TomTom announces record profit for Q3

Revenues drop in the US



TomTom announces record profit for Q3
TomTom today announced its financial results for the third quarter of 2007. Revenue for the third quarter was €427 million, an increase of 12% sequentially and 21% year on year. TomTom sold 2.16 million PNDs during the period, up 20% sequentially and up 83% year on year. The gross margin was 49%, up 4 points sequentially and up 5 points year on year while the operating margin was 31%, up 7 points sequentially and up 3 points year on year. The net profit for the quarter was €99 million, up 44% sequentially and up 36% year on year.

TomTom’s Chief Executive Officer, Harold Goddijn said: “TomTom delivered a strong set of results this quarter with record units shipped, record profits and record cash flow in a market that continues to grow rapidly. Following successful tests of our real time traffic solution in the Netherlands we will launch our new service in November. Discussions with mobile phone operators in other European countries are progressing and we expect to make further announcements shortly. Ahead of the fourth quarter we have launched important new products which have been received positively by the market. The amount of customer feedback we have received since the introduction of Map Share™ is also encouraging. We are confident that with our strong product line-up, supported by advertising campaigns and promotional activity TomTom will be able to defend its market position in Europe and to grow market share in the US.”

TomTom’s CEO, Harold Goddijn
TomTom’s CEO, Harold Goddijn
TomTom’s CEO, Harold Goddijn
TomTom’s CEO, Harold Goddijn
Difficult quarter for TomTom in North America
According to TomTom in the third quarter the European market grew by approximately 80% compared to the same period last year to 3.7 million units. In the same period the US market more than tripled to 1.8 million units. The average selling price for PNDs in Q3 was €184, a decrease of 5% compared to the previous quarter (€195).

Europe represented 86% of total revenue for the quarter while revenues from North America were 10% of total revenue against 15% in Q2 2007, a drop from €57 million to €42.7 million. Part of this drop can be attributed to the exchange rate, but the rest is due to the competitive US market where TomTom is competing head to head with Magellan and Mio while Garmin dominates. For this quarter TomTom did not reveal its US market share (which was over 20% for the previous quarter according to the company), but GPS Business News estimates it dropped under 15%.

Outlook 2007 raised
“The PND market continues to show strong growth, especially in the US,” said the TomTom press release. “We have therefore increased our market expectations for Europe and the US to between 15 and 16 million units (2006: 8.5 million) and between 8 and 9 million units (2006: 3.0 million) respectively. For the full year, we have increased our PND unit guidance to between 9 and 10 million units worldwide and we have narrowed the range of our revenue outlook to between €1.7 billion and €1.8 billion. We continue to expect good profitability for the rest of the year. During the holiday season as expected the investment in marketing will increase significantly and there will be promotional activity in retail. For the full year the gross margin will be more than 40% and the operating margin will be well in excess of 20%”.

Wednesday, October 24th 2007

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