TomTom said retailers reduced their inventory levels of its personal navigation devices more strongly than expected and bought fewer in the first quarter even as the overal market continued to expand rapidly.

The trends forced the British company to reduce prices earlier than planned to make room for new products that will be introduced in the second quarter.


TomTom said European retailers in particular were reducing their inventory levels.


TomTom reported the the overall PND market grew 40 percent year over year in Europe and more than 100% in North America.


Although final results may differ, TomTom expects to have shipped around 2.0 million PNDs during the first quarter of 2008. This is expected to generate revenue of between €260 million ($389.2mm) and €270 million ($404.2mm), lower than in the first quarter of 2007, with an operating margin of a low single digit percentage.

In the coming months, new products are expected to drive revenue growth both through higher volumes and higher ASPs, but not enough to make up for the lower than expected result in the first quarter.

For the full year, TomTom lowered its sales forecast, but held steady on its unit  and gross margin guidance. It now expects to achieve revenue of between €1.8 billion and €2.0 billion, down from its estimate of €2.0 to €2.2 given Feb. 21. It expects to sell between 14 million and 15 million PNDs and to achieve a gross margin and operating margin of close to 40% and 20% respectively. TomTom continues to target a long term financial model of a gross margin of 40% and an operating margin of 20%.