TomTom shares slide on Volvo contract loss
INTERNATIONAL - Dutch navigation firm TomTom said on Tuesday it had lost a contract with carmaker Volvo, overshadowing a forecast-beating earnings report to knock shares as much as 9 percent lower.
The company said the contract to provide location and navigation services to Volvo, which was announced in 2016, had been ended before it was due to go into force in 2019.
That fed into fears of critics who said a deal Google made last month with Renault, another TomTom customer, meant the company risked being relegated to third place in its main market, with lower margins.
Volvo could not immediately be reached for comment on the contract. ING analysts said in a trading note that they believe the Swedish carmaker had switched to Google, rather than the current leading player in the navigation market, HERE.
“Now that Google is making inroads, the mapping business has become a three-player market with TomTom, HERE and Google, which is clearly less attractive for TomTom than the two-player market it was before,” they said.
TomTom shares lost a quarter of their value in one day on September 18 after Google announced a far-reaching supply deal with a group of carmakers including Renault, Nissan and Mitsubishi.
Though the Volvo news knocked shares lower, TomTom reported better than expected third-quarter results on Tuesday, with core earnings rising to 62.4 million euros ($72.2 million) from 35.5 million euros a year earlier.
A company-compiled consensus had seen earnings for the quarter before interest, taxes, depreciation and amortization (EBITDA) at 41 million euros.
Group sales were fractionally higher at 220 million euros, from 219 million euros in the third quarter of 2017.
While sales of the company’s traditional satnav devices continued to fall, that was offset by sales to carmakers and map licensing to customers Apple and Uber.
The company also raised its full-year revenue outlook to 850 million euros from 825 million euros.
TomTom this month announced plans to sell its fleet management business, saying it would instead focus its energy on making digital maps used in highly automated driving — the business on which it has pinned its future.
It said it has seen “strong interest” for the fleet subsidiary, valued at roughly 700 million euros.
Chief executive and co-founder Harold Goddijn said recent new deals with Peugeot and BMW showed the viability of the company’s products.