Interesting article on Google's potential Tomtom killer

Since Google dumped TeleAtlas for its mapping in the States a week or so ago, there have been many reports that Google maps outside the main built up areas are rife with errors that the TeleAtlas maps did not have. If true, that will certainly hinder the droid gps functionality.

Nevertheless, at least as far as TomTom is concerned, the pie in the sky pricing of the products will be (fortunately) affected as it desperately tries to move product this holiday season. TT has been on thin ice financially since they bought TeleAtlas and this may be the final blow.
 
Since Google dumped TeleAtlas for its mapping in the States a week or so ago, there have been many reports that Google maps outside the main built up areas are rife with errors that the TeleAtlas maps did not have. If true, that will certainly hinder the droid gps functionality.

Nevertheless, at least as far as TomTom is concerned, the pie in the sky pricing of the products will be (fortunately) affected as it desperately tries to move product this holiday season. TT has been on thin ice financially since they bought TeleAtlas and this may be the final blow.
Let's be fair, most of us have complained about the accuracy of current maps one way or the other.
If the corresponding providers making a reasonable (yeah, right) data plan available, the Droid may become attractive as it seems to sell with a 2 year contract at the same price it would cost to update the maps on my 930. I can then still used the TomTom for the sparsely settled areas.

I feel one problem with marketing is , for at least a first time buyer, the bewildering amount of models.
I know, three TomTom models can be displayed here, but that is not known to first time buyers.
Someone picking a unit on price only may end up without some features that could have made life easier.
That is really no way to further brand loyalty.
 
DHN, you probably caught me post at another forum on this very subject. I hesitate to rile things up too much by posting the same here.;)
 
Why not, gator? Your views are important, relevant and should be noted. Not all our members belong to more than one forum, you know...... :D
 
Let me think about it a bit. It would be a little out of context as it was in reply to a post throwing Garmin and TomTom in the same boat. But I do think most of the points were very relevant.
 
Repost of a previous reply I made regarding Google's recent offerings in the navigation/location spelling the end of TomTom amd Garmin. Feel free to disagree and/or post a response.

"FWIW, I personally think this impacts TomTom much worse than Garmin. TomTom's stated intentions earlier this year were to replace sagging PND income with well-designed mobile applications across various OS platforms. Sales of the TT iPhone app are already well under projections, with fewer than 100,000 copies sold to date in my estimation, slightly under 80,000 thru TomTom's 3rd quarter according to them. Knock off 30% of the gross revenue for Apple's cut and it's readily apparent the income doesn't make up for too many pnd's. They've given up (for now) on development for the Androids, as they probably should. Blackberry's may also be out of the question as well, as I expect them to offer their own app including live traffic within the next few months. Apple's between a rock and a hard place with deciding what to do with Google's turn-by-turn, but in the end I do expect them to relent and allow it in the iTunes store. In essence, three of the top five projected handset platforms will be impacted or out of TomTom's market, roughly 40% going by 2012 projections. They'd better be targeting Symbian. I bet Navigon is. Top that off with price reductions on the premium-priced mobile nav apps from TomTom and Navigon that are nearly guaranteed to be necessary if they are to remain players. There's already several worthy nav applications that are free or nearly so, and Google is now preparing to change the rest of the rules.

And here is where I see TomTom pummeled much harder than Garmin. Only $160 million of TomTom's 3rd quarter revenue came from non-pnd related sales. They have only one viable market right now where growth could have been realistically expected. . . mobile, altho they have made a few inroads into the dash-mounted/OEM market, but even that could be impacted by Google and/or new data delivery methods within a couple of years. I don't see any direction TomTom can turn to replace lost revenue if Google stays on course. In addition note that TomTom's debts are still quite high. Banks will want their money no matter where the market turns.

On the Garmin side I estimate approx. $300 million this quarter will come from non-pnd sales with Garmin's significant markets in aviation, marine, fitness and handhelds, plus their own partnerships in automotive OEM. Yes, even Garmin will need to replace the roughly 50% of their revenue coming from pnd's before much longer, but they did keep to their plan of developing related markets where there's limited competition rather than flip-flopping or changing direction in mid-stream. Instead of hanging their hat on the mobile tree, they took a much more conservative approach, catching flak from some analysts by not aggressively jumping in to a now very crowded and fluid market. Even with their nuviphone development (with an Android version expected soon), they took the safer path of partnering with Asus, spreading the risk. I'd agree whole-heartedly they were way too slow to roll out their phone line and may have missed out on an opportunity, but their overall slow and cautious entry into the mobile marketplace now doesn't look so dumb, at least to me.

Ready for the biggest advantage? Garmin has no debt. If fact they have a little more than $1.5 Billion in cash/securities they can put their hands on. That's leaves doors open for acquisitions in complementary technology companies, or investment in promising markets. At worst, a fair return for investors should they become a takeover target. TomTom doesn't have that luxury, and after Google's recent announcements, investors and loans are going to be near impossible to get IMHO. That puts TomTom in a very precarious position from where I stand, Garmin to a much lesser extent."
 
I finally got time to listen to Tomtom's financial conference call (been pretty busy lately).

Tomtom continues to make health operating income (before debt) which means for the consumer they'll be viable for quite a while. Even if they collapse under Teleatlas purchase debt, all that means is the shareholders will be wiped out but the company will remain, owned by the bondholders. Again, no big deal for the consumer.

I still feel smartphones are a pretty poor platform for navigation, and consumers (once they get over the wall street hype) will eventually reject them for larger screens. PND for 1-2 years, then in dash where navigation belongs. My guess is the Apple tablet or MS sync will eventually be the platform leaders in the in-dash space. And Garmin/Tomtom/Navigon will be the nav app leaders in that platform.

My informal survey of middle aged non-techies (employees at my work) show that no one trusts google from a privacy perspective, and "free" satnav isn't worth Google tracking their every move. So this seems like a great buying opportunity for Garmin/Tomtom shares. If I could only figure out how to buy Tomtom shares as an American, I'd be buying now.
 
Their market call may have sounded upbeat, but year-over-year net profit dropping nearly in half as a percentage, and current net operating margin of only 19% does nothing to reassure investors, much less be upbeat about it. Without the 17% savings they achieved by slimming down operations and cutting costs, their margin would have been under 10%. Dangerously close to unaffordable losses. Unfortunately their aggressive price cuts on existing models gained them nothing in North America except lost profits. Still at the same 18% market share they had last quarter. Can they really afford to be as price-attractive as their other Holiday competitors? Mobile apps and live services aren't going to deliver anything significant to offset lost pnd revenue in the near future IMHO. They've yet to prove they can even compete with, much less outdo, the other top mobile nav applications, and every week seems to be giving them more competition. I do hope they see the light quite soon. It's a shrinking window, but the big exit door is still there.
 

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