TomTom N. V.

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TomTom N. V.

Rembrandtplein 35
Amsterdam, 1017 CT
Netherlands
Telephone: (+31) (20) 850 0800
Fax: (+31) (20) 850 1099
Web site: http://www.tomtom.com

Public Company
Incorporated: 1991 as Palmtop Software
Employees: 435
Sales: EUR 720.03 million (2005)
Stock Exchanges: Euronext Amsterdam
Ticker Symbol: TOM2
NAIC: 334111 Electronic Computer Manufacturing; 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 511210 Software Publishers

TomTom N. V. is Europe's leading producer of integrated personal navigation equipment. It is also a developer of software for handheld computers and smart phones. TomTom started out making software for PDAs before progressing to navigation-related applications. Phenomenal success followed the introduction of TomTom's self-contained, easy-to-use personal navigation devices. After years of triple-digit growth, the company was expecting to ship nearly four million integrated devices a year in 2006. However, competition was intensifying with the entry of giant consumer electronic firms into the market. Based in Amsterdam, TomTom has been strongest in Europe; it maintains offices in Germany, the United Kingdom, the United States (Massachusetts), and Taiwan.

PALMTOP ORIGINS

TomTom N. V. was formed in 1991 as Palmtop Software. Its founders were Peter-Frans Pauwels and Pieter Geelen, fresh graduates of Amsterdam University. As the name suggests, the company began by making software for handheld computers. It was most closely associated with the Psion brand, and developed most of the leading programs for the Psion Series 3. One of Psion Plc's executives, Corrine Vigreux, became Palmtop's third partner in 1994. She was credited with helping to bring Palmtop's software to the global market.

Because they were awkward to use and not very powerful, early generations of handheld computers failed to find a wide audience. The 1996 introduction of Palm, Inc.'s cleverly designed Palm Pilot made them not only popular, but ubiquitous, at least among ambitious young businesspeople. Palmtop Software turned its attentions to the new generation of PDAs (personal digital assistants), including those made with Microsoft's operating system. Palmtop began releasing programs under its own brand in mid-1997.

NAVIGATING THE NEW MILLENNIUM

TomTom launched a mobile listing service in February 2000. Installed on WAP-enabled smart phones and PDAs, it downloaded local maps via the Internet. It was capable of planning the best routes whether the user was driving or walking. Information on points of interest (POIs) such as nearby restaurants was readily available, as was relevant traffic data. Mobile phone manufacturer Telefonaktiebolaget LM Ericsson was an early partner in the TomTom service, while the famous Michelin Red Guide was soon tapped for POI information.

Harold Goddijn, formerly managing director of Psion Computers, became Palmtop's leader and acquired a 25 percent shareholding in 2001. Sales for 2002 were up to nearly EUR 8 million, and the company was profitable, with net income of EUR 1.4 million. There were only about 40 employees at the time.

TomTom Navigator software had made its debut in September 2002. This application allowed Pocket PCs to be used as in-car navigation systems; a GPS receiver and compressed digital maps were supplied with the program. An updated version, TomTom Navigator 2, came out within a few months. TomTom posted sales of EUR 39 million and net profits of EUR 6 million for 2003.

INTRODUCTION OF GO: 2004

TomTom unveiled a portable, self-contained auto navigation unit called GO in the spring of 2004. The simplicity of the GO product found enormous popular acceptance in the market. While many car navigation units required auto manufacturer or dealer installation, GO was shipped ready for use out of the box. Its appeal extended beyond PDA users and tech-minded gadget junkies. The GO launch was followed a few months later by the debut of MOBILE software, which converted the new generation of smart phones into auto navigation units.

Profits and sales both quadrupled in 2004. TomTom had net income of EUR 28 million ($40 million) on revenues of EUR 192 million ($263 million). GO accounted for about 70 percent of sales. The company claimed almost one million customers in 16 countries. Most of its business was in Europe, but it was also quickly building a presence in the United States, with the GO products being carried by CompUSA and major online web sites such as Amazon.com. Circuit City stores were added in 2005. Still, the United States then accounted for just 3 percent of TomTom's total sales.

GO was TomTom's first step into manufacturing consumer electronics devices, as opposed to just software. The company managed the transition by outsourcing non-core functions.

