Although it was the world leader in portable navigation devices, in recent years, at the time the market TomTom has dropped dramatically following the advent of smartphones
The company has introduced changes adding new technological products and increasing investments in software localization services and applications of autonomous driving.
This last initiative has captured the interest of investors, especially since car manufacturers and companies technological trying to reduce its dependence on Google, which competes in the same field as their customers. So far this year, TomTom shares have risen almost 80%. An alternative to Google Maps is HERE, Nokia, the owner, could end up selling. HERE it is used in 80% of vehicles sold with navigation system built by companies that rely on their navigation software such as Garmin, TomTom’s competitor in the US.
The increasingly important role of services of navigation, especially in the future of autonomous driving has sparked a battle for control of HERE, which shows the value of this type of business .
It is likely that regulators follow closely any operation that HERE is involved. However, doubts about access to its software have helped spark interest in TomTom: the Dutch company could end up being the only independent provider of content maps. According to Morgan Stanley, TomTom covers about 44 million kilometers compared to 43 million kilometers from HERE.
The next generation of maps will have to include 3D features that are updated in real time and in such technology, HERE and TomTom are far ahead of Google Maps.
There are indications that TomTom is taking advantage of this situation. Earlier this year the company renewed its agreement with Apple, which is also developing driverless vehicles, and contracted mapping services with Volkswagen, among other car manufacturers.
The problem is that the growth of sales in the automotive sector is not expected to arrive until 2016 and actual benefits may take time to materialize. The automotive division of the company is still behind in R & D, and need to improve investment, which could dent earnings.
TomTom still confident the consumer hardware hog more than half of its sales. The market continues to decline. Sales of its sports watch with GPS are also facing tough competition in the mobile technology, with the introduction of Apple Watch.
Against this backdrop, TomTom trades at about 38 times earnings forecasts. With these, it is possible that investors are ahead, as the company has not shown yet that can increase profits.
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