UPDATE 2-TomTom adds Peugeot to navigation supply deals

* Reiterates 2012 outlook

* Q2 group revenue -17 pct, consumer PND rev -26 pct

* Shares soar more than 10 pct

By Roberta Cowan

AMSTERDAM, July 24 (Reuters) - TomTom has agreed to supply French carmaker PSA Peugeot Citroen with digital maps and other higher-margin services, as it seeks to offset plunging consumer sales of its flagship personal navigation devices (PNDs).

The Dutch firm, Europe's largest navigation device maker and one of the top three digital map makers, said the deal could see TomTom's maps, navigation and traffic services offered in as many as 2.5 million Peugeot cars a year from 2015.

The deal comes as Peugeot, Europe's second-biggest car maker, plans to cut 8,000 jobs and close a factory in response to mounting losses.

Peugeot reported a 13 percent fall in sales in the first half of the year to 1.62 million vehicles as it lost ground to competitors such as Volkswagen and Hyundai-Kia in the shrinking European market.

TomTom competes on PNDs with Garmin and in the commercial digital map market with Google and Nokia . It has struggled to overcome slumping demand for PNDs used by car and truck drivers, as smartphones and free navigation software become more popular.

TomTom shares were up 10.6 percent on news of the Peugeot deal, which follows other supply deals with Renault, Fiat and Mazda, and as the company reiterated its outlook for 2012.

"The Peugeot deal is still far away but it is an indication that the company is able to provide competitive products in the automotive section and this reassures investors, in combination with the reiterated guidance," said Maurits Heldring from ABN Amro in Amsterdam.

Speaking to reporters after TomTom reported second-quarter results on Tuesday, Chief Executive Harold Goddijn said: "The deal is a biggy, potentially bigger than (the current deal) with Renault," He declined to give further financial details.

The Peugeot deal includes software and services to be built into car dashboards as part of information and entertainment systems. That is a higher-margin, more lucrative, business for TomTom than the Renault deal which includes built-in hardware.

ABN's Heldring estimates that the deal with Peugeot will add almost 10 percent to TomTom's earnings before interest and tax (EBIT) when the cars with the TomTom services are shipped in 2015.

TomTom reported second-quarter revenue down 17 percent, dragged lower by a 26 percent fall in revenue at its consumer unit. TomTom blamed the lower sales on weak consumer spending, particularly in debt-laden southern Europe and shrinking demand for PNDs.

It said sales of its flagship consumer PNDs continue to be hit by a software bug reported earlier this year.

But TomTom said it is confident of meeting its 2012 targets for around 1.1 billion euros in revenue and around 0.35 euro earnings per share.