PUBLIC IN 2005

The fast-growing company capitalized on its momentum by completing an initial public offering (IPO) on the Amsterdam Stock Exchange in May 2005. The offering, Amsterdam's largest in five years, raised about EUR 469 million ($587 million). According to The Deal.com, TomTom had not previously tapped any venture capital funding. The company was valued at nearly EUR 2 billion after the IPO. The four partners who had owned the company before the IPO continued to hold a majority of shares. (Before going public, the company had been known for a time as Versalis Group BV, but was renamed TomTom Group BV in May 2005. This was merged into TomTom Nederland BV, which was then converted into TomTom NV.)

While TomTom was growing phenomenally, the consumer electronics business it entered was fickle and extremely competitive, warned analysts. Price competition from new rivals was already putting pressure on the company's operating margins. In addition, more new cars were being shipped with GPS units already installed.

TomTom managed to crack into the OEM market. It signed deals to supply navigation units to Opel, Toyota, Lancia, Citroen, Chevrolet, Smart, and Nissan. These for the most part were not factory installed systems, though special products were developed for Toyota and Opel.

COMPANY PERSPECTIVES

Company Perspectives: TomTom helps people find their way. We use the very latest technology to do this, building it into all-in-one navigation solutions, handheld computers and Smart-phones. The company was founded in 1991 in Amsterdam, and has grown to supply a market that spreads across the whole of Europe and North and Central America. Our navigation solutions are now used by close to a million customers in 16 countries and 18 languages. We love what we do, and are continually exploring new and better ways to help mobile people reach their destinations quickly, safely and as easily as possible.

TomTom was already lowering its prices to cater to a wider market. A top-of-the-line, full-featured GO navigator could cost almost EUR 900 ($1,070), but the company's budget-oriented ONE series, brought out in October 2005, was priced at just EUR 400 ($475). The ONE would be supplied with a line of economy cars produced by Spanish automaker SEAT, as well as the Spanish version of Ford Motor Co.'s Fiesta. TomTom had also developed a product for motorcycles and scooters called RIDER.

TomTom acquired Datafactory AG in September 2005. Headquartered in Leipzig, Germany, Datafactory produced web-based solutions for tracking vehicle fleets. It had 30 employees and sales of about EUR 5 million ($6 million) a year. Datafactory's logistics-oriented systems were the basis for TomTom's WORK line, introduced in April 2006.

TomTom was developing relationships with mobile phone companies, though this proved more difficult than working with auto manufacturers. The company did sign up to produce the hardware for a new navigator device from MapQuest Inc., a leading mapping software company in the United States.

The company shipped two million units in 2005; by the end of the year it had grown to more than 400 employees. Revenues rose 275 percent to EUR 720 million. Net profit of EUR 143 million was up 411 percent. TomTom was aiming to pass the EUR 1 billion mark in 2006 in spite of supply problems in the second quarter. It was expecting to sell nearly four million navigation devices.

NEW FEATURES, CHALLENGES IN 2006

CEO Harrold Goddijn told AFX News that with up to 30 companies making personal navigation devices, the market was ripe for a shakeout. TomTom was the clear leader in Europe, with a 50 percent or better market share, but in the United States was far behind Garmin Ltd., the well established leader. The business had reportedly already attracted the attention of Dutch consumer giant Royal Philips Electronics NV.

TomTom was facing some legal challenges. Garmin was suing the company for alleged patent infringement. TomTom lost a similar case in the United States to National Products Inc. and was also being sued by San Francisco's Next Innovation LLC.

New products and features were being announced on nearly a monthly basis. A new line of network-based services, called PLUS, was introduced to provide live traffic information and weather news. The ability to locate friends was one of the features TomTom was including in an updated European version of the RIDER product. (A unit of Italy's Piaggio Group SpA began supplying the RIDER with its Norge 1200 GTL model in May 2006.) The GO series was updated with the GO 910, which added a larger screen, more memory, and the ability to read out street names. It could also play mp3 audio files.

Scotland's Applied Generics Ltd. was acquired in early 2006. This added technology for providing real-time road traffic information gained from cell phone networks. Applied Generics had a staff of 18 and annual revenues of about EUR 1 million. TomTom was looking to China and Taiwan as future growth markets. It made navigators that were adaptable to the millions of bicycles there, as well as the increasing number of automobiles.

PRINCIPAL SUBSIDIARIES

TomTom International BV; TomTom Sales BV; TomTom Inc. (U.S.A.); TomTom Software Ltd. (U.K.); TomTom Asia Ltd. (Taiwan); Drivetech Inc. (Taiwan); Datafactory AG (Germany); Applied Generics Ltd. (U.K.).