Amsterdam, The Netherlands — TomTom reported an 83 percent decline in net profit for the first quarter due to falling prices and increased promotions on personal navigation devices (PNDs) and to general economic belt-tightening in Europe..
Net profits were $11.7 million, down 83 percent from $70 million during the first quarter last year.
Revenue for the quarter fell 11 percent to $422 million, down from $473 million.
TomTom stressed that much of its profit shortfall was due to general retail inventory reductions across all product categories in Europe. CEO Harold Goddijn called this a general “destocking” in Europe but noted “underlying demand for PNDs remains strong” and said he expects PND retail prices to bounce back in Europe in the second quarter. Initial sales results for the second quarter have been on track, and TomTom “is looking forward to a good Q2,” he claimed.
Overall, PNDs have represented the fastest-growth product in consumer electronics, and North American unit sales will grow by 100 percent in 2008, Goddijn claimed in a conference call with analysts.
PNDs have reached a U.S. penetration rate of only 10 percent of automobiles, while Europe has a 20 percent penetration, he said.
Goddijn expects total U.S. PND sales for the year to reach 18 million units and European sales to hit 20 million units. TomTom itself expects to sell total of 14 million to 15 million units.
TomTom expects to grow its U.S. market share to 30 percent in 2008, up from 25 percent in March, and to maintain its European market share of 50 percent. TomTom reported it shipped a total of 2 million PNDs for the quarter, up 50 percent over the period last year.
The company said it plans to begin working with an unnamed auto maker to include TomTom navigation in automobile dashboards. Goddijn also said that TomTom’s IQ Routes, a smart traffic system now in use in The Netherlands, produces more efficient routing around traffic in 50 percent of the cases.
The company’s map-share program that allows users to upload map changes is resulting in 10,000 user map changes per day, he noted.