TomTom: Q2 PND Volume In North America Down 27%

By Joseph Palenchar -- TWICE, 7/22/2011

Amsterdam, The Netherlands - Industrywide retail-level unit sales of portable navigation devices (PNDs) in North America fell 27.3 percent in the second quarter to 2.4 million units following a 19 percent first-quarter decline to 2.1 million units, TomTom said in releasing its second-quarter financial report.

The company said its North American unit share fell to 21 percent in the quarter from the first quarter's 24 percent, largely because the company scaled back its aggressiveness in the low end of the market, said CEO Harold Goddjin. As a result, the company was able to maintain its average selling prices in the second quarter compared with the year-ago quarter, he noted.

TomTom attributed declines in the North American and European markets to weak CE markets and retail channels that have continued to reduce inventory levels. Goddjin attributed retailers' reductions of PND inventory levels to a general trend to scale back CE purchases to shorten inventory cycles. "I don't think we're losing shelf space," Goddjin said of PNDs.

Industrywide PND retail unit sales fell in Europe by 45 percent in the quarter to 2.7 million units.

Because of the PND market's rapid decline, TomTom said it expects to make cost cuts that it will announce in its third-quarter financial report "to maintain a healthy cash flow whilst at the same time continuing to invest to support our growing revenue lines." Those lines include OEM automotive sales, commercial sales, map licensing and the like.

A total of 67 percent of company revenues in the second quarter were from the consumer group, consisting largely of PND sales but excluding OEM sales to automakers.

The company's consumer-market sales fell 23 percent in the quarter to 209 million euros ($300.2 million) and fell 20 percent in the half to 365.8 million euros ($525.4 million). Combined sales of all product segments fell 13 percent to 363 million euros ($521.4 million) and in the half by 8 percent to 579 million euros ($831.6 million).

Because of the PND sales decline, the company is taking a one-time impairment charge on goodwill and other intangible assets of 512 million euros ($735.3 million) in the second quarter, pushing the company into the red with a first-half 489 million euro ($702.4 million) operating loss and a first-half net loss of 512 million euros ($735.3 million). Without the charge, TomTom would have posted net profit of almost 23 million euros ($33 million) in the first half compared to the year-ago 67 million euros.

Exchange rates are based on 1 euro equaling $1.44.