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Dutch-based TomTom, which has a market capitalization of 1.75
billion euros ($2 billion), with no debt and 179 million euros
in cash, hired Barclays in September to conduct a review of its
"Telematics" division with an eye to possible sale.
Working out a fair price for the division, which helps
businesses to save money by using software to monitor and
improve the performance of their car and truck fleets, might not
be straightforward, Chief Executive Harold Goddijn said.
Telematics, which had 43 million euros in sales in the third
quarter, up 6 percent from a year ago, is "a bit of a mystery"
for analysts, added Goddijn, one of the company founders.
The division has grown quietly but quickly in the shadow of a
company better known to consumers for making satnav devices -- a
business in decline -- and to analysts for serving up the
digital maps built into iPhone's Apple Maps app.
With Telematics expected to post core earnings of 60-70 million
euros this year, valuations of the business range hugely, from
700 million euros to 1.4 billion euros. Sell-side analysts
disagree about what multiple of earnings the business, which
seems likely to extend its steady but not spectacular growth,
will fetch.
Getting a good deal for Telematics would help to underpin the
TomTom share price after recent volatility.
"If you look at the sum of the parts and the valuation and
market cap, there is something not quite right and that needs to
be better explained," Goddijn said in an interview this week in
San Francisco.
TomTom, set up in 1991, helped to pioneer navigation devices
mounted on dashboards but now competes with German-owned HERE
and with Google to sell digital maps integrated into the cars'
own software and control panels.
NEXT TURN?
Goddijn declined to say what TomTom will do with proceeds if
Telematics is sold, despite the dramatic change a disposal would
have on the company's profile.
TomTom shares are down 7 percent year to date after Google Maps
entered its key market, supplying navigation and traffic
software to carmakers. Google has so far poached several TomTom
clients including Renault and Volvo.
That's part of a broader pattern of carmakers and tech firms
teaming up as they prepare for a long, expensive transition
toward self-driving vehicles.
This week alone it emerged that Ford and Volkswagen, and Volvo
and Baidu <BIDU.O> are in talks on partnerships to develop and
commercialize self-driving car technology, in which maps will
play an important role.
"It's not clear what the right economic model is going to be
going forward for delivering the next generation of mapping
content to the vehicle: is it best to be independent? Is it best
to team up? It will take time to figure that out," Goddijn said.
He said he was confident TomTom's automotive software sales will
continue to grow in the coming three years, but did not rule out
a takeover or far-reaching partnership with a carmaker or larger
technology firm.
Goddijn and TomTom's three other founders hold a 44 percent
stake in the Dutch company, which some investors fear means the
company would never enter a deal that meant surrendering
effective control.
"There's always a big thing about founders and emotional
attachments and what have you. I want to set the record
straight," Goddijn said.
"We will do whatever is right for the business and the people
and the stakeholders and the customers like any other business,
and we’ll look at how it will evolve. We'll see."
($1 = 0.8780 euros)
(Reporting by Alexandria Sage; Writing by Toby Sterling in
Amsterdam; Editing by Keith Weir)
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