Bloomberg News

TomTom Posts Surprise Loss on Writedown, Plans Cost Cuts

July 22, 2011

(Updates with analyst comment in fourth paragraph.)

July 22 (Bloomberg) -- TomTom NV, Europe’s largest maker of portable navigation devices, reported an unexpected second- quarter loss after writing down goodwill from the acquisition of Tele Atlas NV in 2008.

The net loss was 489 million euros ($705 million) compared with net income of 34 million euros a year earlier, the Amsterdam-based company said in a statement today. The average forecast of nine analysts surveyed by Bloomberg was for profit of 10.7 million euros.

The company took an impairment charge of 512 million euros in the quarter on a reduced outlook for the portable navigation device market. Of the charge, 473 million euros related to goodwill from the acquisition of Tele Atlas, which represents the map database, Chief Financial Officer Marina Wyatt said in a conference call. Map sales are hurt if demand falls for portable navigation devices, she said.

The impairment in the second quarter “does raise questions about the value of the map database,” said Martijn den Drijver, an Amsterdam-based analyst at SNS Securities, who added that the second quarter was “weak.” He retains his “hold” rating for the company’s stock.

Profit Forecast

Sales decreased 13 percent to 314 million euros. On June 27, the company predicted revenue of 300 million euros to 310 million euros for the quarter.

TomTom also slashed its full-year profit and sales forecasts on June 27, saying U.S. demand for its devices had declined faster than predicted and consumers were opting for cheaper navigation systems. The stock declined 27 percent the day after the announcement.

The company will announce costs cuts in the third quarter, ”to maintain a healthy cashflow,” Chief Executive Officer Harold Goddijn said today, declining to give more details.

”Our cost base increased in the first half, we will have to bring that down in the second half,” the CEO said in an interview.

TomTom, which also competes with Google Inc., aims to get more revenue from maps, services and built-in systems in cars amid a slowdown in sales of portable navigation devices.

The company’s automotive revenue climbed 34 percent to 60 million euros in the quarter. The company is talking with carmakers “across the globe” about possible contracts for built-in navigation systems, Goddijn said.

Earnings per share will be in a range of 25 euro cents to 30 cents in 2011, excluding the goodwill impairment, TomTom said. The company in April predicted “broadly flat” earnings per share compared with 49 cents in 2010.

Shares Fall

TomTom shares traded 2.3 percent higher at 3.745 euros as of 12.02 p.m. in Amsterdam after falling as much as 7.1 percent earlier in the day. The stock has lost 52 percent this year, paring the company’s market value to 830 million euros. U.S. rival Garmin Ltd. has gained 5.6 percent in the period.

“It doesn’t make sense that shares are up, when you look at the company’s performance,” said Tom Muller, an analyst at Theodoor Gilissen Bankiers, referring to TomTom. “With such a low valuation it could however mean takeover speculation is back in the market.”

--Editors: Jerrold Colten, Robert Valpuesta.

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net


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