TomTom To Spend over $2.5 billion for Tele Atlas

The market for personal navigation devices is growing rapidly, and TomTom NV has been a direct beneficiary. It is a profitable company whose U.S. sales, in terms of units will more than double in 2007 over 2006 (reaching 6-7 million units). But TomTom's executive team is made up of product and marketing managers who have brought new solutions to the marketplace, like the addition of a highly effective automated speech-based interfaces and the rendering the core product as software that can be downloaded to smartphones.

Acquiring Tele Atlas is an exercise in vertical integration. TomTom knows that complete solutions include much more than PNDs (Personal Navigation Devices); they include software and services that are instantiated as auto electronics or software in wireless devices. Tele Atlas and TomTom have enjoyed a long and prosperous vendor/supplier relationship. In the past few years, Tele Atlas has aggressively pursued opportunities and partnerships in Local Mobile Search - having its database and services baked into solutions from Google, Yahoo! and MSN as well as mobile device makers RIM and Nokia.

The combination of TomTom and Tele Atlas brings together a company that has demonstrated responsiveness to user requirements for a positive experience through a multiplicity of devices and modalities, with a data aggregator/supplier that has extensive experience forging relationships with go-to-market partners with solutions of their own. In a recent presentation to financial analysts, Rik Temmink, Sr. Director of Segment Marketing, demonstrated that Tele Atlas fully appreciates the need to integrate local content and advertising with core maps and navigation.

Few other firms also understand from first hand experience the need to solidify business models and division of revenue schemes that benefit provide sufficient incentive for all involved. Presently, Tele Atlas has three possibilities: (1) a percentage of a user subscription fee or per query fee; (2) Subscription fees for "navigation upsells" (per Nokia); and (3) Fee for "API access" from other companies' applications (as they are doing with RIM).

In the near future, the combination of TomTom and Tele Atlas expect to garner revenues that combine device sales with a split of the revenue for map licensing and advertising.