TomTom reports euro989 million loss in 4Q
By TOBY STERLING
AP Business Writer
AMSTERDAM (AP) - TomTom NV, Europe’s largest maker of navigation devices, reported a euro989 million loss for the fourth quarter Tuesday after writing off more than a third of the value of digital mapmaker Tele Atlas, which it acquired for euro2.9 billion last year.
TomTom took an impairment charge of euro1.05 billion for Tele Atlas. The net loss compares to a net profit of euro107 million in the same quarter a year earlier. Sales fell 17 percent to euro528 million amid poor car sales and weak economies in Europe and the U.S., TomTom’s major markets.
TomTom said it had no regrets about the Tele Atlas buy, but acknowledged it overpaid.
“Tele Atlas is core to the strategy of the group, however the worsening macro (economic) environment means that…we cannot sustain the full valuation of the acquired business of Tele Atlas as established at the time of the acquisition,” it said in a statement.
TomTom had initially bid just euro2 billion for Tele Atlas, but larger competitor Garmin Ltd. of the Cayman Islands put in a rival bid of euro2.3 billion.
TomTom was forced to raise its bid or watch its main source of maps fall into Garmin’s hands.
TomTom’s shares fell 8.2 percent to euro2.99 on Tuesday, continuing a long slide from over euro6 at the start of the year and over euro50 when the Tele Atlas deal was announced.
Net debt at the end of the year was euro1.1 billion, TomTom said, with interest expenses of euro27.6 million in the fourth quarter. TomTom said that stripping out impairment and restructuring charges, it would have had a profit of euro70 million in the quarter.
Analyst Eric de Graaf of Petercam Bank repeated a “Sell” rating on shares.
He noted that TomTom shares trade at a premium to Garmin “which we believe is not realistic given the difference in profitability and the financial position.”
“The biggest issue for investors will likely continue to be the debt,” he said in a note on earnings.
“With the uncertainty around consumer spending in general continuing and the likelihood that TomTom will have to come up with new financing in the current distressed market, we continue to be cautious on the stock.”
TomTom acknowledged that the debt posed potential pitfalls.
“Based on the group’s plans for 2009, management expects to comply with the loan covenants,” it said. “However, given the uncertainties in the wider macro economic environment and their knock-on effect on consumer spending, scenarios can be envisaged where the loan covenants could be breached.”
It said it was reviewing options, including renegotiating with its banks or “other actions.”
Both TomTom and Garmin have been hurt by sharp falls in the sales price of navigation devices as they have become more commonly owned and subject to competition from cheaper models made in Asia.
TomTom’s average selling price was euro100 in the fourth quarter, down from euro141 a year earlier.
The company said it had market share of 46 percent in Europe and 23 percent in North America as of year end.
Chief Executive Harold Goddijn said the company generated cash in the fourth quarter “despite the tough market conditions.” TomTom said the company planned to cut euro60 million in costs this year by reducing workers and combining offices with Tele Atlas.
TomTom forecast sales of between euro1.4 billion and euro1.6 billion for 2009, which would be a decline from euro1.67 billion in the full year 2008. However, the company said that European retailers are cautious and need to reduce inventory, and it expects sales to be stronger in the second quarter than the first.
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