Time was when a GPS device was the must-have item in any self-respecting gadget-lover’s gear bag. But as years wore on and smartphones began to usurp the location functions, they’ve grown increasingly irrelevant. Sure, they still serve a purpose, but we’ve been advising companies like Garmin and TomTom for years to do some serious self-evaluation if they expect to be around much longer. TomTom appears to have truly taken this to heart, and are taking the appropriate actions.
As CEO Harold Goddijn diplomatically put it after their earnings report:
The PND business is important and will remain an important part of our business and revenue, but the market size in absolute terms is shrinking and we need to adapt our costs, some of which are variable and some aren’t.
In other words, the volume is shrinking fast (sales down 23% just this last quarter) and they can’t afford to be running design and manufacturing infrastructures that were configured with a much larger market in mind.
The new focus will be on automotive and embedded systems. It’s an area where Google (the biggest danger to their business by far) has almost no foothold at all except in a few special cases. Meanwhile people still associate the TomTom brand with location and GPS, and the expansion of such systems into cheaper cars means the market is blowing up. They can ride the wave yet again, growing a new market while iOS and Android devour the old one.
It won’t be a bloodless restructuring, though. Jobs will be lost and shipped overseas, and it’s likely that they’ll have to move to cheaper manufacturing to stay in the black. Meanwhile, shares bounced back a bit on the news, though they’re still an order of magnitude away from where they were a few years.