TomTom issues profit warning

PND manufacturer TomTom today issued a profit warning for its first quarter results and reduced its outlook for the full year. “TomTom expects to have shipped around 2.0 million PNDs during the first quarter of 2008. This is expected to generate revenue of between €260 million and €270 million, lower than in the first quarter of 2007, with an operating margin of a low single digit percentage”, said the press release of the company.

The market growth continues with approximately 40% year over year in Europe and by more than 100% in North America and TomTom has maintained its market share, however, TomTom has explained ths weak first quarter by the fact “Retailers reduced their inventory levels more strongly than expected, especially in Europe, which restricted sell-in volumes in the quarter”. Additionally TomTom said it has “reduced prices in the channel earlier than planned ahead of the introduction of new products in the second quarter”.

For the full year, TomTom now expects to achieve revenue of between €1.8 billion and €2.0 billion. “We expect to sell between 14 million and 15 million PNDs and to achieve a gross margin and operating margin of close to 40% and 20% respectively. We continue to target a long term financial model of a gross margin of 40% and an operating margin of 20%”, stated the company.

But TomTom remains optimistic about the market as a whole and did not notice market saturation in Europe. “We still see very strong growth in the UK and Germany”, said Harold Goddijn, CEO of TomTom. However, some analysts are worried that if the final revenue for the full year is in the lower end of the revenue expectations (€1.8 billion), then it would be a pretty flat year in terms of revenue versus 2007 (€1,737 million), which would probably mean it would get worse in 2009.

Tuesday, April 8th 2008

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