TomTom 2005 Annual Report Download - page 51
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Productconcentrationrisk
Themajorityofourrevenueisderivedfromintegrated
personalnavigationdevicesconsistingofthefamilyof
GO
products,TomTom
ONE
and
RIDER
.Ifnewproduct
implementationsandattemptstofurtherdiversifyour
productrangefurtherdonotachieverequiredlevelsof
marketacceptance,orifthespeedofdevelopmentand
time-to-marketoftheseproductscomparesunfavorably
todirectlycompetingproducts,thiscouldhaveamaterial
adverseeffectonourbusiness,resultsofoperationsor
financialcondition.Byexpandingourotherrevenue
streams,seekingnewmarketsandintroducingnew
productsinthebusinesstobusinesssector,weaimto
diversifyproductconcentrationrisksoverthemedium
andlongterm.
Newproductintroductionrisk
TomTomhasintroducedasignificantnumberofnewand
upgradedproductsandservices.Thetransitiontonew
productsrequirescarefulmanagementofexistingstock
levels.Ifthereisexcessexistingstockwhenanew
productisreleased,theretailpriceoftheexistingstock
islikelytodecrease,andTomTomwouldowe
compensationtoitsdistributorsandretailersontheprice
differencefortheirexistingstock.Theintroductionofnew
products,togetherwithseasonaldemand,significantly
increasesworkingcapitalrequirements.
Oursuccessisdependantonourabilitytodevelopand
commercialisenewandupgradedproductsandservices,
thetimingofreleasesoftheseandourproductmix
relativetothoseofourcompetitorsandchanging
consumerpreferences.
Demandforecastingrisk
ForecastingdemandforTomTom’sproductsisimportant
toitsfinancialperformanceandtomaintainingagood
customerreputationandrelationshipswithdistributors
andretailers.Ifthenumberofunitsneededisover
forecast,TomTomcouldfacedownwardpricingpressure
andaresultinglossofrevenuesandanincreasein
finishedgoodsinventoryandnetworkingcapital.
Ifdemandisunder-forecastfollowedbyashortage
ofproducts,TomTomcouldfaceunfulfilledconsumer
demandandtheresultinglossofrevenues,aswellas
damagetoitsreputationandrelationshipswith
distributorsandretailers.Aspartofmitigatingthisrisk,
wemonitorsell-throughratesatourmajordistributors
andretailers.
Growthandinternationalexpansionrisks
Theglobalnatureofourbusinessincreasesrisks
associatedwithourinternationaloperationsandwithour
potentialfutureexpansionintonewinternationalmarkets.
Ourbusinessoperationsspanfourcontinentsand
accordingly,wefaceeconomic,regulatory,legaland
politicalrisksinherentinhavingrelationships,operations
andsalesinavarietyofjurisdictions.
Ourrapidgrowthinarelativelyshortperiodoftimehas
placed,andmaycontinuetoplace,significantdemands
andstrainsonourresources,oursystems,internal
controlsandourseniormanagement.Ifweareunableto
successfullyintegratenewpersonnelorsystems,orif
weotherwisefailtosuccessfullymanageourgrowth,
thiscouldhaveamaterialadverseeffectonourbusiness,
resultsofoperationsorfinancialcondition.
Thefuturedevelopmentandsuccessofourbusiness
dependstoalargepartonthefuturegenerallevelof
demandforpersonalnavigationproductsand,in