TomTom writes off €1B for Tele Atlas acquisition

PND manufacturer TomTom announced yesterday its financial results for the Fourth quarter and the full year 2008. Quarterly revenue of the Dutch company was down 24% year on year (including Tele Atlas), and TomTom Group recorded a one-off non-cash goodwill impairment charge of €1,048 million, writing down more than a third of the amount paid for Tele Atlas.

During this quarter, revenue was €528 million, Ebitda was €98 million and net profit €70 million. Gross profit margin was 45%, Ebitda margin 19%. TomTom generated €251 million cash flow from operations. The net debt of the company is now €1,109 million, reduced by €213 million (Q3 2008 €1,322 million).

For the full year 2008 TomTom Group revenue was €1,674 million, down 3.6% from 2007 (1,737 million).

PND market decline

According to TomTom, in the Fourth quarter the whole European PND market declined 7% year on year to 4.9 million units and grew sequentially by 19%. In North America the market increased 12% year on year to 8.0 million units which represents sequential growth of 150%.

TomTom shipped 4.443 million PNDs in the quarter, an increase of 76% sequentially (Q3 2008: 2.526 million) and an increase of 4% year on year (Q4 2007: 4.278 million).

The average selling price for TomTom’s PNDs in the fourth quarter was €100, a decrease of 26% compared to the previous quarter (Q3 2008: €136) and a decline of 29% compared to the last quarter of 2007 (Q4 2007: €141). On that topic TomTom said “the sequential decrease in ASP is due to geographical and product mix shifts as well as promotional activities. We expect that the pace of ASP decline will reduce in 2009.”

Market shares were rather stable sequentially; TomTom estimates its share to be 46% in Europe and 23% in North America during the Fourth quarter.

TomTom also gave an update about its PND inventory: “Channel inventory of TomTom PNDs continued to decrease in absolute terms in the past quarter, especially in Europe. However retailers are cautious, and channel inventory still needs to be reduced which will limit our sell in opportunities in the first quarter.”

Tele Atlas: losing ground against NAVTEQ

Tele Atlas results for the full year have been disappointing, as a matter of fact the map maker generated 6% less revenue than in 2007 and an operating loss of €9 million (€1 million last year). While The PND category grew by more than 30% in 2008, its PND map revenue was down 11% and the number of map licenses sold (PNDs, in-dash and other) only grew 8%. Today the mapping company represents only 10% of TomTom’s Group revenue.

Those poor results explain the goodwill impairment charge of €1,048 million. “Tele Atlas is core to the strategy of the group”, explained the press release, “however the worsening macro environment means that currently we cannot sustain the full valuation of the acquired business of Tele Atlas as established at the time of the acquisition.” This €1 billion write off is pretty much in line with what the bidding war against Garmin cost to TomTom. Its first bid for Tele Atlas was €2 billion but after a €2.3 billion offer from Garmin the Dutch company ended up paying €2.9 billion.

In the last quarter of 2008 73% of the map licenses sold by Tele Atlas (6.062 million) were to TomTom (4.443 million PNDs), a 9% increase from a year ago (6.667 million licenses; 4.278 million TomTom PNDs) which underlines the shrinking addressable PND market for Tele Atlas outside of its parent company.

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TomTom completes Tele Atlas acquisition, reshuffles management

TomTom today declared its $4.3 billion takeover bid of digital mapmaker Tele Atlas was finalized and decided to make a number of management changes related to this acquisition. TomTom will propose to appoint Alain De Taeye, CEO and founder of Tele Atlas, as a member of the Management Board of TomTom. Alain De Taeye is expected to “focus on strategy and business development giving TomTom and Tele Atlas continued access to his vast experience and industry knowledgeâ€?, said the public statement.

Additionally, Alexander Ribbink will step down as Chief Operating Officer and member of the Management Board of TomTom on his own request “to pursue other interests outside TomTomâ€?, said the Dutch company.

George Fink, President and COO of Tele Atlas since 2002, will step down as a member of the Management Board of Tele Atlas and resign his position of President and Chief Operating Officer of the map maker.

Tele Atlas will propose to appoint Bill Henry as new CEO. Bill Henry has more than 20 years of management experience running global technology companies. Formerly, he was COO at iSOFT where he oversaw the company’s merger with IBA Health in 2007. Before that he held the position of CEO of Star Technology Services, provider of messaging security services.a division of Message Labs Group. He has also held executive roles at PeopleSoft, Bellcore/Telcordia Technologies, Sprint and Computer Sciences Corporation (CSC).

The most surprising news in this management reshuffle is the departure of Alexander Ribbink. Harold Goddijn, CEO of TomTom sees this departure “with regretâ€?; however Ribbink has committed to remain a member of the Supervisory Board of Tele Atlas where he was elected in December 2007.

Ribbink joined TomTom in 2003 to lead TomTom’s marketing when the company launched the TomTom GO, its first personal Navigation Device (PND), on the European market. He was appointed Chief Operating Officer in 2004.

Via Michelin to stop its PND business

According to news published earlier today in France, Viamichelin will stop to produce its own portable navigation systems.

In the inner circles of European PND manufacturers it was well known that the brand, subsidiary of the tire maker, was losing money due to the lack of real market share and high marketing spendings. In 2007 its European market share was below five percents everywhere except in France, its historical market, where the company had a market share of more than ten percents. Additionally Viamichelin started to sell its products in 2007 in the United States, but its distribution remained limited. The announcement made today is the logical conclusion of this situation.

According to our information, the company would refocus its activities on providing services (real time traffic data, points of interests from the digital edition of the famous Michelin guide, etc…) to other PND manufacturers. However, Viamichelin is today looking for a manufacturing partner to keep its brand alive on the market. Navigon could become this partner according to news from CNET France.

The consolidation is therefore moving forward on the PND market, following on the acquisition of Navman by Mitac (in March 2007) and its final merger with Mio announced this week.