The Amsterdam, Netherlands-based company is enjoying booming market conditions and has increased its forecast for the total market for personal navigation devices to grow from 8.5 million in 2006 to between 15 million and 16 million in Europe and for the US market to increase from 3 million to between 8 million and 9 million.
Despite a continued fall in average selling prices, TomTom increased its net income in the third quarter by 35.7% to 99m euros ($140.4m) on revenue 20.8% higher at 427m euros ($607.9m). It now believes total revenue for the year will increase by at least 25% to a range of 1.7bn and 1.8bn euros ($2.4bn to $2.56bn).
With market penetration in the high teens in Europe and single digits in North America, TomTom is anxious to make it clear that the market is far from saturated. Nonetheless, it agreed to pay 2bn euros ($2.76bn) in July to acquire digital mapping company Tele Atlas to establish a position in a broader navigation market, stretching from cars to mobile phones.
TomTom would make no comment on Nokia’s decision earlier this month to pay $8.1bn for the digital-mapping market leader Navteq, though it puts it into competition with a company with considerably greater resources.
The company said it is pinning its hopes of establishing a continuing revenue stream from owners of its devices by offering continuously updated maps and content. By integrating information from users, it plans to offer real time traffic solution in the Netherlands by the end of the year and for the UK in 2008. It said discussions are underway with mobile phone operators in other European and it expects to make further announcements soon.
Our View
A continuing competitive battle between TomTom and Garmin is likely to be bad news from the many smaller companies trying to establish a presence in the market that do not have the economies of scale or marketing and R&D budgets to cope with falling prices.
