TomTom announces a weak Q1

TomTom announced yesterday lower than expected revenues in the first quarter, with an operating margin ranging between 0% and 10% (instead of the usual 20%).

This is not surprising given the impact of the price war we have been seeing in the recent months. The prices and margins of entry level PNDs are plumeting, while still making for the biggest part of the market.

What does it mean ? To our opinion, it indicates even more than PND manufacturer need to :
1) beef up their PNDs with additional services that can be sold to end-users, and generate revenues through subscriptions (e.g. traffic, weather, speedcam, gas prices, parking availability, etc)
2) convince PND owners to buy higher-end models to benefit from these services

Traffic information is clearly one example of a service that people will pay for, and it is no surprise TomTom has been closing a number of agreements with Vodafone in this respect. But as more connected PNDs hit the market this year and in 2009, we expect PND manufacturers to be very creative and launch a number of value-added services that will make a difference. And NAVX will actively contribute to this business :-)