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July 25, 2006 6:33 pm

TomTom shrugs off threat of new rivals

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TomTom, the European market leader for in-car navigation devices, on Tuesday played down the threat from new arrivals in the mobile mapping market, predicting that global electronics companies could struggle to match its performance.

Harold Goddijn, chief executive of Netherlands-based TomTom, said: “We are focused and have all the technology in one hand. That means we can synchronise software and hardware so that it all works perfectly together. If you do not have that, it is going to be hard to match us.”

Philips, the Dutch technology group, said last month it would launch car navigation devices in September. Japan's Sony entered the sector this year, targeting 20 per cent of the European navigation devices market.

On Tuesday, TomTom reported it had a 53 per cent European market share and said it had increased US market share from 19 per cent in the first quarter to 27 per cent. Mr Goddijn said TomTom’s closest rival in Europe had only a single-digit market share, adding that there were 40 vendors active in the sector.

He said: “That includes large international companies with strong brands and distribution power but they have not been able to shift the market dynamic in the last 12 months. Philips’s and Sony’s entry is interesting, but the question for me is what Philips will be able to add that others are not already doing?”

He noted, too, that TomTom’s performance in the US, where the share of total revenues has risen from 6 per cent to 10 per cent from the first quarter, lessening its reliance on Europe. It is readying a product to launch in Taiwan but Mr Goddijn said it would be 2008 at the earliest before Asia made any impact on revenues.

Shares gained 4.5 per cent to €29.23 as it posted operating income of €64m ($80m), 28 per cent higher than the previous quarter, and above analysts’ forecasts. Sales rose 8 per cent to €277m, with net profits of €38m.

The company said it had resolved a supply issue concerning a component that this month forced it to cut sales guidance.

It sold 830,000 devices in the second quarter at an average price of €310. Its gross margin rose to 43 per cent, of which 1.8 percentage points related to the weaker dollar. TomTom reiterated full-year guidance of €1.1bn-€1.3bn in revenues, sales of between 3.6m and 3.9m units, and gross margins of about 40 per cent of sales.

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