TomTom Back On Track – US-FOREX.US
Dutch navigation device specialist TomTom has had a tough time over the past 12 months, thanks to its hefty debt pile from acquiring Tele Atlas in 2007 and a depressed consumer environment. The company’s stock is still down 90% from its peak in late 2007. But a set of strong second-quarter results boosted hopes of a turnaround on Wednesday, as promising new products and a successful rights issue also worked their magic.TomTom said Wednesday that it had swung back to a profit of 30 million for the second quarter, after a tough first quarter that saw it report a loss of 43 million. This was partly thanks to job cuts and cost control, but also because TomTom managed to ship 73% more navigation devices than in the first quarter and at a higher price on average of 112 euros . Unlike in the first quarter, when retailers were in de-stocking mode and prices were sliding, TomTom enjoyed a more optimistic environment and appetite for new products. Shares of TomTom
jumped 7.8%, or 48 euro cents , to 6.77 euros , during morning trading in Amsterdam. On a year-over-year basis, earnings were still down 43%, and sales down 24%. The share price has lost 62% over the year. But over the past three months, in tandem with wider investor optimism across global stock markets, the stock has gained 46%.”The numbers were better than expected,” said Eric de Graaf, an analyst with Petercam. “But most importantly, it looks like the emphasis has shifted from financial problems back towards operations.” He upgraded his recommendation on the stock Wednesday, to “buy,” from “add.”TomTom’s finances, weakened by its purchase of Tele Atlas, have kept the stock under pressure since the subprime crisis left credit markets gridlocked in late 2007. But TomTom successfully raised 400 million euros from shareholders on June 14, and said on Wednesday this would bring its net debt level down to 672 million euros , from 1 billion euros . The company is also generating more cash, with cash flow from operations at 98 million euros for the second quarter, almost double last year’s levels.So what’s next for the device manufacturer? Early reactions to its new units fitted in cars made by Renault
have been “encouraging,” says TomTom, and a forthcoming application for the Apple
iPhone should help as well.