TomTom 3Q earnings fall 41 pct as costs rose

AMSTERDAM, Netherlands - TomTom NV, the Dutch maker of navigation devices, reported a 41 percent fall in third-quarter earnings as its costs rose amid tough competition.

Net profit was 58 million euros ($72 million), down from 99 million euros ($124.01 million) a year ago. Sales rose to 429 million euros ($535 million) from 427 million euros ($532 million) due to to TomTom's acquisition of digital mapmaker Tele Atlas NV in June for 2.9 billion euros ($4.6 billion).

The Tele Atlas acquisition left the company with 1.32 billion euros ($1.65 billion) in debt at the end of the quarter.

Despite the debt load, TomTom revealed it has renegotiated its bank loan, although at a slightly higher interest rate. It must repay 10 percent of the loan at the end of this year and next year.

That eased market fears over TomTom's finances, as analysts and investors had worried declining earnings would put it in danger of defaulting on the loan.

That news sent shares 5 percent higher to 6.04 euros ($7.54) in Amsterdam, although they are still down 88 percent for the year.

"The company feels 'comfortable' with the revised covenants," said Petercam Securities analyst Eric de Graaf, who rates the shares a "reduce."

"The bad news is that they were comfortable with the old covenants at the time as well," he said.

TomTom is the largest maker of navigation devices for cars in Europe. It competes with Cayman Islands-based Garmin Ltd., which is bigger in the U.S. and the rest of the world. Both compete with several low-cost Asian rivals.

TomTom said it had a 45 percent market share in Europe and a share of at least 20 percent in the U.S. in the quarter.

A bright spot in the earnings was that after several quarters of steep price declines, average selling prices for TomTom devices rose 4 percent from a quarter earlier, to 136 euros ($170). That's still 26 percent below where they were a year ago.

The company's research and development, marketing and selling costs all rose.

TomTom Chief Executive Harald Goddijn said it was difficult to predict how the economic conditions will affect the company. However, TomTom cut full-year sales forecasts by 5 percent to around 1.7 billion euros ($2.1 billion).

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