‘We’re Not Google’ Won’t Cut It for TomTom
(Bloomberg Opinion) -- TomTom NV’s pitch to customers is simple: It’s not Google. Yet as jittery as carmakers might be about letting the Alphabet Inc. unit into their vehicles, investors are wary that the Dutch mapmaker is struggling to keep pace with the Silicon Valley behemoth. They have good reason to be concerned.
Once known for its satnavs, TomTom is competing to create the best high-definition maps for the nascent self-driving car industry. Autonomous vehicles need far more detailed data than humans because GPS is only accurate to within about 16 feet — the difference between driving down the sidewalk or the road.
TomTom’s announcement on Tuesday that it had lost Volvo Cars as a customer helped to send the shares down by as much as 15 percent. The Swedish carmaker instead plumped for Google’s Android Auto system earlier this year. That follows a similar move by the Renault-Nissan-Mitsubishi Alliance last month.
Carmakers may be wary about teaming up with the tech giants. They know what happened to cellphone-makers when Silicon Valley came calling, and don’t want to become the makers of vehicles while Google develops all the software and reaps all the value. But TomTom’s selling point only holds up if its product is as good as Google’s. The recent customer losses suggest it might not be — and it lacks its U.S. rival’s funds to improve it.
TomTom shares are down by almost 50 percent since 2015, when the 2.8-billion-euro ($3.2 billion) purchase of HERE by a group of carmakers stirred optimism that TomTom might become a takeover target too. Now, most of those with an interest in HD mapping have pursued other options.
Apple Inc. and Google are developing their own. Robert Bosch GmbH, the world’s biggest automotive supplier, has invested in HERE alongside Volkswagen AG, BMW AG, Intel Corp., Daimler AG, Continental AG and Pioneer Corp. Meanwhile, Softbank Group Corp., a major backer of self-driving technology, has invested in Mapbox Inc., and is likely to encourage portfolio companies including General Motors Co.’s Cruise unit to use the startup’s offering.
Have TomTom CEO Harold Goddijn and his co-founders, who between them own 44 percent of the company, missed the boat?
The best moment to capitalize on the mapping business as an asset seems to have passed. Management is now finally taking some steps to placate shareholders: The company said last month it’s considering a sale of the telematics business, which lets companies monitor and manage fleets of vehicles. That could raise as much as one billion euros, according to UBS analysts.
The funds could be reinvested in the mapping business, returned to shareholders, or a combination of the two. That would placate shareholders for a while, and fund development of its HD maps — but it wouldn’t resolve TomTom’s fundamental problem: It lacks a deep-pocketed parent and needs to keep its customers locked in. Investors sitting in the back seat have every reason to question their navigators’ sense of direction.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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