TomTom considers telematics disposal to navigate Google challenge

By Toby Sterling

AMSTERDAM (Reuters) - TomTom is considering the potential the sale of its telematics division, a secondary but profitable business line in fleet management, the Dutch navigation company said on Thursday.

The announcement underlines TomTom's determination to push ahead with its vision of remaining a major supplier of digital maps, traffic data and other information to carmakers despite competition from larger rivals.

TomTom's shares dropped 24 percent on Tuesday last week after Google announced a far-reaching deal to supply software including Google Maps to TomTom customer Renault.

Analysts said competition from Google will relegate TomTom to third place in its main market and heralds an era of lower margins in its maps business. The leading supplier of maps to the automotive industry is HERE Technologies, owned by the three biggest German carmakers.

 

TomTom said it had conducted a "diligent review" of telematics over the summer and had received "several expressions of interest". It said it would now conduct closer examination of strategic options for the division, including a possible sale, with the support of Barclays investment bank.

The telematics business, which helps businesses save money by using software to monitor and improve the performance of their car and truck fleets, has been a bright spot for TomTom in recent years and posted 2017 core earnings of 59.1 million euros ($69.1 million) on sales of 126.3 million euros.

That compared with a group-wide net loss of 204 million euros on revenue of 903 million euros as the popularity of dashboard-mounted GPS systems continued to wane.

The company expects group sales to fall further this year, to about 825 million euros.

TomTom invests more than 100 million euros annually to improve its mapping and supporting technologies. Though the company is debt-free, analysts question whether it can generate enough cash as an independent company to fund the investment needed to remain competitive against Google, HERE and others.

($1 = 0.8549 euros)

(Reporting by Toby Sterling; Editing by David Goodman)