TomTom going through temporary decline

TomTom revised its 2008 revenue outlook on Tuesday and warned price cuts would hit first quarter sales and profits, sending the stock to a 32-month low.

Photo: TomTom going through temporary decline

TomTom is a Dutch manufacturer of automotive navigation systems, including both stand-alone units and software for personal digital assistants, and mobile telephones. It is the leading manufacturer of navigation systems in Europe.

The company said quarterly sales would fall year-on-year for the first time since the company went public in 2005.

Its 2.9 billion euro ($4.56 billion) bid for digital map maker Tele Atlas remains on track, TomTom said.

The Amsterdam-based firm now expects first quarter sales of 260 million to 270 million euros ($409-$425 million), well below an average forecast of 347 million euros.

Analyst forecasts range from 290 million to 418 million euros for the figures, which are due on April 23.

Revenue in the same quarter a year earlier was 296 million euros.

The Amsterdam-based firm said its operating margin would fall to a low single-digit percentage from 19 percent a year earlier.

Shares in TomTom were down 10 percent at 23.79 euros at 0914 GMT after hitting 22.58 euros, their lowest since July 2005. TomTom went public at 17.50 euros per share in May 2005.

A weak first quarter would mean full-year 2008 revenue of between 1.8 billion and 2.0 billion euros, TomTom said, cutting a projection of 2.0 billion-2.2 billion made in February.

Analysts on average expect revenue of 2.17 billion euros.

TomTom kept its forecast for device shipments unchanged at 14 million to 15 million units, indicating price cuts.

It expects to achieve a gross margin of 40 percent and operating margin of 20 percent, in line with long-term targets.

TomTom said first quarter results would reflect the fact it had cut prices ahead of the introduction of new models and retailers reducing their inventory levels more strongly than expected, especially in Europe.

"That's not TomTom specific, it's not even PND specific, it's a generic desire of retailers to shorten their balance sheets," TomTom CEO Harold Goddijn told an analyst conference call. "I don't think it's a slowing down of the market overall."

The global slogan for TomTom is "the smart choice in personal navigation". In the United States and Canada, they currently use "Go confidently". The UK slogan is "Find your way the easy way".