Smartphones decimate TomTom’s profits
The sales
of navigation systems and subscriptions for map updates are under massive
pressure because of all the free applications that are available for
smartphones and tablets. This will cause the demand for paid solutions to
drop by ten to fifteen percent each year, says CEO Harold Goddijn in Dutch
paper NRC Handelsblad. Even though they are good for the brand recognition of the company, they eat away at profitability.
TomTom wants to start focusing on selling licenses, such as the ones the company is
currently supplying to Apple. The cooperation with car manufacturers should
also bring in higher margins. By quitting the consumer market the company would
be able to free up more means for this part of the company.
Sales down
by 13%
Subscriptions
for traffic services and map updates are already being cancelled for newly sold
navigation systems. Currently these devices are worth half of sales of TomTom, totalling 202 million euro in the first quarter of 2013, a drop of 13% when
compared to the same period a year earlier. For the entire year TomTom is expecting sales of 900 to 950
million euro. The eventual result will cohere with the evolution of car sales.
TomTom made a loss of 2.3 million euro in the first trimester of 2013. During
the same period in 2012 the loss was limited to about 1.5 million euro.
