TechPulse 360

TomTom is now on the brink of bankruptcy amid heavy borrowing to pay for the Tele Atlas acquisition

Amid a heavy debt load and the global credit crunch, GPS maker TomTom might end up bankrupt.

Today, the Dutch company reported its 2008 financial results posting a $183 million profit on revenues of $2.2 billion.

For the year ending in December, TomTom booked a $1.3 billion impairment charge for Tele Atlas, the digital-map maker it over-paid last year for $3.7 billion.

With a total debt load of $1.4 billion and sales expected to decline in 2009 according to analysts, TomTom might not be able to afford to repay its debt and apply for bankruptcy protection.

“Based upon the group’s plans for 2009, management expects to comply with the loan covenants. However, given the uncertainties in the wider macro-economic environment and their knock-on effect on consumer spending, scenarios can be envisaged where the loan covenants could be breached,” said TomTom Chief Executive Harold Goddijn in a statement.

TomTom expects flat sales in 2009

Looking ahead, the GPS maker – which leads in Europe but lags behind rival Garmin in the U.S. – now expects to sale between 11 and 12 million units in Europe and North America, with revenue for the full year 2009 of between $1.79 billion and $2.04 billion.

An overly optimistic outlook despite the sudden drop of consumer spending. In 2008, TomTom sold 12 million units. Meaning that the Dutch company expects in 2009 to keep revenues and units sold constant with the prior year!

The markets for personal navigation devices (PNDs) – including the GPS devices for cars – in Europe and North America are around 15 million and 17 million units in size respectively.

This entry was posted on Tuesday, February 24th, 2009 at 4:02 am and is filed under hardware, news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.