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TomTom 50m Euro Cost Cutting Drive
Article by: Darren Griffin
Date: 25 Oct 2011
TomTom have announced a program which will seek to cut 50m euros in costs through 2012 in an effort to counteract falling sales of its PNDs.
Although PND sales have been on the decline, TomTom has been working hard to grow its business in the Automotive market and this re-focus has slowed the fall in sales. Net profit has seen a small rise in the last three months of trading.
TomTom has also seen some success in its services division with licensing of map data and services such as Live Traffic also contributing to higher sales and increased subscriber numbers.
There are no plans to sell the PND business but the cost cutting will see a number of job cuts.
TomTom shares saw a boost up 19% following the announcement,
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| Comments
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 Posted by tomtom_shareholder on Tue Oct 25, 2011 8:41 am |
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Hi Darren,
I have always wondered what "selling the PND business" means. I think it's meaningless, because there is no real PND division.
The PND's are manufactured in Asia, so there are no plants or whatever to sell. Also, the content (maps, software, etc) are not limited to PND, they are part of the entire company. Also the brand is not 'owned' by the PND.
What I can imagine is that there will be costsavings and lay-offs on the PND side of their organisation, and extra investments in the licensing, traffic, software and in-dash (automotive) segments.
I think the PND will be important, maybe not as a cashcow or profitcentre (it shouldn't be loss making either), and also as a platform to develop technology for the entire business. For instance: HD traffic was introduced on PND's, but it's now also available in in-dash systems (Renault, Fiat, Mazda) and they might even license it as a seperate service to car manufacturers (without any hardware).
So to me the PND is just one of the channels to offer content and services rather than a seperate business unit. See this image to understand what I mean. http://www.flickr.com/photos/66391512@N03/6269248606/
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| Posted by SpeedCam on Tue Oct 25, 2011 9:47 am |
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I just wish our Government & Councils would adopt a similar approach instead of just increasing costs or reducing services, its not just TomTom but all privately owned companies are having to take similar measures.
Speedcam
Model : HTC HD2, HTC Magic, iPhone 3g, GO 740, XL GO Live |
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| Posted by spook51 on Tue Oct 25, 2011 2:11 pm |
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| SpeedCam Wrote: | | I just wish our Government & Councils would adopt a similar approach instead of just increasing costs or reducing services, its not just TomTom but all privately owned companies are having to take similar measures. |
You might want to check the number of local government jobs lost since the May 2010 general election; over 100,000 - I'd call that cost cutting!
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| Posted by MaFt on Tue Oct 25, 2011 3:11 pm |
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| tomtom_shareholder Wrote: | Hi Darren,
I have always wondered what "selling the PND business" means. I think it's meaningless, because there is no real PND division. |
it would mean giving a different company the rights to create tomtom hardware leaving tomtom themselves solely dealing with maps, traffic and software.
Maft
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| Posted by tomtom_shareholder on Tue Oct 25, 2011 8:00 pm |
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@Maft.
I understand what you are saying. But I hear financial analysts question why TomTom does not sell it's PND business. What you are saying is selling the entire hardware business, including automotive and the brandname. Because you can't really seperate those. So by saying "selling the PND", actually something very different and bigger is meant, and I think the analysts don't oversee that. I also think that's just a bridge too far and unnecessary.
At this moment PND sales are down 23% and automotive sales are up 40-50%. So they want to keep the automotive activities for sure. And I think you can't see that apart from the PND. First of all, because you need the PND itself to develop and test the product and to receive customer feedback. Technology that is proven on PND then makes it's way to the automotive business.
If you know you want to keep the automotive part. Then you also want to keep the brand. Why allow someone to use your brand name, when you have no or less control on the customer experience that drives the brand?
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| Posted by JaguarV12e on Wed Oct 26, 2011 6:02 am |
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| tomtom_shareholder Wrote: | | I understand what you are saying. But I hear financial analysts question why TomTom does not sell it's PND business. What you are saying is selling the entire hardware business, including automotive and the brandname. Because you can't really seperate those. |
It would be quite easy split, the purchaser would get a (non-exclusive?) licence to the software source code and hardware design, and rights to some of the TT trade marks, but with restrictions not to sell directly or indirectly into the automotive OEM sector. Tomtom would agree not to sell directly or indirectly into the retail PND sector.
I have been involved in a couple of companies who have (or tried to) sell off their "main" product line, in order to focus on newer technology, or just to keep the Venture Capitalists happy by generating a large wedge of cash.
| tomtom_shareholder Wrote: |
At this moment PND sales are down 23% and automotive sales are up 40-50%. So they want to keep the automotive activities for sure. |
There is little reason to believe that the OEM sector is more profitable than the retail sector. Vehicle manufacturers are not known for allowing component suppliers large margins, and my feeling is that people are much more reluctant to renew subscription services for hardware that was bolted to their car when the bought it.
It is quite likely that the most profitable medium term "product" is "live services" to be sold wholesale to other PND manufacturers and automotive OEMs. This could be one way that TT could slash their staffing and R&D costs while actually increasing their turnover and profitability.
Tomtom Go 1005
Tomtom Go 730T |
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| Posted by tomtom_shareholder on Wed Oct 26, 2011 9:30 am |
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| JaguarV12e Wrote: |
There is little reason to believe that the OEM sector is more profitable than the retail sector. Vehicle manufacturers are not known for allowing component suppliers large margins, and my feeling is that people are much more reluctant to renew subscription services for hardware that was bolted to their car when the bought it. |
Thanks for the reply Jaguar. You are right that margins are lower in the OEM sector. But the volumes are (potentially) higher. Also there is a large potential in selling more apps on more platforms. Alltogether I think that apps, OEM and live services can together compensate for declining hardware PND sales. But it will take some time for other segments (including business solutions and data offerings) to mature enough. Also I think they want to keep the brand and brand recognition in the car.
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