TomTom To Buy Map-Data Supplier Tele Atlas For $2.76 Billion

Tele Atlas provides data that goes into the maps displayed on TomTom's personal navigation systems.

TomTom, Europe's largest car navigation systems maker, said Monday it has agreed to buy map-data supplier Tele Atlas for $2.76 billion in cash, a move that could prove advantageous to Tele Atlas's U.S. rival Navteq.

Under the deal, TomTom would pay about $29.35 in cash for each share of the Dutch company, a premium of 28% over the July 20 closing price. Tele Atlas shareholders are expected to approve the acquisition by the end of the year.

TomTom, also based in the Netherlands, said it planned to operate Tele Atlas as a separate unit. Tele Atlas provides data that goes into the maps displayed on TomTom's personal navigation systems. The acquiring company accounts for about a third of Tele Atlas' sales.

TomTom competes with device makers Garmin and Magellan, while Tele Atlas' key rival is Navteq. Combining the two Dutch companies would change the dynamics of the market, Mike Ippoliti, analyst for ABI Research said. That's because it would probably derail a price war that was brewing between Tele Atlas and Navteq.

Tele Atlas, which recently snatched carmaker BMW from Navteq, was making inroads against its larger competitor. As a result, Navteq was expected to drop prices. But if TomTom buys Tele Atlas, that may no longer be necessary, Ippoliti said.

"Some device makers won't want to use Tele Atlas data, because that would support TomTom," Ippoliti said. "It changes the competitive dynamic for sure, and lowers the possibility of a price war."

Instead, Navteq's biggest value will be that it's independent from TomTom, Ippoliti said. Switching from one map-data supplier to another is easy because navigation systems are designed to compile vendors' map data the same way.

Other companies could be interested in making a counter bid for Tele Atlas. Oppenheim analyst Nicolas von Stackelberg told Reuters news agency that Microsoft could be interested.

TomTom expects the acquisition to lead to better products from Tele Atlas, because the acquiring company can draw on feedback from customers of the millions of TomTom devices in use today. "By integrating customer feedback into the Tele Atlas map manufacturing process, we will be able to considerably enhance the user experience and further increase all Tele Atlas and all TomTom's customers' satisfaction," TomTom Chief Executive Harold Goddijn said in a statement.

On Monday, TomTom reported that revenue in the second quarter was up 37% over the same period a year ago to $524.3 million. Net profit rose 81% to $93.8 million. The company expects revenues this year of between $2.2 billion and $2.5 billion. The company expects to sell between 8 million and 9 million personal navigation devices this year, up from its previous forecast of 7 million to 8 million units.

The largest market for personal navigation systems is in the Asia/Pacific region, followed by Europe and North America, according to ABI Research.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Email This  | 
Print  | 
More Insights
Copyright © 2021 UBM Electronics, A UBM company, All rights reserved. Privacy Policy | Terms of Service