TOMTOM : DJ TT Shares Rise As It Forms JV In Chi

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15 févr. 2012 •14:04

DJ TomTom Shares Rise As It Forms JV In China



By Archibald Preuschat

Of DOW JONES NEWSWIRES



AMSTERDAM (Dow Jones)--Navigation system maker TomTom NV (TOM2.AE) said Wednesday will team up with AutoNavi Holdings Ltd to provide real-time traffic information in China.

The sophisticated service--calculating the fastest route on the basis of the current traffic situation, known as HD Traffic--will be rolled out nationwide, covering up to 30 Chinese cities by the end of 2013, the Amsterdam-based company said.

Investors welcomed the news, and at 1108 GMT, TomTom shares were up 11.8% at EUR4.38, topping the risers on the benchmark AEX index.

"In the longer term, TomTom can make money with this joint venture, as China is a growth market and traffic jams are common in big Chinese cities," said Jos Versteeg, analyst at brokerage Theodoor Gilissen. He described the deal as a good one, but maintained his hold rating on the stock with a EUR3.50 target price, as he doubts that TomTom will see much growth short-term.

TomTomŽs core product, the more basic navigation systems, are a fast declining market, with a 19% fall in sales year-on-year as of the end of the third quarter. HD Traffic, a service to which customers of high-end navigation devices can subscribe on a yearly basis, are a revenue source which should help to mitigate the slump in sales, although navigation systems still contribute almost half of TomTomŽs sales.

The Dutch company competes with Cayman Islands-based Garmin Ltd. (GRMN).

"This agreement is an important step in enabling drivers to save time and money when finding their way to destinations on the increasingly congested Chinese roads," said Ralf-Peter Schafer, Head of TomTom Traffic Product Unit, in a statement. "In addition to the cost savings, TomTom HD Traffic can help reduce CO2 emissions and improve driving experiences," he added.

Financial details of the deal werenŽt disclosed.

-By Archibald Preuschat, Dow Jones Newswires; +31 20 5715 218; archibald.preuschat@dowjones.com