TomTom profits turn a corner

TomTom, the Dutch personal navigation device and digital map group, beat profit expectations in the third quarter, raising hopes among investors that the company, which has seen earnings fall in the face of competition from smartphones and Google, may have turned a corner.

The improvement was due in part to the higher value of the US dollar against the euro in the third quarter. But it also reflected better sales in two key elements of the company’s strategy for future growth: preinstalled navigation devices in cars, and subscriptions to its premium Live service, which sends real-time traffic information directly to drivers. TomTom said Live subscribers rose to 1.3m from 1.1m in the second quarter.

But the long-term threat to the company was clear in total sales, which fell to €336m, down 10 per cent year on year. That mainly reflected the long-term decline in sales of personal navigation devices, as customers turn increasingly to smartphones using Google’s free digital mapping services.

TomTom said earnings before interest, taxes, depreciation and amortisation (ebitda) rose to €67m, well above analysts’ consensus of €40m. Net profits came in at €29m, up from €19m in the third quarter last year.

TomTom reaffirmed plans to cut €50m in operating expenses, a move it said would begin to bolster margins starting in 2012.

The company said full-year earnings for 2011 would come in near the high end of the previous guidance of €1.225bn-€1.275bn. Shares were up 19 per cent to €3.64 in morning trading on the Amsterdam exchange.