TomTom 2010 Annual Report Download - page 34

p 32 / TomTom Annual Report and Accounts 2010
Business
Risks (continued)
Real-time services
We provide real-time services such as HD Traffic, IQ Routes
and dynamic routing to our customers. Our subscription
base in the fleet management business is growing and we
are extending this service to new countries. Through our
website, customers can buy our products and services on-
line. However, should these services not achieve
anticipated levels of demand our results of operations and
financial condition may be adversely affected.
Furthermore, 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.
Together with our outsourced partners for ICT we have
backup and continuity procedures in place; however, these
may not function as intended when, and if, required. It is
not possible for us to plan for every kind of incident or
disaster that we may encounter. This could cause a
disruption to our business activities and interruption
of our services to our customers.
There may be disasters that we are unable to plan for, or
disasters that we are unable to recover from, that could
have a material adverse affect on our reputation, financial
performance and sustainability.
LEGAL AND COMPLIANCE RISKS /
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 of our
intellectual property assets.
We may be faced with claims that we have infringed the
intellectual property rights of others, leading to royalty
costs, licence fees, legal costs, and a restriction on the use
of certain technologies and innovations, and/or an inability
to secure our intellectual property rights.
Map quality
Map quality is integral to delivering the highest quality
navigation experience, irrespective of what delivery platform
is used. This is of key importance to our PNDs, automotive
clients, governmental clients, fleet management clients,
our smartphone navigation solutions and our customers
who license our maps and use them in their products.
We therefore aim to have the highest quality automotive
maps in the industry.
A key aspect of achieving this is the move from producing
maps in a manual fashion supported by technology, to
production with a higher level of automation. Over the
past few years we acquired Tele Atlas (for map data),
Applied Generics (for HD Traffic) and ilocal (for enriched
map content), and additionally we launched Map Share.
In order to facilitate the production of higher quality
maps at lower production costs we established a single
production platform for map development. This enables
us to further automate the integration of our map data
sources, including leveraging our community input, for
the benefit of all our customers.
We are continuing to develop new technologies to expand
our map production capabilities and improve the quality of
our maps. We have shortened production cycles of maps
so that we can have more frequent map updates and
improve the “freshness” of our map. We are continuing to
invest in developing maps in new geographies to expand
our global presence across all our business lines.
We face competition in the map industry from companies
that have greater resources and can therefore afford to
invest more than we can in map production. If these
competitors are able to produce significantly higher
quality maps than we can, it could severely impact the
competitiveness of all our products and ultimately our
performance as an organisation. Furthermore, some of
our competitors have historically been TomTom customers
and can be expected to reduce or cease their licensing
of TomTom maps in the future. As a smaller organisation
we need to be more dynamic, focused and innovative to
make sure our map quality is leading the automotive
navigation industry.
Tele Atlas acquisition
TomTom acquired Tele Atlas in 2008 with the strategic goal
of reducing map production costs and improving map
quality. We improve the quality of our maps by absorbing
community input from our navigation end-users into the
map data creation process. The community input is
gathered via automatic anonymous trace data from devices
in the market and directly through customer feedback
provided by Map Share. The possibility exists that we will
not be able to fully realise the cost and revenue synergies
anticipated from the acquisition, which could lead to a
further impairment of our intangible assets and/or goodwill.