UPDATE: TomTom And Logitech Warn On Device Sales
21 January 2009 - 12:36AM
Dow Jones News
By Steve Goldstein
LONDON (Dow Jones) -- Bleak news came from two European
consumer-electronics firms on Tuesday, with
portable-navigation-devices maker TomTom warning on sales and
operating profit and computer-mouse maker Logitech International
reporting a 70% profit slide for its fiscal third quarter.
TomTom said it now expects fourth-quarter portable navigation
devices, in both Europe and North America, to fall one million
units short of estimates, and also said it's looking to write down
the value of a mapping firm it bought over the summer.
The rival of Garmin (GRMN) said its market share, however, was
"strong," at 46% in Europe and 24% in North America. In the third
quarter, TomTom had a 45% market share in Europe and more than 20%
in North America.
Still, the company said it would have to lower its revenue and
margin guidance. After previously estimating annual sales at 1.75
billion to 1.85 billion euros on an operating margin between 20%
and 24%, TomTom now expects sales of 1.66 billion euros to 1.68
billion euros on margins between 19% and 20%.
It's the second time that TomTom has lowered sales guidance for
2008.
TomTom also said it's carrying out an impairment review of Tele
Atlas, the digital-map maker it bought in June for 2.9 billion
euros after outbidding Garmin.
"TomTom is in the process of carrying out an impairment review
and our preliminary assessment is that due to the changed macro
environment we can no longer fully sustain the full valuation of
the acquired business of Tele Atlas as established at the time of
the acquisition," the company said.
The warning didn't exactly leave investors floored as the
recession in the U.S. and Europe hits consumer-electronics makers
around the globe. The stock, in fact, rose nearly 8% on Tuesday,
though it's down more than 85% over the past 12 months.
Separately, peripherals producer Logitech (LOGI) issued its full
results after a warning in early January, with the Swiss-American
firm reporting a 70% drop in third-quarter profit.
For the quarter ended Dec. 31, Logitech earned $40.5 million, or
22 cents a share, compared with $133.6 million, or 71 cents, in the
year-earlier period. Sales fell 16% to $627.5 million from $744.2
million.
Hurting gross margin were "a significantly stronger dollar and a
retail environment that was highly promotional, particularly in the
Americas," President and Chief Executive Officer Gerald P. Quindlen
said in a statement.
The executive added: "All indications point to an even weaker
retail environment in the coming months. Consequently, our plans
assume that in [the fourth quarter] we will see year-over-year
declines in sales, operating income before restructuring charges,
and gross margin that are similar to or worse than the
year-over-year declines" of the third quarter.
Analysts at Dutch broker SNS Securities said that looking at
Logitech's results, TomTom's warning probably was due more to
flagging prices than to volume.
"Although investors may be worried about the first quarter,
especially given Logitech's statements about that quarter, there
may also be a sense of relief that TomTom has been able to generate
an (operating) margin of between 19% and 20%," they noted.
Investors weren't as pleased with Logitech, with the stock
shedding 9% to take 12-month share-price losses to 55%.
Sales missed analyst estimates by 10% and its operating profit
fell nearly 50% below analyst views.
"Logitech is clearly hit badly by the economic downturn as
consumers hold back tightly on spending. As no end is currently
seen to the crisis, we expect negative news flow to continue and
will likely see several quarters of negative sales and profit
development," said analysts from Swiss brokerage Vontobel.
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.