TomTom’s Q2 2011 Results: Where is TomTom’s Mobile Strategy?

TomTom’s Q2 2011 results further confirmed the demise of PNDs with consumer revenue declining by 23% year on year to 209 million Euros despite an active user base of LIVE Services of 1.1 million. ABI Research extensively discussed the decline of the PND market in its recently published report Personal Navigation Devices - Making Money from a Declining Market. TomTom’s 2011 Outlook isn’t any rosier: global PND market decline of between 15% and 20% and even higher drops in the North American market.
Equally worrying is TomTom’s ailing maps and traffic licensing business unit posting a revenue decrease of 3% year on year and 4 % quarter on quarter. TomTom expects their Licensing unit to show flat revenue development compared to last year. TomTom seems to struggle to sell its maps and high quality traffic data with Mappy one of the rare commercial deals announced – next to a number of agreements with governments.
TomTom was also forced into another write-off (473 million Euro) on the Tele Atlas goodwill – following a previous write off of 1 billion Euro in 2008.This results in a sorry bottom line: a net result of -489 million Euro.
The (only) bright spot in TomTom’s Q2 results is the continued growth of its in-vehicle products. The Automotive unit revenue grew by 34% year on year to €60 million with more than 1 million Carminat TomTom systems sold by Renault since the launch and Blue&Me recently introduced in the US on the Fiat 500. The Business Solutions unit grew by 12% year on year to €14 million posting some impressive numbers: 13000 customers and 152000 vehicles under management.
However encouraging the in-vehicle initiatives have been they do not compensate for the decline of TomTom’s PND business and will not do so in the medium term future. Ramping up its currently sorry presence in mobile might be the key for TomTom to turn around the company. Considering the all-encompassing mobility trend – including the integration of smartphones into connected vehicle systems - TomTom should be much more aggressive, supporting all mobile platforms, designing in-vehicle hardware solutions which can interface with (smart)phones, and, most importantly, aggressively pursuing partnerships with handset vendors. Apple should be a good candidate as its two main smartphone rivals Microsoft-Nokia-NAVTEQ and Google-Android both own strategic mapping, navigation and traffic information assets allowing them to offer free navigation services.