cut its outlook for growth in the personal navigation-device industry Tuesday, although its shares traded higher after the company renegotiated the terms of its outstanding debt.
TomTom, a Dutch company, said that the navigation-device market will probably grow at a slower pace than it originally thought. TomTom now believes about 18 million devices will be sold in Europe and another 18 million in the U.S. in 2008. Previously, it forecast that around 20 million units would be sold in both regions.
Additionally, TomTom lowered its full-year revenue projection to a range of 1.75 billion euros to 1.85 billion euros, down from its previous range of 1.95 billion euros to 2.15 billion euros, mostly due to the dramatic slowdown in consumer spending worldwide.
The revised outlook accompanied TomTom's third-quarter earnings report, which showed that revenue was flat from a year-ago at 428.7 million euros. On average, analysts were looking for sales of 467.4 million euros, according to Thomson Reuters.
TomTom said that, due to worsening macroeconomic conditions, it renegotiated the conditions of the debt it took on in order to finance its acquisition of
earlier this year.
"As part of the renegotiated facilities we also agreed to pay a higher interest rate," the company said. Industry observers had feared the company would breach the covenants, another reason the company's stock has been under considerable pressure.
Shares of TomTom have fallen nearly 90% this year amid the global economic slowdown, as margins have been compressed due to lower average selling prices of its devices. In morning trading in Europe, the stock was up more than 4%.
On the positive side, TomTom said gross margins improved sequentially, rising to 56% from 50.2% in the second quarter, although that was still down from 57.6% in the year-ago quarter. The company sold 2.52 million personal navigation devices, an increase of 17% from a year ago but down 18% from the previous quarter. The average selling price of devices fell 26% from a year ago, the company said.
TomTom didn't offer any guidance for 2009, although the prospects of shrinking consumer spending has left many analysts fearing the worst for navigation-device makers. According to Thomson Reuters, analysts have ratcheted back next year's earnings targets by nearly 9% in the last month.
Investors will now wait to see what
will say when it reports its results Wednesday. The Cayman Islands-based navigation-device maker is expected to post a profit of 84 cents a share on revenue of $865.6 million, according to analysts.
Shares of Garmin were lately up 3.7% to $21, but the stock has dropped 79% for the year to date.