TomTom 2008 Annual Report Download - page 39

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Brand
The company could face factors that negatively affect our
reputation or brand image, such as adverse consumer
publicity, which could have a material adverse effect on
our business, results of operations or financial condition.
We may not be able to sustain or improve the strength of
our brands or may as a consequence experience
difficulty in maintaining our market acceptance.
We are constantly striving to increase awareness of our
brand and strengthen our reputation for providing smart,
easy-to-use, high-quality portable navigation products
and services.
Tele Atlas integration
Since the acquisition date of 10 June 2008 Tele Atlas has
operated under the control of the TomTom Group. The
possibility exists that we will not be able to fully realise
the cost and revenue synergies anticipated from the
acquisition. Integrating TomTom’s technology and data
into Tele Atlas production processes might prove a
challenge.
In order to cope with these challenges Tele Atlas has
been restructured from a regionally focused organisation
to one aligned functionally. It is now a separate business
unit within TomTom. In addition, a new Executive Board
for Tele Atlas has been formed and the former Chief
Executive Officer and founder of Tele Atlas, Alain De
Taeye, has joined the Management Board of the Group.
In order to realise the anticipated synergies and with a
view to integrating Tele Atlas, one single Shared
Technologies centre and a Dynamic Content & Services
centre for all business units including Tele Atlas have
been put in place.
Intellectual property
We rely on a combination of trademarks, trade names,
patents, confidentiality and non-disclosure clauses and
agreements, copyrights and design rights to define and
protect our trade secrets and rights to the intellectual
property in our products. Although we have implemented
protection mechanisms including digital rights
management, these may prove to be inadequate: they
may not extend to all countries in which we operate or
may operate in the future, or may not cover all our
intellectual property assets.
We may be faced with claims that we have infringed the
intellectual property rights of others, leading to royalty
costs, license fees, legal costs, a restriction on the use of
certain technologies and innovations, and/or an inability
to secure intellectual property rights.
OPERATIONAL RISKS
Human resources
The success of our business depends on attracting,
integrating and retaining qualified personnel in all
business units and supporting development centres.
The loss of key members of management could have a
material adverse effect on our business. Furthermore,
if we are unable to retain or increase our pool of talented
personnel to keep pace with our overall rate of growth
our business could suffer.
In order to mitigate this risk we have implemented
policies for attracting and retaining staff, which include
management training and career planning.
24/7 services
We have moved into new markets, diversifying our
product portfolio by rolling out our product offering of
HD Traffic™, IQ Routes™ information and routing, and
our connected navigation solution to business clients
(TomTom WORK) in a growing number of countries.
In providing these services to our customers we rely on
our own as well as outsourced information technology,
telecommunications and other infrastructure systems.
A significant disruption to the availability of these
systems could cause interruptions to our service to
customers, loss of, or delays in, our research and
development work and/or product shipments, or affect
our distributor and consumer relationships. We mitigate
these risks through contracts and by continuity planning
and are constantly striving to improve and strengthen
our internal systems and infrastructure. We have back-
up procedures in place, making use of outsourced
partners, which are closely monitored.
Product quality
We are subject to risks resulting from defects in our
products, as well as returns and warranty expenses.
We develop hardware and software products which may
contain defects in design or manufacturing or other
errors or failures. Material defects in any of our products
could therefore result in decreasing revenues, increased
operating costs and/or the possibility of significant
consumer products liability.
We have introduced extensive failure mode and effects
analysis and finite element analysis at the start of all
projects in order to understand, minimise and manage
the design risks at an early stage. This reduces the risk
of manufacturing, hardware and component defects after
the start of mass production. We set out the guidelines
and manage the quality control procedures for testing
and manufacturing to our specifications and in addition
our contract manufacturers perform quality control tests
themselves.
In order to mitigate the risk associated with product
quality, we have quality assurance and engineering
departments that monitor the quality of our products,
contract manufacturers and component suppliers.