Tomtom announces 2nd quarter 2009 financial results

[mvl]

Tomtom's results are here: summary html and detail pdf.

No new product offerings/strategy were announced with the financial results, usually they give useful tidbits in the call.

I'll post a link to the financial call when Tomtom publishes the webcast.

 

[gatorguy]

To add a bit of plain English to TomTom's report, overall results were better than expected. Net profits were still significantly down from the 2nd quarter of last year (around 60% less), but they did beat the financial gurus guesses by around 7 million euros, 20 million rather than 13 million. Also, they don't appear to be in danger of default on their loan obligations this year anymore since the 400 million euros put back into the company by the current owners as well as some investors previously associated with TomTom and TeleAtlas. Their CEO is indicating he believes the industry may have bottomed out, or very soon will and is encouraged that business will begin to see improvements. Live devices would appear to be selling better than earlier in the year, since the profits were a bit higher even tho device unit sales were flat. Average selling prices were reletively high, averaging 112 euros after declines closer to 105 late last year and into the first quarter of this year. Live devices are of course on the higher end of TomTom's pricing. They've also reaffirmed their intentions to move away from concentrating on hardware (ie, new pnd models) and more towards services using map data and location technologies. TomTom also declined to reaffirm it's earlier stated outlook of 11-12 million total device sales, but also said they saw no indications that it couldn't be done. Second quarter unit sales were about 2.4 million devices.

 

[dhn]

But.......

Only 30% of Live subscribers renewed. That is NOT a good sign regarding cash flow. Also, TomTom market share DROPPED in North America by 1% from year to year.

 

[gatorguy]

Yes, their NA market share has been shrinking for over a year.

This is just my opinion so take it for what it's worth: I don't see very many new models coming from TomTom after this year. I also see even fewer of them making it to North America. I expect to see them accede the US market to Garmin (tho they would never say that), concentrate on Europe and a few emerging markets for hardware, and then gradually pull out of device sales for the most part over the next two to three years. The necessity to sell off TeleAtlas is reduced for now, allowing them to make serious plans for leveraging TeleAtlas' extensive mapping data to stabilize, and maybe even increase profits. Not great news for fans of their pnd's if it happens, but overall would give TomTom a rosier future.

 

[mvl]

Just listened to the call, a few notes:

1) They gave a few details on the upcoming USA HD-traffic solution. It will use cell-probe technology, and be supplanted with Tomtom probes and other journalistic feeds, just like in Europe. It will focus on the major cities initially rather than pan-US coverage.

The above makes me think more along the lines of paralleling Verizon's LTE launch. Even the smallest US cellco is in 1 in 20 cars, which is more than enough to report a jam anywhere in the country. The only reason I could see for an urban-first deployment is if it is somehow dependent on LTE rollout.

2) Tomtom for iPhone is on track for summer launch - it will launch simultaneously in North America/Europe. The carkit will be sold via Tomtom.com, and via retail outlets (apple store sales TBD).

3) The higher asps are due to the higher prices of the new products (140/340/XL LIVE) launched in the quarter.

4) Teleatlas's automation capability in applying community updates is improving. We'll see how much when the August map comes out.

The call's link is here.

 

[gatorguy]

So when TT offers it's own traffic service for NA, your understanding is it too will only be for the top 50 (or so) metro areas? If so, why do it at all? That wouldn't be any better than Irnrix, TrafficCast, Navteq, Airsage or anyone else. Without more widely available reporting, that would not be my definition of HD traffic the way I see it, but I guess they can call it whatever they want.

For an effective US traffic reporting system for our pnd's, I think it's essential that all primary travel roads include flow and incident reports, not just the big cities. Yeah, it's nice to know there's a fender-bender slowing down traffic approaching 295 in Boston. But what about the accident on Cypress Gardens Blvd in my city of 60,000, adding 15 minutes to 2000+ commuters morning drive. Or the roadworks that completely close Recker Highway, a local feeder route, to thru traffic for 3 days in a row at a RR crossing upgrade and affecting thousands of drivers in a metro area of over 1 million (not exactly small town America). Covering 50% of the population but 10% or less of the highway miles just doesn't appeal to me as a quality traffic service. Certainly not the "HD-Traffic" I envision, nor that TomTom would have us believe.

Sorry for the slightly off-topic rant, but I'm becoming increasingly jaded by the rosy pictures offered by traffic reporting services accompanied by their less than stellar coverage. TT's IQR (and Navteq's Traffic Patterns for that matter) really do offer benefits for all drivers. No existing or announced traffic service available to our pnd's can say the same with a straight face.

 

[gatorguy]

This caught me by complete surprise. . . How many live devices do you suppose TomTom has sold, both here and in Europe? Their stated goal for this year is one million 940's, 740's and XL Live's worldwide.

Half a million so far? Perhaps as few as 250,000?


I was shocked to see that it was only about 100,000 total since they were first introduced. Renewal rates on subscriptions running at 30% according to TomTom. But I suspect some significant percentage of the total sold are still on either the 3 or 6 month free evaluation period. Bottom line, live services aren't contributing near the revenue as I thought. Based on total sales, I'd be surprised if more than 10-15 thousand 740's have been sold in North America and probably less. Thats only a few hundred per state on average. Not near enough to build an HDTraffic service for North America that has very much reliance on live device travel data feedback. I had hoped to see a whole lot more than that so traffic services might see really significant improvement on my 740 in the near future.

 

[mvl]

Makes me glad I'm holding out for a 950. Given that HD traffic is priced the same as LIVE traffic in the US, and that Trafficcast was paid on a per-purchase basis (not per month), there is no business reason why Tomtom can't switch the sold 740s to the HD traffic system when it is launched. It may not provide probes, but the cellco feed is the most valuable part anyways.

One possibility: HD could have the massive coverage you expect. Tomtom may have decided not to waste hardware development on the dying CDMA chipset, and designed the 950 as a sim-card based, LTE/GSM device. Thus it will run on Verizon's LTE (4G simcard) network in the US, and Vodafone's GSM network (later LTE) in Europe. Because of airsage, Verizon probes work everywhere and will report traffic everywhere, but the 950 will only get signal where Verizon has its sim-card (4G) network deployed. Verizon's LTE target is 2 US cities by end of 2009, and 30 cities by end of 2010.

Second possibility: Tomtom can't scale their servers to support the mileage of the whole US road grid. The 950 device may work anywhere, but Tomtom may limit coverage to major cities to lessen the traffic server load.

Hopefully we don't have to wait that long to find out.