AMSTERDAM— TomTom TOM2.AE -1.81% NV, the small Dutch company that helped put satellite-navigation technology into consumers' hands, is struggling to find its way these days as some of the world's biggest technology players invade the mapping business.
The company warned on Tuesday that sales and profit will decline this year after another weak quarter in which it struggled to break even. TomTom plans to increase its investment in new mapping and navigation software by 17% this year to €100 million ($138 million).
The company's shares fell 14% after the announcement.
TomTom, once a global leader in providing easy-to-use and install, stand-alone navigation and mapping devices, faces a shrinking market as consumers shun those devices.
The company has recently tried to make inroads into built-in car navigation systems but that market is dominated by Nokia Corp. Meanwhile, Google Inc. and Apple Inc. have swept into the smartphone-based mapping business.
"TomTom is too small make these huge map investments on its own, especially given the rat race with mapping giants Google and Nokia," Hans Slob, analyst at Rabobank said.
Net profit dropped to €3.2 million in the fourth quarter, compared with €99.5 million in the fourth quarter of 2012 when it booked a tax gain. Revenue fell 7% to €268 million. Revenue at its consumer business, which sells the personal navigation devices, dropped 12%.
The company said it expects profit to decline in 2014 on a roughly 6% decline in revenue, to €900 million, as sales of satnav boxes are expected to fall further. That compares with the €1.74 billion revenue TomTom reported in 2007, when 95% of business came from selling satnavs.
TomTom has had limited success in gaining a foothold in the automotive market, with regard to build-in systems. The unit generated about 20% of revenue in 2013.
"In the automotive market, things take a long time, it will take until 2015 before we start to see strong revenue growth coming through," said Harold Goddijn, the company's long-term chief executive.
Mr. Goodijn is tweaking that strategy now, steering away from complete systems for the in-car market, and instead focusing on selling separate components, like maps, traffic services or navigation software.
TomTom also has introduced other consumer products to diversify away from satnav kit, like a GPS-equipped sports watch. But those devices have had a limited impact on earnings. The watch, launched last year, currently makes up just a few percent of revenue, chief financial officer Marina Wyatt said.
Bron: online.wsj.com