TomTom 2013 Annual Report Download - page 5

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understanding of the market. The new structure provides us with
a portfolio view, which enables informed resource allocations.
Our products are all 'software intensive' in the sense that customer
value derives to a large extent from the software we develop. This
makes software development effectiveness the dominant
determinant of our R&D effectiveness. However future
uncertainties unfold, a stronger software development capability
will leave TomTom in a better place. We have a long-term on-going
initiative to improve our software development practices in many
areas, which is bearing fruit.
We are increasingly assessing the quality of many of our software
systems using third party assessment tools, which measures
software quality by analysing source code that can be benchmarked
with more than 600 projects from participating companies. I have
been pleased to note steady improvement in our quality. At the
time of writing, we have the top ranking for small-sized projects
(less than 100K lines of code) and our navigation engine (NavKit) is
ranked second in the big-sized projects (more than 500K lines of
code).
Our investments in our new map making platform, which started
in 2011, are fundamental to our future. This platform is
transforming our digital map process from a quarterly batch
process to one in which our map is continuously releasable and
which can process sensor and crowd-sourced data from our own
and customer applications in near real-time. The new platform has
a good fit with the incremental update capability of the NDS map
format. It is also well suited to address the emerging trend for highly
automated driving, leading eventually to autonomous driving,
which makes challenging demands on map resolution and
freshness.
We are investing to reinforce our leadership position in real-time
traffic, which is now available independently of our connected
navigation application, and which delivers quicker journeys than
competing applications.
We continue to invest in our navigation software, now with much
greater efficiency owing to the elimination of multiple variants.
During 2014, our connected navigation application will support
NDS maps and demonstrate that map error reports can efficiently
and routinely produce updates within days, combining the benefits
of an on-board map with an up-to-date map.
There is a synergy between serving Automotive OEMs and serving
consumers with our PNDs and smartphone navigation apps. Our
investment in our navigation software is justified principally by
future returns from automotive OEMs, but the same investment
allows us to improve our PNDs by more than would otherwise be
justifiable for a declining category, to increase our market share and
even to hold category decline. The much faster cycle time of our
PND and smartphone navigation apps validates new navigation
features and promotes them to prospective automotive customers.
Having consumer navigation apps on smartphones that can
interoperate with in-dash systems is increasingly important for
automotive customers. Our navigation software is also integrated
into our fleet management system.
Financials
Our balance sheet is solid, and we established a net cash position
mid-way through the year. Our result is limited by our investments
in new product and technologies, such as our new map making
platform and our navigation software for automotive, which are
made in the expectation of a good return in the future.
Outlook for 2014
In 2014, we expect continued growth in our fleet management
business, to announce new deals with automotive customers, and
to establish a multiproduct consumer business. We expect our
leadership position in traffic to translate into new traffic deals. We
will have a rationalised, cost-effective PND range in Europe and
North America, which will continue to improve from our on-going
investments. By the end of 2014, we expect to have substantially
completed the first version of our new map making platform and
to have an NDS-based connected navigation application that keeps
its on-board map up-to-date and which delivers a better user
experience than any competing system.
I would like to thank all our stakeholders: our shareholders for their
continuous support in our journey in this dynamic and fast-moving
industry; our customers who give us valuable feedback and the
drive to improve ourselves every day; and finally our employees for
their dedication and hard work.
Harold Goddijn / Chief Executive Officer, TomTom NV
CEO Letter / Continued
ANNUAL REPORT AND ACCOUNTS 2013 / 5