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TomTom: Privacy Please

by Roger Lanctot | Feb 06, 2019

TomTom's earnings call at 9 a.m. this morning should be an attention grabber coming, as it does, on the heels of selling off its telematics division for €910M, or a little over $1B. TomTom CEO Harold Goddijn was evasive in the last earnings call regarding the company's plans for the proceeds.

SeekingAlpha reported the essential exchange between Goddijn and Francois-Xavier Bouvignies, equity research analyst at UBS Investment Bank, as follows:

François-Xavier Bouvignies

"Okay. And just another one on telematics, against more on the strategic side and more long-term. The question I had is, why now? Because you said that you have a lot of interest – and correct me if I’m wrong – it has always been an interesting assets. So, I would be surprised that you have much more interest than in the past.

"And the second part of the question is, if you do something with it the potential sale, which is a part of the options, I guess, what to do with the money because you will have more than €200 million net cash on your balance sheet at the end of the year, assuming a proceed of this telematics. I guess it will be a lot of money. So, just what’s the plan?"

Harold Goddijn

"Yeah. So, we’ve always been aware, of course, that telematics was a valuable asset. And we have had, as you say, inbound calls for a number of years. We’ve always looked at –carefully, we looked at again beginning of this year. We had some strategic review. We looked at further opportunities for synergy, and we came to the view that this was probably the right time to have another look. It’s a larger business now than a couple of years ago, reaching €200 million in revenue at some point. It’s growing. We completely renewed it. It’s in tip-top shape. We renewed a whole software suite. It’s ready for further growth. And I think by separating the business, it becomes – TomTom will be comfortable. So, a clearer story and a more focused business that is easier to operate and perhaps also easier to explain what it is we’re doing. So, I think it's the right thing to do it now. It’s got now the scale, the market-leading position in all the – most of the European countries where we are operating. And I think it’s the right moment to make that move.

"What we will do with the procedures, I don't want to discuss it. At this stage, we first need to do the transaction, and all sorts of things can happen. But if we have clarity about the deal and deal certainty and the proceeds, we will engage with the shareholders to discuss what’s going to happen with those proceeds."

François-Xavier Bouvignies

"Do you have a precise idea of or idea of what you would like to do with it or – I guess, do you have a plan?"

Harold Goddijn

"Yeah. There’s all sorts of ideas, of course, But I don’t want to discuss them at this stage."

François-Xavier Bouvignies

"But it would be in your core business presumably if you want to, like, mapping and traffic, right?"

Harold Goddijn

"Again, I don’t want to –"

After the sale of the telematics division, TomTom indicated its plans to return a substantial portion of the proceeds to investors. Since the original founders comprise a substantial portion of those investors it led to speculation reported by Bloomberg that the founders may seek to take TomTom private.

"SatNav's Fallen King Gets $1B to Play with" - https://tinyurl.com/yatg8otd - Bloomberg

Today's earnings call should help clarify the situation, or maybe not. What we will hear on the call is a world weary Harold Goddijn, as we have heard many times before, tolerating the barrage of questions from investors and analysts which are either repetitive, regarding the performance of familiar navigation and traffic information assets or unanswerable, regarding the outlook for automated driving.

TomTom, like Nvidia and General Motors and Tesla Motors, has learned and seen that shifting an organization's focus to autonomous driving technology is an unpleasant task to conduct under the scrutiny of financial markets. These activities, with potentially terrifying outcomes in the form of failures - catastrophic (highway fatalities) or mundane (milestone misses) - are best tackled out of sight.

Goddijn's reticence to share TomTom's plans for the telematics proceeds in the previous call now appears disingenuous and points all the more directly toward an effort to take the company private. It has implications, as well, for mapping rival HERE, now owned by a collective of investors and better able to conduct its own affairs in private.

Today's TomTom call should provide some clarity or, if not, more of Goddijn's reluctant responses to repetitive questions. At least no one is asking about a sale to Apple any more.

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