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TomTom warns of lower revenue ahead, shares slide

FILE PHOTO: TomTom navigation are seen in the car in this illustration taken July 28, 2017. REUTERS/Dado Ruvic/File Photo

By Toby Sterling

AMSTERDAM (Reuters) - TomTom warned of weaker-than-expected growth in automotive revenue this year following the sale of its Telematics fleet management business, sending shares in the Dutch navigation company lower.

Along with the loss of revenue from Telematics, the company faces a long-term decline in the sales of dashboard-mounted satnav devices.

However, it said it expects revenue from the digital maps-linked businesses it has staked its future on to rise by around 15 percent to 430 million euros in 2019.

It expects 2019 revenue of 675 million euros from continuing operations, down from 687 million in 2018.

Those figures strip out the impact of Telematics, which it sold to Bridgestone for 910 million euros and which represents nearly half of TomTom's market value.

TomTom shares fell 6.3 percent to 7.37 euros in Amsterdam.

The Telematics sale, which is expected to close in the second quarter, involves a 750 million euro cash return to shareholders.

TomTom, which is debt free, plans to use the remaining 160 million euros from the sale to fund investments including possible minor acquisitions.

"We will accelerate our investments in strategic areas while generating cash," CEO Harold Goddijn said in a statement.

"Those areas are: further improvements in the efficiency of our map-making system... and services for the automotive market, including maps for automated driving and developer products."

TomTom is the third player in automotive mapping, competing against Google Maps and HERE, the maps company owned by major German car makers.

Analysts say TomTom will face an uphill battle to win new automotive customers after the defection of Renault-Nissan last year.

TomTom also sells mapping services to software makers. Notably, it is the largest provider of digital maps to Apple, though Apple intends to roll out a maps service in the United States this year using an in-house system.

This week TomTom said it has expanded a previous deal with Microsoft to supply maps for Microsoft products, while it will also rely more heavily on Microsoft cloud hosting for TomTom services. Terms of the Microsoft deal were not made public, but a TomTom spokeswoman said in an email that licensing revenue will grow "significantly" in 2019 overall.

Analysts for ING, which rates the shares a "buy", said TomTom's forecasts were in line with consensus.

"Automotive order intake was a bit weaker than we expected," they wrote in a note. However "despite pressure on profitability, free cash flow is going to be very healthy at 10 percent of revenue" in 2019.

Separately, the company beat expectations for the fourth quarter with core profit rising to 43.6 million euros ($49.65 million) from 38 million a year earlier.

That topped the 36 million euros in earnings before interest, taxes, depreciation and amortisation (EBITDA) expected by analysts in a poll supplied by the company.

($1 = 0.8781 euros)

(Reporting by Toby Sterling; editing by Subhranshu Sahu and Jason Neely)