TeleNav 2013 Annual Report Download - page 21

Table of Contents
The design and sales cycle for on-board or off-board automotive navigation services and products is substantially longer than those associated
with our mobile navigation services to customers of wireless carriers. As a result, we may not be able to achieve significant revenue from the
automotive navigation business in a short period of time, or at all. For example, design wins for vehicles may be awarded 24 to 36 months prior to the
anticipated commercial launch of the vehicle.
As we have limited experience in the automotive navigation market, we also may not price our solutions in such a way that is profitable for us
and enables us to recoup the development expenses we incurred to provide such solutions in the time we expect or at all. Development schedules for
automotive navigation products are difficult to predict, and there can be no assurance that we will achieve timely delivery of these products to our
customers. To the extent that we charge service fees beyond an initial fee at the time the vehicle is purchased, we may not be successful in gaining
traction with customers to provide services and charge ongoing fees outside of the traditional on-board navigation service model. Our map, POI and
other content costs for our automobile navigation solutions are higher than those we have historically paid for our mobile phone-based navigation
services. If we are unable to improve our margins, we may not be able to operate our automobile navigation business profitably. If we fail to achieve
revenue growth in any of our automotive navigation solutions (whether on-board, off-board or other), we may be unable to achieve the benefits of
revenue diversification.
We introduced Scout, a service that end users can access for navigation and planning with their mobile phones, computers, and cars. We have
not previously offered a planning service or a service that spans different platforms. We cannot assure you that automobile manufacturers and end
users will accept our Scout service or, even if they do, that end users will adopt and use this service, which encompasses services different than our
historical strength in navigation, or that we will be able to generate sufficient revenue from Scout to offset its costs. If we fail to develop innovative
products that automobile manufacturers and end users adopt, our operating results and financial condition could be harmed.
We may be unable to enter into agreements to provide automobile navigation products if we do not offer navigation products that serve
geographies throughout the world or automobile manufacturers and OEMs are uncomfortable with our ability to support markets outside of the
United States. Our automobile manufacturer and OEM customers may choose to partner with providers of location services with extensive
international operations. We may be at a disadvantage to attracting such customers due to our business being concentrated in the United States. Ford
only recently began offering vehicles with our solutions outside of the United States and we may not be successful in those geographies if customers
are uncomfortable with the look and feel of our solutions. If we are unable to attract or retain such automobile manufacturer and OEM customers, our
revenue and operating results will be negatively affected.
Our ability to build demand for our automobile navigation products is also dependent upon our ability to provide the products in a cost effective
manner, which may require us to renegotiate map and POI content relationships to address the specific demands of on-board navigation applications.
Two wireless carrier customers account for a large but declining portion of our revenue and if we are unable to replace this revenue with other
revenue from these wireless carriers or third parties, our revenue and net income would be adversely affected.
We have been substantially dependent on two wireless carrier customers for a large portion of our revenue. In fiscal 2011 , 2012 and 2013 ,
AT&T represented 37% , 35% and 28%
of our total revenue, respectively. AT&T is not required to offer our navigation services. Our agreement with
AT&T expires in March 2014 and during the term of our agreement, we are the exclusive provider of white label GPS navigation services to AT&T.
If AT&T were to terminate its agreement with us or fail to renew or renegotiate the agreement on favorable terms when it expires, we would lose a
substantial portion of our revenue and our business operating results and financial condition could be harmed. Even if AT&T continues to renew our
agreement, we may not receive material revenue from AT&T if its subscribers do not continue to purchase our navigation services. In fiscal 2013,
AT&T subscribers have materially decreased their subscriptions for, and usage of, our paid navigation services and our revenue from our relationship
with AT&T has declined accordingly. We anticipate that AT&T subscribers, and subscribers of other carriers who pay monthly recurring charges for
our services, will continue to decrease their subscriptions for paid navigation services in favor of free or freemium offerings and that our revenue
from our relationship with AT&T will continue to decline. AT&T may determine that the cost of offering our service to its subscribers outweighs the
benefits if the drop off of subscribers continues. Our failure to maintain our relationship with AT&T would substantially harm our business and we
cannot assure you that we and AT&T will be able to reduce subscriber erosion. We anticipate that even if AT&T remains a wireless carrier customer,
our revenue from AT&T will continue to decline substantially during fiscal 2014 and possibly beyond.
In fiscal 2011 , 2012 and 2013 , Sprint represented 41% , 36% and 16% of our revenue, respectively. Effective July 1, 2012, we amended our
agreement with Sprint to, among other things, extend the term of our agreement from December 31, 2012 to December 31, 2015. Pursuant to the
terms of our agreement with Sprint, we are Sprint's preferred supplier of navigation applications until December 31, 2015 and Sprint is required to
use commercially reasonable efforts to feature our navigation services more prominently than other navigation applications on handsets and to
preload certain of our products on certain
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