April 25 (Bloomberg) -- TomTom NV, Europe’s largest maker of portable navigation devices, reported an unexpected first-quarter loss after it took a charge for a software bug and as sales to carmakers dropped.
The net loss was 1.5 million euros ($2 million) compared with profit of 10.6 million euros a year earlier, Amsterdam-based TomTom said today in a statement. Analysts surveyed by Bloomberg this month after the software fault was announced estimated profit of 450,000 euros. Sales fell 12 percent to 233 million euros.
“The economic headwind in southern Europe impacted consumer and automotive revenue in the quarter,” Chief Executive Officer Harold Goddijn said in the statement. “We saw consumer discretionary spending decline,” and car manufacturers responded by reducing production.
TomTom took a provision of 13 million euros in the quarter related to a “leap-year” bug in the software of a GPS receiver provided by a third party, Chief Financial Officer Marina Wyatt said on a conference call. The fault caused some TomTom products to stop functioning properly after March 31. The charge hurt adjusted earnings per share by 5 cents.
“The costs related to the bug are much higher than I expected,” said Jos Versteeg, an analyst at Theodoor Gilissen, who said he had “penciled in a couple of millions” in charges in his estimate. “If you take out the impact, the results weren’t that bad at all.” Versteeg recommends holding TomTom stock.
TomTom rose as much as 3.2 percent to 3.59 euros and was trading up 2.9 percent at 10:52 a.m. in Amsterdam, reversing a drop of as much as 6.6 percent earlier today. The stock has fallen 43 percent in the past 12 months.
The company, which once dominated the navigation industry before Google Inc. and Apple Inc. took market share with similar services on smartphones, is trying to boost sales of built-in navigation systems for vehicles as well as electronic maps and other software.
TomTom extended a partnership during the quarter with Renault SA, France’s second-biggest carmaker, for a multimedia system and signed a deal for the Chinese market with Qoros Auto, which will equip its cars as of 2013 with TomTom products.
“We are in talks with more carmakers, from Europe, the U.S. and China, about products for the Chinese market,” Goddijn said in an interview by phone. TomTom is unlikely to see a gain in revenue from the Chinese agreement before 2013.
Goddijn initiated an overhaul last year that includes cutting 457 jobs, or about 10 percent of the workforce, with the aim of saving 50 million euros in 2012.
The company reiterated a forecast today that sales will fall to about 1.1 billion euros in 2012 from 1.27 billion euros in 2011 and that adjusted earnings per share will drop to about 35 cents per share from 55 cents.
Goddijn declined today to comment on a report by Dutch magazine Management Team on April 20 that TomTom may delist its stock as the four founders, including Goddijn, were said to be considering making an offer for the remaining shares. TomTom shares jumped as much as 24 percent that day.
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