Navigation systems maker TomTom is shedding 10% of its workforce as part of a cost-cutting plan it hopes will help its move into higher-growth markets.
TomTom, which made its name with its personal navigation devices (PND) used in cars, said on Thursday it would cut more than 400 jobs and restructure its research and development departments to cut the time it takes to get products to market, Reuters reported.
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TomTom faces intense competition in its core market and is now targeting higher-growth areas: it increasingly sells navigation devices built into car and truck dashboards, rather than the standalone versions, and sells mapping data and real-time traffic services through smartphone apps and other devices.
TomTom reiterated its cost-savings target for next year, and said its research and development activities would be regrouped into 10 product units, including maps, traffic, navigation, fitness and personal navigation devices.
“The new structure brings more transparency and accountability; makes it easier to make innovation choices and will reduce our time to market,” said TomTom chief executive Harold Goddijn in a statement.
Hans Slob, analyst at Rabobank, told Reuters news of the job cuts and restructuring charge were not surprising but added: “we expect TomTom to target a flat EBITDA (earnings before interest, tax, depreciation and amortisation) for 2012.”
TomTom’s consumer PND unit, its biggest division, is suffering from declining sales and profits while growth at the other units is still far from offsetting those declines.
Spokesman Taco Titular declined to comment on the consumer unit but said some retailers had reported “disappointing” consumer electronic sales in the run-up to the Christmas holiday.
“Q4 is performing according to budget and according to guidance,” he added.
TomTom said it would cut 457 jobs, and would take a EUR14m charge, booked in the fourth quarter to cover cuts.
The firm has struggled for months to overcome slumping demand in PNDs as consumers opt for free or cheap navigation software as well as cooler gadgets like smartphones and tablet computers.
Cellphone maker Nokia, for example, offers navigation free with its Maps app that is free with many of its phones.
