TomTom has lowered its full-year revenue forecast due to declining sales of its built-in car navigation devices in Europe. In order to offset the waning popularity of personal sat-navs, Europe's largest navigation device maker and one of the top three digital map makers worldwide are attempting to boost sales of the navigation gadgets and services to carmakers.
However, the European car market was shrinking due to the debt crisis in the region. Its September sales had been dropping at their quickest pace in the last 12 months as government spending lessens the impact and unemployment worsens. Last Tuesday, TomTom said that 2012 revenue is predicted to be about 1.05 billion euros ($1.4 billion), a decline from a previous prediction of 1.10 billion euros.
In a statement last Tuesday, Chief Executive Harold Goddijn said that the European economic situation has a major impact on the automotive industry but it’s likely that Automotive revenue will continue to be under pressure in the upcoming quarters. PSA/Peugeot-Citroen, Renault and Fiat are among TomTom's customers that have experienced some of the largest decreases in auto sales in Europe.
TomTom posted a net profit in the third quarter to 22 million, standing for a 23% drop. According to SNS Securities analyst Martijn den Drijver, TomTom's car division was affected more than expected because of much lower sales at Renault and Fiat, combined with new contract extensions not yet helping revenue.
Group revenue decreased by 19% from the same period in 2011, with a 24% drop at the consumer unit and a 16% decrease at the automotive division. as As smartphones with affordable or free navigation software lower the demand for its personal navigation devices, TomTom shares fell from a record high of 56 euros in 2007 to 3.9 euros.
Goddijn chose not to offer an outlook for PNDs or for the automotive sector for 2013. He also declined to make any statement about the recent problems noted by Apple customers with regards to the quality of Apple's newest app for maps. In the PND market, TomTom competes with Garmin while it goes up against Google and Nokia in the commercial digital map market.