TomTom to Cut Jobs, Aims to Speed Product Launches
"The new structure brings more transparency and accountability; makes it easier to make innovation choices and will reduce our time to market. I am confident that our customers will start to see the benefits and a higher pace of product introductions as soon as 2012," Mr. Goddijn said in a statement Thursday.
AMSTERDAM—Navigation equipment maker TomTom NV Thursday detailed plans to cut costs, including shedding around 10% of its global work force and reorganizing its research and development, aiming to reduce the time it takes to launch new products.
TomTom, which is trying to offset a slump in sales from personal navigation devices, or PNDs, by cutting costs and boosting sales of other products and services, said it will cut 457 jobs, 255 of which will be redundancies, from a total work force of about 4,000.
TomTom said it will also reorganize its centralized R&D activities into 10 product units to improve its return on investment and increase the control its sales force has over what is being developed based on customer feedback, a spokesman said.
To achieve the previously-announced €50 million ($66 million) in annual savings, TomTom, which competes with Cayman Islands-based Garmin Ltd., will take a €14 million charge in the fourth quarter, mainly related to the job cuts.
The company has faced a mounting challenge from free navigation and other location-based services on smartphones, and has shifted focus to higher-margin add-on services such as live traffic updates. It also pushed to grow in the in-car navigation segment, striking deals with several large car makers.
But it has continued to struggle.
When TomTom was listed in 2005 it was valued at close to €2 billion, but shares hit an all time high of €70 at the end of 2007, but spiralled downwards as it overstretched its balance sheet when it bought digital map-maker Tele Atlas in 2007 for €2.9 billion.
In 2012, the company's operating expenses should decline by about €35 million from this year's estimated €540 million, it said Thursday. Capital expenditure is expected to drop by about €15 million in 2012, compared to guidance of €80 million in 2011.
TomTom Chief Executive Harold Goddijn recently said he doesn't expect the decline in PND sales to accelerate next year, after a 19% decline on an annual basis in the third quarter, but he said much would depend on fourth-quarter sales figures, which are crucial for consumer electronics because of the Christmas holiday shopping season.
"The new structure brings more transparency and accountability; makes it easier to make innovation choices and will reduce our time to market. I am confident that our customers will start to see the benefits and a higher pace of product introductions as soon as 2012," Mr. Goddijn said in a statement Thursday.
TomTom's restructuring comes as no surprise and the €14 million charge is relatively low, said Hans Slob at Rabobank, adding he expects the company to target flat earnings before interest, taxes, depreciation and amortization, or Ebitda, for 2012 compared to his estimate of €236 million for 2011 and €299 million in 2010.