TomTom unfazed by free navigation apps

TomTom, the Dutch maker of satellite navigation devices, insisted on Thursday that its business was not threatened by the launch of free navigation software by Google and Nokia.

The group, which forecast flat revenues and earnings this year, has yet to make any strategic changes since the launch last October of Google’s free navigation software in the US on its Android mobile phone operating system and Nokia’s move to do the same on its phones in 70 countries last month.

TomTom, which last year made 73 per cent of its €1.5bn ($2bn) revenues from stand-alone personal navigation devices, expects it will sell about 11.5m PNDs this year, matching last year, at slightly lower average prices.

“We also give free navigation with our PNDs,” Harold Goddijn, chief executive, co-founder and owner with his wife of about a quarter of the company, told the Financial Times. “If you buy a PND, the map and the application come free of charge.”

To the extent that TomTom concedes it faces strategic challenges, it points to its entry last year into navigation built into new cars where it says it has already captured 10 per cent of the market.

It has also launched premium subscription services such as highly accurate traffic information and offers its own basic paid-for application for Apple’s iPhone.

According to Mr Goddijn, “people don’t say” that TomTom’s business is dead because the market for PNDs will remain “a compelling value proposition for years to come”.

The company’s shares rose 5.5 per cent on Thursday to €5.73 after reporting fourth-quarter revenues that increased 1 per cent to €533m and a net profit of €75m or 33 cents, compared with a loss of €989m a year ago. The stock has nearly halved in value since Google announced its free navigation software.

Asked about Google’s entry into the sector, Mr Goddijn said: “It is slightly worrisome that a company with monopoly-style profits in one area can invest and throw spaghetti at the wall to see what will stick.”

But he argued that the explosion in usage of mobile navigation had increased the importance of digital maps. The group bought Tele Atlas, a digital mapmaker, for €2.9bn in 2007 and its business now generates €50m or just under 10 per cent of quarterly revenues.

“There’s uncertainty about business models, granted, but it’s very clear . . . the strategic value of that map has increased,” Mr Goddijn said.