As mentioned in my article Three US- listed Dutch Stocks To Consider, I already considered TomTom as a possible acquisition candidate. TomTom is a leading provider of navigation and location-based products and services. On May 17 Rolfe Winkler from the Wall Street Journal ran an article titled Investors Could Use an Exit Ramp for TomTom, recommending that investors have a close look at TomTom if the acquisition of Waze was finalized by Facebook Inc (NASDAQ:FB).
Facebook and Waze
Waze makes a “social” mapping app for smartphones. Users turn on Waze and as they drive around, roads are drawn. They can tell traffic patterns by how fast people are moving around on the roads via GPS. Facebook Inc (NASDAQ:FB) is committed to local search and Waze would improve Facebook Inc (NASDAQ:FB)’s local search.
With more than a billion Facebook Inc (NASDAQ:FB) users the map could become really accurate, so they could incorporate this into their platform and have their own mapping service.
Google and Waze
Google Inc (NASDAQ:GOOG) has its own Google Maps, but now suddenly they are interested in Waze. Why would Google Inc (NASDAQ:GOOG) want to shell out more than $1 billion for Waze? The most important reason is that Waze’s collaborative, user-based approach to mapping represents a real breakthrough for mobile navigation apps and poses a real threat to Google Maps. In other words, it’s a pure defensive move.
Google Inc (NASDAQ:GOOG) wants to map the whole world but investigated what the real value is. In January, the company commissioned two studies, one from Boston Consulting Group and one from the European firm Oxera, to look at the geo-services industry in the United States and worldwide. The research showed that the U.S. consumers placed a $37 billion value on these mapping services. Charlie Hale, a Google Inc (NASDAQ:GOOG) policy analyst, stated:
”Worldwide, that number jumps to between $150 billion and $270 billion a year and $90 billion in wages.”
Nokia has also its own Navteq’ maps, so that would leave TomTom as the sole independent provider.
For 2013 the company expects the PND market “to decline by 15–20% in volume year over year.“ I believe the PND market is still important for the company but they also need to turn their focus to other products and services. If you look to some numbers you will see that TomTom belongs to the leaders in the PND market. The PND market size in Europe in the first quarter 2013 was 1.7 million units compared to 2.1 million units in the same quarter of last year. The North American market size was 1.1 million units compared to 1.5 million units last year. The company’s market share in Europe grew by 5 percentage points year on year to 51%. In North America our market share decreased by 1 percentage point year on year to 23%.
The decreasing PND market also affected the company’s revenues:
The growth engines could be:
The Licensing business unit leverages content to deliver relevant, fresh and high-quality digital maps, and content, to a wide range of customers. TomTom’s customers range from leading PND manufacturers, Internet companies, mobile phone handset manufacturers and network operators as well as governments and enterprises.
The company’s product range includes maps that cover more than 200 countries and territories globally, with navigable coverage for 109 countries, as well as enhanced content such as Address Points and 2D City Maps. Additionally, the product portfolio includes both real-time traffic products, such as HD Traffic and historical traffic products.
Licensing generated revenue in the first quarter was €30 million (Q4 2012: €37 million).
The Business Solutions unit offers professional solutions for fleet management and efficiency control for commercial fleets.
The main product is TomTom WEBFLEET, a secure online application that allows customers to coordinate movements, dispatch jobs, monitor KPIs and generally manage the customer’s field service operation seamlessly from the office. Business Solutions revenue was €19 million in the first quarter (Q4 2012: €20 million).