TomTom profits drop 83% due to price cuts

The war for the low end of the GPS market promises to be a bloody one, and it looks like TomTom's suffered the first major injury: quarterly profits at the device maker dropped 83 percent from last year, and the company says it's due to competitive price cuts. TomTom made a net profit of just €7.3M ($11.4M) this quarter compared to €44M ($66.2M) in the year-ago quarter, results which led the company to lower its outlook for the entire year. The company actually sold 50 percent more devices than it did a year ago, but as PND prices steadily fall, it looks like TomTom will have to figure out a new way to pad those margins and refill its piggy bank if that $4.2B all-cash Tele Atlas deal goes through.

[Via TrustedReviews]

[nxtiak @ Apr 28th 2008 1:52PM]

Garmin all the way!
opps wait, we're on the internets..... lemme re-phrase.
Garmin FTW!

[FrankTheCrank @ Apr 28th 2008 1:56PM]

I've owned two Garmin's. The Streetpilot i2 and it's replacement the Nuvi 200. Just awesome. I switched to the Magellan Roadmate 1200 on the cheap but took it back because the Garmin had a better navigation system, the graphics are better and the lady voice talks you the whole way. Unlike Magellans, "ding!". Yuck!

[Johan S @ Apr 28th 2008 2:00PM]

Don't worry, I'm sure the execs are doing OK.

Still, I'd be pissed if I suddenly can't afford a fourth yacht.

[Stem $ell @ Apr 28th 2008 2:05PM]

The company seems to be losing its direction...

[John @ Apr 28th 2008 2:18PM]

Berry funny!

[Ben Bethel @ Apr 28th 2008 2:08PM]

I'm not sure who needs a standalone GPS unit these days... or a built-in one in your car either.... now that a lot of phones are offering GPS turn-by-turn directions, with real-time traffic, I think days are numbered for GPS units, both in cars and standalone.

Now, all we need is a much better camera in our phones (ahem iphone) and I can get rid of all my extra devices: laptop, digital camera, gps, mp3 player, xm radio (last.fm rocks!).... lots of crap will be replaced by the same functionality in mobile phones. the end consumer benefits, as does the planet.

[darkstar @ Apr 28th 2008 3:05PM]

the gps services on phones are charged monthly... like telenav, about 10 bux per month. also, telenav will NOT work if there are no phone coverage. hence, i rather have the standalone gps units. im not using one now though cause my car has one already.

[Jeffrey Picard @ Apr 28th 2008 3:38PM]

Let's see...I could use a phone for navigation and have to hold it in my hand. Of course, the phone has a very small screen compared to my 4.3 inch Garmin and whenever I get a phone call I better hope that I remember where I've got to go because unless I'm on speakerphone I won't be able to look at the map. I'd also most likely have to give up the touchscreen feature since most phones don't have that. I could go on and on but why bother? A phone based service will NEVER replace a stand alone or vehicle integrated GPS system. I really can't understand why some people insist on having every device they own combined into one inferior unit. The only concession I make to this is that my Garmin will also play MP3's. I use this only for audiobooks. It's by no means a replacement for the trusy Video iPod.

[Chad @ Apr 29th 2008 9:40AM]

@Ben, I completely agree. I see dedicated GPS systems going back to the niche market they once occupied due to GPS integration in mobile communication devices.

@Darkstar, Not all services incur a monthly charge. I use Google maps with my Blackberry 8800 on AT&T with their unlimited data plan and the GPS is included.

@Picard, you have some valid points and for some the large screen is a plus but I can attest to the effectiveness of GPS on my BB 8800. The main caveat being you need to be moving to get pinpoint accuracy otherwise it just shows where you are in reference to the closest cell tower. The BB has a speaker phone built in so talking and looking at the screen isn't a problem (not that I would do that while I am driving ;-)

[TIMMAH! @ Apr 28th 2008 2:12PM]

Yeah I like Garmins over Magellan, but they're still the pricey brand names. I now have an Intellinav unit that's been really awesome. I also owned a Nextar C3 which I gave to a friend when I upgraded (it's also running Intellinav's software which is based on Navteq maps.) I'd recommend any GPS unit which runs this software as it's very good and is pretty easy to use.

[Chrispy @ Apr 28th 2008 2:13PM]

If they made $11.4M in one quarter compared with $66.2M for all of last year, isn't that a decrease of only about 31%? Either the 83% figure is wrong, or else the article is written inaccurately.

[chuffpdx @ Apr 28th 2008 2:30PM]

Basic math:
66*.83=54.78 (ie. 83% drop from year ago quarter)
66-54.78=11.22

[John @ Apr 28th 2008 2:32PM]

First of all, the conversion is off for the €44M figure (it should be $68.7 million USD according to Google).

Secondly, where are you getting a 31% decrease?

100-(11.4/66.2)*100 = 82.8%

Maybe that's the incorrect formula, but that's where they got the number from.

