October 29, 2008

TomTom Profits off 41% - How Bad is it Out There?

We all know that we are going through some tough times economically, and that this holiday season is not going to be a normal one - the potential for low spending, deep discounts and low profits for the GPS companies. We may not be talking about consumers win, GPS companies take it on the chin here; we may be talking consumers lose, they lose, when we get great deals and then they go out of business.

TomTom just released results and their earnings are DOWN 41% in the most recent quarter. They had discounting, as well as increased costs which led to the drop, but one might say that they needed to discount this way to get inventory moving. In the holiday season last year, they deeply discounted and gained market share as a result, but that always comes at a cost to earnings.

In this Business Week article, it also talks about the market concerns over TomTom's recent renegotiation of their debt load, partially brought on through the TeleAtlas purchase. TomTom just recently renegotiated it's debt, easing those fears, but it's another sign that things are bad.

To be clear, the stock market isn't just punishing TomTom, Garmin is getting hit as well. Not sure where this will end up it the two market leaders are hurting, where does that leave the others?

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Posted by Scott Martin at October 29, 2008 6:34 AM

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