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Shares in the Dutch company jumped by 17 percent to 7.25 euros
on the news, but that only recovered about half of the one-day
loss suffered last week when Google announced a far-reaching
supply deal with a group of carmakers including Renault, Nissan
and Mitsubishi.
TomTom said it has begun a strategic review of its telematics
division, which helps businesses to save money by using software
to monitor and improve the performance of their car and truck
fleets and has been valued by analysts at about 700 million
euros ($820 million).
Chief Executive Harold Goddijn said the threat posed by Google
played no role in TomTom's decision and the company wants to
concentrate on selling navigation, traffic and other software to
carmakers.
"I want to focus the united company behind that goal, give the
company a clearer profile," he told Reuters. "It's true that
today it's a more bumpy ride, but that's what we like, that's
what we're good at."
LOSING GROUND?
Some analysts have said that TomTom, which is debt-free but
barely profitable, will be relegated to third place in its main
market. They say it will be left trailing behind both Google and
market leader Here Technologies, which is owned by the three
biggest German carmakers.
"That's not a scenario we're planning for," Goddijn said, adding
that carmakers should be wary of becoming dependent on Google
software.
"I'm confident the car industry will get together and say what's
going on here?. The car industry is notorious for not allowing
single-source components into its development chain."
Goddijn said he could not comment on how TomTom would use
proceeds from a sale of the telematics business, but a cash
injection would clearly be welcome for a company that spends
more than 100 million euros a year to maintain and develop its
mapping technology.
ING analysts, who rate TomTom shares a buy, said a sale of the
telematics division could be a precursor to further strategic
moves.
"We believe the door is still wide open for a partnership of
TomTom with an industry player in automotive," they said in a
note, citing Toyota as a possible partner.
TomTom's revenue from map licensing is expected to grow for at
least the coming year, with deals made in 2016 with Volkswagen
and others offsetting a broader decline in group sales because
of its declining satnav hardware business.
TomTom also supplies maps for Apple and Uber.
($1 = 0.8540 euros)
(Reporting by Toby Sterling; Editing by David Goodman)
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