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A Turnaround Telematics Market Stock

In my recent article I recommended TomTom (OTCPK:TMOAF), and I am still
standing firm.

The gold standard for telematics success is daily relevance. One of the
greatest challenges for companies introducing telematics systems and solutions
is to bring daily relevance to their offerings.

Traffic data is something that is relevant five days a week to a substantial
portion of the working public. Companies that get traffic data right have a huge
competitive advantage not only in providing traffic data, but also for providing
a wide range of data feeds and services. In fact, the very infrastructure
required for delivering traffic data storage and processing facilities and
servers and, in some cases, broadcasting capability is a suitable platform for
providing other telematics services.

For this reason, traffic data providers such as TomTom and Navteq (NVT) also
serve as content and service aggregators. The opportunity to provide additional
telematics services is the brass ring for which traffic data providers are
reaching. It is for this reason these companies are seeking to bundle traffic
data offerings with trafficinfluenced routing, developing mobile apps for
smartphones and connected navigation systems, and other initiatives focused on
moving up the value chain ultimately leading to sponsored content, reviews and
locationaware advertising and promotion.

The daily relevance of traffic data is a powerful elixir for delivering
additional locationaware addedvalue services, including advertising. That why
Google (NASDAQ:GOOG), TeleNav (NASDAQ:TNAV), Nokia (NYSE:NOK), Navteq, Research
in Motion (RIMM) and TomTom are moving quickly to introduce or enhance their
probebased (handset GPS) traffic flow solutions to develop their telematics
business.

The winner(s) to emerge from this marketing scrum will be the company or
companies with the highest quality traffic data. Traffic data quality, in turn,
is determined by a handful of critical factors including data sources,
integration, and delivery. (The quality and nature of the user interface is
important as well, but is the responsibility of the device or service
designer/manufacturer.)

Telematics (software) will become more and more important for navigation
devices companies. The result is a clear transition away from pure hardware
sales to software basedsolutions and revenues. Software will take half of the
total navigation market by 2016, according to ABI Research.

TomTom is poised to be such a winner. It designs and sells route navigation
systems, is global market leader in the sales of portable navigation devices and
is the world leading provider of location and navigation solutions. The company
employs over 3,000 employees worldwide. Over 45 million people daily use its
solutions, be it in the form of dedicated portable navigation devices, indash
car systems or tracking and tracing solutions for fleet management. In addition,
hundreds of millions of people use TomTom digital maps on the internet or mobile
phone.

Last week TomTom announced disappointing FY 2010 results. The company
reported revenue of EUR1.521 billion and diluted EPS of EUR0.49. The company
announced that it expects broadly flat revenues and earnings per share in fiscal
2011 compared with fiscal 2010.

In my opinion there were two reasons that panicked the market:

The market for navigation devices seems to be shrinking quicker than
previously thought. TomTom indicated that though its global market share in
navigation devices grew in Q4 from 46% to 49% as smaller competitors drop out of
the market. But, worryingly though, the market size dropped 23% in comparison
with last year.

This year TomTom expects unchanged revenues and net profit, while the www.christianlouboutinus.com
market was already expecting net profit to rise 10% in 2011. Despite the
reasons for the stock decline TomTom is undervalued for the growth prospects it
has. The market is evolving to support new revenue sources and this will take
some years to occur. By 2014, more than 60% of the installed base will consist
of softwarebased navigation solutions, and the offdeck locationbased services
market will be primarily funded by advertising rather than direct fees.

The company is a takeover candidate with its high amounts of navigation
sector intellectual property. One of the companies that is frequently mentioned
is Apple (NASDAQ:AAPL) because Apple clearly wants to reduce its dependence on
Google Maps.

TomTom strategy to move into the fastgrowing sports and fitness market with a
partnership with Nike (NYSE:NKE) was also a step in the right direction to
diversify their revenue stream.

2011 will be a transition year. A stock price between EUR5.50 and EUR6.00 is
an interesting entry point for a changing company with a strong cash flow and a
healthy balance sheet. The P/E is well below average (