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TomTom banks on partnerships to help drivers escape traffic jams

Tuesday, March 7, 2017 - 19:37

[AMSTERDAM] TomTom NV wants to build more partnerships with infrastructure companies and cities as it carves out its role in a future where autonomous vehicles reduce consumer demand for satellite navigation devices.

The Amsterdam-based mapping company is already working on traffic management systems with engineering giant Siemens AG, roadworks monitoring company Elgin and transport planning specialist PTV AG, and is seeking more such tie-ups, chief executive officer Harold Goddijn said in an interview.

"We don't control the whole value chain, we don't do traffic lights, we don't do big traffic control centers, but we have a lot of smart technology," Mr Goddijn said.

TomTom and its peers have come into increasing focus as the automotive industry races to build autonomous vehicles. With carmakers wary about leaning on tech behemoths such as Alphabet Inc's Google, they have instead turned to others to supply the mapping data essential to developing so-called self-driving cars.

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In 2015 Nokia Oyj sold its HERE mapping business to a consortium consisting of Volkswagen AG, BMW AG and Daimler AG for 2.6 billion euros (S$3.889 billion).

Traffic management systems could become an attractive source of revenue. While at present they are used by cities to manage congestion by controlling traffic lights and other hardware to try to prevent blockages, the advent of autonomous driving means that centralised, cloud-based infrastructure management may play a greater role. 

TomTom currently supplies that technology to places such as Berlin, Zurich and Amsterdam in many cases free of charge, which provides insight to local transport authorities.

In return, the cities supply TomTom with traffic data it can use to improve its products, which it licenses to technology companies including Apple Inc and Uber Technologies Inc. Mr Goddijn said TomTom gets data from half a billion sources each day.

"Uber is very much relying on our technology and our data for routing, for traffic information," Mr Goddijn said. 

"We have a vast amount of data and experience, which helps them to tune their algorithms."

TomTom doesn't have the cash riches of other companies to pile into its mapping efforts. It had 144 million euros in cash and equivalents at the end of December. In contrast, chief rival in the satnav sector Garmin Ltd had US$2.3 billion, Google had US$92 billion and Apple had US$246 billion.

Apple last year opened an office in Hyderabad, India to focus on mapping, creating as many as 4,000 jobs in the city. TomTom's total headcount is 4,700, including 3,100 in R&D roles.

TomTom is not alone in identifying traffic management as a growth opportunity. Panasonic Corp has started testing its technology in Denver. Even as TomTom shifts away from selling the satellite navigation gear on which it has built its business, and moves toward data, software and services, it still generates half of its revenue from hardware.

Mr Goddijn is one of the co-founders and biggest shareholders of TomTom and said he has no desire to sell up. TomTom's four founders jointly own some 45 per cent of the company.  TomTom shares trade at around 8 euros, and are still valued well below its all-time high closing price of 53.56 euros, reached in November 2007.

It hopes to gain shareholder appreciation with its recently outlined strategy goals of growing its business to business enterprise at around a 15 per cent compound annual rate between 2016 and 2020. TomTom's founders, including its current CEO, 25 years later are still the biggest shareholders, jointly owning some 45 per cent.

"Really, I am here to run the show, and run this company as well as I can," Mr Goddijn said.

"That's my duty and eventually that will hopefully translate in a higher share price."

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