Dutch navigation-equipment maker TomTom NV announced on Tuesday, June 12, that it will provide maps for Apple Inc.'s newly unveiled mapping service, the Wall Street Journal reported. The deal may help the Dutch company boost its declining sales of traditional satellite-navigation gadgets.
TomTom said it has signed a global agreement with the Cupertino, California-based tech giant for maps and related information. The company did not provide additional details, but the news of the agreement drove TomTom stock 15 percent higher in early trading. The news of the new deal with Apple comes a day after the iPhone maker announced at its annual Worldwide Developers Conference (WWDC) that it will ditch Google's Maps business as the default navigation system on its iPhones and iPads. Apple said the service that will replace Google Maps has a mode for viewing areas in three-dimensions, as well as a local search service and turn-by-turn directions for in-car use.
Major Win for TomTom
According to analysts, the deal is a significant step forward for TomTom, which has seen its sales of its personal navigation devices (PNDs) decline. The gadget maker's standalone satellite-guided direction-finding devices, satnavs for short, drove TomTom's rise, but now they are the reason for its trouble. As direction-finding software is now available on smartphones and tablets, TomTom has experienced a long-term decline in sales of standalone satnav devices.
"The deal with Apple is a boost for TomTom because of the huge installed base of Apple product users and because of the brand and all that it stands for itself: innovation, ease of use and quality," said SNS Securities analyst Martijn den Drijver, as cited by the Wall Street Journal.
Financial Implications
The analyst, however, added that the financial implications are not so clear, because the deal could affect sales of TomTom's navigation application in Apple's iTunes store, and potentially hurt PND sales.
Following news of the new deal with Apple, Robobank upgraded TomTom from "hold" to "buy," noting that the financial impact can be significant. "We believe TomTom will not only deliver maps, but will also offer content and its highly valuable [high-definition] traffic service," said the bank in a note, as cited by the Wall Street Journal. Apple's announcement at WWDC and today's announcement of the deal, confirm recent rumors that Apple will be replacing Google Maps as the default navigation systems on iPhones and iPads.
