Falling pushes TomTom into huge loss

TomTom, Europe's largest maker of navigation devices, reported a €489 million (Dh2.6 billion) loss in the second quarter on Friday as demand for its consumer products worsened, and the company took a large impairment charge. TomTom said the non-cash charge of €512 million reflects the poor and worsening outlook for the future of navigation devices. The company said the North American market is particularly weak and expects its consumer sales to shrink by nearly 20 per cent this year, though its smaller business selling in-dashbord devices to car manufacturers is growing. Without the one-time charge, the company would have made a net profit of €11 million, compared to €34 million in the same period a year ago. Revenues fell 13 per cent to €314 million. TomTom's net debt was €366 million at the end of June, up from €309 million at the end of March. Chief executive officer Harold Goddijn said the company planned to reduce costs but didn't say how many jobs would be cut. Shares, which were above €8 at the start of the year, were up 2.5 per cent to €3.753 in early trading. "As expected, this was a weak quarter for TomTom in terms of volume, sales mix and thus margins," said SNS Securities analyst Martijn den Drijver. He said that the impairment charge raised questions about one of TomTom's key assets, its map database, and he would adjust his future estimates downwards but keep a "Hold" rating on shares. TomTom has struggled after acquiring digital mapmaker Tele Atlas for €2.9 billion in 2008, beating larger competitor Garmin in a bidding war but taking on so much debt that it had to issue shares to stave off bankruptcy when the market went into a slowdown. In addition, margins have shrunk as cheaper Asian competitors have entered the market, while smart phones have proved another formidable competitor. From / Gulf News