other growing parts to compensate. I'm trying to figure out at what point the non-PND activities are a bigger than PND sales and the company will grow again. My guess it will take about a year.


Who is to say that these new market sectors will compensate or grow the company? TomTom invested in Tele Atlas and from the looks of the market they vastly overpriced it.

TomTom are no longer a private concern and have to make sustainable profits for their shareholders and protect the investments as best as they possibly can. With a shareprice crash over the last 4 years they are clearly not on track.

You mention Live service subscriptions as part of the growth, but I think that the majority of the live users are as a result of the free subscription from buying the device. I dont think the take-up for paid subscriptions is that good. In other areas they are producing apps but not exploiting the full potential of the market. There is nothing available for Android, Windows Phone, Nokia, RIM etc.

As for the in-car market it is still embryonic and as yet the business models are still being developed, but at some point we will understand the depth of the demand for these systems.

In the mean time as you rightly point out TomTom must spend money on R&D, they must also invest in their mapping and make improvements in other existing areas all with a limited amount of capital. At some point something must break.

I predicted this nearly 2 years ago when Nokia after buying Navteq announced free OVImaps ( http://www.pocketgpsworld.com/Nokia-announce-FREE-OVI-Maps-for-all-1107.php ). This was clearly not sustainable and now Navteq are feeling the pinch. How much longer will it be before TomTom are forced to do the same to Tele Atlas (sorry TomTom Maps).


Hi Mike,

I will split my comment in two parts. The value of maps, and TomTom’s transition.


MAP VALUE

I think you are absolutely right about overpaying for TeleAtlas. Even though you can argue what ‘overpaying’ means. Does it mean buying something you can’t afford? Or does it mean paying more than the value?

I think the first is definately the case. TomTom paid 2,9 billion euros for TeleAtlas. Which was a huge acquisition for a young company. TomTom itself was probably worth less than the company it bought. They lent 1,6 billion euros to buy it. And they had to pay huge interest costs for years. They have overeaten and it has taken a few years to digest.

Still, that doesn’t mean that TeleAtlas has lost a lot of value. Also considering that there have been al lot of geographic expansion, like Brazil, India, Russia and parts of Africa. And maps will be the basis of future business models of location based advertising. Also historic data (IQ routes) are now part of the maps.

In the mean time, TomTom has been able to reduce it’s debt to 300 million euro on january 1st 2011. http://ar2010.tomtom.com/interactive_charts.html. Which could only happen because sales and cashflow of TomTom were strong.

So shareprices plummeting has had more to do with financial concerns of shareholders, especially during the crisis, rather than concerns about the commercial side of things. So be carefull comparing shareprices dropping with the business not doing well.

In the past I have also seen TomTom shares drop after announcements by Google and Nokia about free navigation. But if you look at the figures, you can see that revenue declined just a little, and it grew in 2010. So it has a lot more to do with fear than facts.

Google makes some shareholders pee their pants. Personally I don’t see a reason for that. Offcourse they are a serious competitor, which is fine. But there is also a lot of expertise and opportunities for TomTom. Also I don’t see one party, whether it’s Microsoft/Navteq, Google, Garmin or TomTom dominate the entire market. I think there will be space for all of them in different segments.

Also one should be carefull of letting personal experience – as a tech savvy person - be a guidance for consumer preference. There have been many truthsayers claiming that the PND would be dead by now. Which hasn't happened. And these truthsayers are mostly technology bloggers who are some time ahead of the average consumer.

TRANSITION

I believe that TomTom should be far more clear about what ‘transition’ means. If you’ve seen the interview above. CEO Goddijn can’t expect the journalists from CNBC to know what transition means. Where does transition differ from everyday changes? How long does it take? When is it finished, what are the milestones?

That is quite unclear, but I think that transition consists of four things:

- Less hardware and more content & services (like maps, traffic, etc)
- Less PND dependance, grow in automotive segment
- Less dependent on US and Europe sales, grow in Latin America and Asia
- Grow in the mobile segment and prepare for location based advertising.

What I am seeing now is:

* Less hardware and more content and services revenu IS happening, but the trend is slow. Also I haven’t yet seen them license HD traffic as a seperate service to a carmanufacturer, in the way that Inrix does. I did see them license some predictive traffic statistics to governments who are working on roads.

* More revenue from automotive segment. This is happening fast (40-50% this year) which is also faster than they expected themselves.

* More revenue from mobile segment. This is not going fast enough, but the opportunities are still there. There have been some licensing deals, like maps for HTC phones. Also the iphone app is doing well, selling 110.000 per quarter. But we’re still awaiting the Android app. Also we’ve seen them launch the free TomTom Places app, which sources the POI’s from yellowpages. They will need to invest and grow in POI quality and grow the amount of customers, in order to earn from location based advertising/coupons in the future.

* More revenues from emerging market. It’s just getting started in India, they sourced 400 people in their office in Pune, India, and start selling India-specific VIA devices from this month. So nothing big there yet, but expectations on the long run are positive. Also Renault en Fiat (with in-dash systems) are pushing in various emerging markets.

PS
I've seen them launch one sports watch with Nike, but it is unclear if they want to set up a sports segment. They might want to focus on car-navigation. I just don't know.
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