[Hawk21 @ Apr 28th 2008 2:50PM]

66 million for first quarter last year, not for all of last year.

[Chrispy @ Apr 28th 2008 4:31PM]

"66 million for first quarter last year, not for all of last year."

That makes sense. It looks like the original article has been updated too.

[Steffen Jobbs @ Apr 28th 2008 2:35PM]

I guess the guys making the TomToms are getting scalped.

[carl @ Apr 28th 2008 2:39PM]

Chrispy,

The article says 66.2M is for the same quarter of last year, not the profit for the entire year. Your math would be spot on if the 66.2m were split up into four quarters.

[Homeboy @ Apr 28th 2008 2:40PM]

Yeah, tell me about them price cuts. When I moved to SoCal last year I bought a used car off craigs list, gave the seller a lift back to where he lives, 20min away from my place. Got lost on the Californian freeways for 3 hours and ended up having to impulsivly purchase a GPS in order to get home. Target was closing in 30 minutes to I stomped in and bought a TomTom ONE for a wopping 399 dollars, this was in February last year. A mere 4-6 months later the device could be had for half the money.

Visiting most online sotres a 150-200 dollar GPS is not an uncommon sight. The market has reached the level of saturation. Price have dropped dramatically during the latest year.

[John @ Apr 28th 2008 3:24PM]

I have a 3rd edition Tom Tom One, I got for 129 at Circuit City after they priced match their online mishap, but after using the TomTom, my dad's Mio, and my friends Garmin, I like the TomTom, then the Garmin (depends on the model but some Garmin's are way better and vice versa) and lastly the crappy Mio. He paid for a Mio with many more features then the other two I played with but it failed at the important task of getting you anywhere without acting like it needed a nap.

TomTom, if you want to make more money, start selling us extra crap we can't live without like Doom .9 (since you are just linux anyway)...

If my passengers could use my TomTom as a TV when we don't need directions it would be much more useful, hint grab a cheapo tuner and stick it in there!

;)

I love the Garmin's ability to have funny icon cursors FTW!

[YouFaceTheTick @ Apr 28th 2008 4:53PM]

Handheld GPS market is becoming disposable. Soon it'll be gone. The integration with phones is nearing 100% and obviously manufacturers can included rudimentary systems in all cars cheaply. If Garmin can sell a text-to-speech GPS system for $200, a car manu can enclose a basic GPS chip, software, touch lcd for about $100 and charge an easy $400 for it install.

[teej @ Apr 28th 2008 5:38PM]

integrated manGPS = free.

[sinai @ Apr 28th 2008 6:53PM]

i see your manGPS and raise you a gas station

[lanejasper69 @ Apr 28th 2008 7:11PM]

I wonder if any of it has to do with Palm?, Tom Tom has sold their palm GPS software for years for Palm and we all know where Palm is headed...just a thought, not pointing any fingers, but the TomTom support team has always been right on for me, shame to see them hurting but i think most tech companies will start showing signs of this as our econmoy is flushed down the toilet. Thanks GW!!

Faslane

[ecco6t9 @ Apr 28th 2008 7:30PM]

I use to work at Toys R Us that sold Tom Tom's and I kid you not they were on sale from 11/1/07 through 1/30/2008.

[Jonathan B. @ Apr 29th 2008 12:02AM]

I wouldn't be so sure that there weren't other factors at work helping to deplete those earnings figures.

I was one of the many people this past holiday season to purchase a TomTom One 3rd Edition for a reduced price, only to get it home and realize there was no way to bring the unit out of hibernation besides jamming a pen inside to reset it. I mean sure, it was fun looking at "the white screen of death" while the voice-guide continued to mouth off about where you should turn and how far before you got there, but I paid for visuals gosh darn it. :- )

Needless to say they came out with a patch weeks later to fix the software glitch causing the white screens on effected units, but not after what I would presume to be hundreds (at least) of them were already RMA'd.

To research this on your own, just google "TomTom One + white screen". You shouldn't have any problem verifying the story, and digging into the software glitch during the Christmas rush which could have cost them a lot of reputation in a short amount of time.

I do realize that we don't exactly have the results from Q4 of '08 just yet to compare things with ^_^, but this is my two cents.

I'm still pullin' for ya' TomTom!!!!

[Shane @ Apr 29th 2008 9:47AM]

Jonathan:

Love my TomTom ONE 3rd Edition but I got bitten by the 'white screen of death' bug. Was given a brand new one for Christmas (which DIDN'T have the bug) had it destroyed in a car accident (not GPS related) then replaced it with one from eBay. The eBay unit had the glitch but a firmware update fixed it.

[geognerd @ Apr 30th 2008 2:02PM]

Count me as part of the crowd that favors discrete GPS receivers over cellphone GPS receivers. If I drop my phone on the sidewalk or in the toilet, I'm out two devices. Then there's the screensize issue. And I'm probably in the minority for someone who posts on Engadget, but I like my cell phone to only be a cell phone. No PDA, no camera, no sat-nav functionality.