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TomTom sales fall in Q2, but shares surge on news of deal with Peugeot
AMSTERDAM (AP) TomTom NV, Europe's largest maker of navigation devices, reported a return to profit in the second quarter, and its shares surged Tuesday after it announced a supply deal with carmaker Peugeot.
Net profit was 8.89 million ($10.8 million), compared with a loss of 489 million in the same period a year ago, when it wrote down the estimated value of its main business: selling personal navigation devices to consumers. Without the charge, the company would have made around 11 million in the second quarter of 2011.
The company's total second quarter sales fell 17 percent to 262 million; sales to consumers fell 26 percent to 155 million, while sales to carmakers were flat at 60 million. But TomTom's shares rose 14 percent to 3.376 after it said it will eventually supply navigation software for Peugeot. It did not give details.
"Rumors are that TomTom will also announce a deal with Mercedes soon," wrote SNS Securities analyst Martijn den Drijver in a note. He said the second quarter results were "solid."
"Things appear to be looking up in automotive, although patience is required," he said. He rates the shares a Hold.
In June, TomTom struck a deal with Apple Inc. to supply maps for its smartphones. Ironically, competition from smartphones has been one of the largest reasons for the decline in TomTom's business in recent years. The Apple deal temporarily sent TomTom shares up 13 percent, but the companies provided few details and TomTom's shares gave up their initial gains.
TomTom's stock traded above 50 per share before the financial crisis of 2008, but it had taken on too much debt when personal navigation device sales went into decline, and it was forced to issue shares to avoid bankruptcy.
TomTom on Tuesday reported net debt of 191 million, down from 192 million at the end of the first quarter of 2012.