TomTom 2012 Annual Report Download - page 4

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TomTom Annual Report and Accounts 2012
2
Technology
—
At the beginning of the year we introduced a new R&D structure
consisting of 11 product units. The new structure reduces
the interdependencies between our technologies, allowing
innovations and products to be brought to the market faster.
Our map, traffi c and navigation product units form the heart of
our new R&D structure. We have directed much of our investment
to these technologies over the past couple of years. The
advancements we are making with innovation in these areas will
be fundamental to the long term success of the company.
It is part of our strategy to move towards becoming a content,
software and services company. Innovation in our core assets is
enabling us to license core technologies as individual components;
selling map content, navigation software and HD Traffi c as
standalone solutions. In the automotive market as a result we
have positioned ourselves as a supplier of content, software and
services for connected in-dash navigation. We need to take more
steps to realise this strategy, which requires continued investment
in our core assets.
Strategy
—
Our strategy is to restore revenue growth. This will be achieved
through greater growth from non-PND product sales while limiting
revenue decline in the PND category. We have been working on
establishing the foundations for our non-PND related business
since 2007. During 2012 we reached an important milestone in
this regard: over 50% of group revenue was derived from non-
PND sales. The new revenue structure does not compensate for
the declining demand for PNDs, but we are getting closer to that
point. Nonetheless, we believe that PND will remain a meaningful
category in its own right for the foreseeable future. Working with
Nike, we have made a successful step into the fi tness market and
we will build on this positive momentum. Licensing also benefi ts
from our strategy to sell modular components of a content,
software and services company. Business Solutions operates an
underpenetrated market. With its legacy-free, state of art, online
fl eet management platform, its aim is to continue to signifi cantly
outperform the growth of the market as a whole, helped by
alliances in some of its newer markets.
Major business developments
—
Developments in the smartphone industry in recent years have
been dominating the consumer electronics market, and location-
based services have become a core feature on smartphones today.
As one of three global map companies in the world, TomTom is
part of the battle for global smartphone platform dominance.
There are rapid technological developments in consumer
electronics. These are having major impacts in the consumer
space, and the challenge for the automotive industry is to
keep up with consumer expectations. The list of features and
requirements for in-dash infotainment systems has grown, as
have the complexity and costs involved in their manufacture.
This makes it more diffi cult for a single supplier to deliver full
infotainment solutions. To solve this problem, car manufacturers
have been developing their own model-independent platforms,
allowing specialists in certain areas to add specifi c applications
and features to them. TomTom is positioning itself as the preferred
location and navigation services supplier by offering maps, traffi c
and navigation software as stand-alone components which are
easy and cost effective to integrate by tier 1 suppliers and car
manufacturers. Our deal with PSA Peugeot Citroen, who will
include our components in its new infotainment solution, is one
example of early success with our approach to the automotive
market.
Business Solutions is getting increased attention owning to its
consistent strong track record of growth and because of increased
activity in the industry it operates in. We envisage further growth
opportunities beyond fl eet management services and are using
our telematics technologies to enter new areas of business, such
as car leasing and user based insurance markets.
CEO Letter
During 2012 we focused our investment in our core map, tra c and navigation assets which underpin
our roadmap of products and solutions for the future. Our fi nancial performance was in line with
expectations and we generated strong operating cash fl ows.