TomTom loses its way as drivers opt for smartphones

TomTom, the Dutch maker of satellite navigation systems, issued a profits warning which wiped more than a quarter off its value yesterday, as it struggles to compete with the rise of smartphones offering applications that rival its own services.

The company warned of ongoing weakness in consumer electronics markets, with the US personal navigation device (PND) market set to contract by 30 per cent over the year, and the European market by 10 per cent. It now expects full-year revenues of €1.2bn (£1.1bn), with earnings per share between 25 and 30 euro cents.

Its new prediction for revenues was nearly €200m below analysts' expectations, and the statement sent TomTom's stock crashing by 28 per cent in Amsterdam. TomTom also said it was expecting second-quarter revenues of between €300m and €310m at its results on 22 July. Revenues in the same quarter of 2010 were €362m.

Yesterday's profits warning is not the first sign of the company's troubles. Increasingly, motorists are using sat nav software integrated into their phones, rather than buying a separate device. Nokia smartphones and devices running Google's Android software, for example, offer free turn-by-turn navigation.

Yesterday's profits warning was the second setback for the company this year. In Feburary, TomTom reported a 29 per cent slump in fourth-quarter profits to €52m, on revenues down 3 per cent at €516m.

As its consumer market dwindles, it is focusing on deals with car-makers to build its technology into vehicle dashboards – a strategy TomTom said yesterday was "developing as expected". It is also building its business with commercial customers such as shipping companies, as well as its "Live" service, which offers subscribers real-time traffic information.

TomTom was forced to apologise for selling customers' data, such as speed and routes, to the Dutch police, who used it to site speed traps.