April 23, 2008 / 5:54 AM / 11 years ago

TomTom Q1 profit drop meets forecasts, shares stumble

AMSTERDAM (Reuters) - TomTom (TOM2.AS), Europe’s largest maker of navigation devices, reported a steep drop in quarterly operating profit on Wednesday, in line with analysts’ reduced expectations.

TomTom earlier this month cut its 2008 outlook and indicated that first-quarter sales had fallen from the year-ago quarter and its operating margin had tumbled.

Earnings before interest and tax (EBIT) fell to 9 million euros ($14.26 million) from 57 million euros a year ago, while the average forecast in a Reuters poll of 15 analysts was 10 million euros.

TomTom said it sold 2 million navigation devices in the first quarter for an average selling price of 117 euros.

It is the first time since the fast-growing company went public in 2005 that sales fell year on year, to 264 million euros from 296 million.

TomTom shares fell 3.8 percent to 21.76 euros by 0724 GMT following a 9.5 percent rise on Tuesday after industry and other sources told Reuters the company was expected to win unconditional EU approval to buy its main map supplier Tele Atlas TA.AS in a 2.7 billion euro deal.

The shares are still down about 18 percent since the firm gave the first-quarter sales warning. They peaked at an all-time high of 68.15 euros in October.

TomTom, whose main rival is U.S. market leader Garmin (GRMN.O), repeated it was committed to the Tele Atlas acquisition and was looking forward to a positive outcome of the review by the European Commission.

Responding to concerns that TomTom is overpaying for Tele Atlas, Chief Executive Harold Goddijn told journalists on a conference call that the strategic rationale for the deal was intact.

“This is very important technology — there are only two map databases in the world that can do what is needed, and it is important for TomTom to make better maps at lower cost, expand geographically further and put ourselves at the heart of the navigation and mapping industry,” he said.

The other global map maker, Navteq (NVT.N), has agreed to be bought by the world’s top cell phone maker Nokia NOK1V.HE.

Goddijn said TomTom’s markets were growing strongly and would continue to.

“We have seen price declines in the first three or four years of the existence of personal navigation devices, but the price declines will slow down and the market growth will continue,” he said.

“There is a long, long time of continued profitable growth of the segments we’re operating in.”

Editing by Louise Ireland

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