TomTom issues profit warning, shares down

TomTom, the Dutch navigation solutions provider, has issued a profit warning and said it expected annual sales of between €1.8 billion and €2.0 billion euros (£1.4 billion/£1.6 billion), down from its February estimate of €2.0-€2.2 billion.

The company blamed having to make earlier-than-expected price cuts ahead of a series of product launches. The group said new products would drive sales growth for the remainder of the year, but not enough to make up for a slow start.

Shares in the company fell nearly 14% to a 32-month yesterday after the news.

TomTom Chief Executive Harrold Goddijn said he was optimistic about the outlook for the second quarter and that the company remains committed to its €30 a share bid for digital map-maker Tele Atlas NV.

The company is in the process of acquiring map-maker Tele Atlas, although there has been some concern among analysts that falling profitability could cause problems for the deal.

The less-than-expected first quarter is not due to weakening consumer demand, said Mr Goddijn. Retailers cut their stocks more strongly than expected, particularly in Europe, which restricted first quarter sales, commented Mr Goddijn.

Eric de Graaf, an analyst at Petercam, said the profit warning puts a major dent in the investment case, as it appears that the company is no longer able to control the average selling price decline while keeping revenues and the margins at the planned level at the same time.

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