- Message from the CEO
Message from the CEO
2016 marked our 25th year in business. We started by developing meter-reading software for handheld computers, we developed apps for mobile devices before 'apps' was even a word, and then became famous for our invention of the portable navigation device for consumers. We soon diversified into other products, such as integrated in-vehicle navigation systems, traffic and operational fleet management. We worked hard to make our software more modular and changed our automotive strategy to move away from designing and manufacturing infotainment hardware and to integrating our maps, traffic and navigation into third-party hardware. With our expertise in maps, traffic, and navigation, we are well-positioned for the exciting emergence of self-driving cars.
At its heart, TomTom is a software technology company. In the beginning, our software ran predominantly on specific devices and we still develop device software but, these days, most of our software runs on servers in the cloud, often at scale. When our world-leading traffic service started to use location traces (probes) from vehicles, we got into 'big data' before the term became popular. We receive data probes from half a billion sources every day and with this, TomTom will help cities to become Smart Cities. We now offer current and historical traffic information in 54 countries around the world. We introduced TomTom City, an open access traffic web portal which is available in over 100 cities. By providing traffic conditions across the road network, we help make a driver's journey faster and more predictable and our technology can enable road authorities to get more throughput from their road networks.
TomTom is well placed to provide the kind of map that Autonomous Driving needs. Our HD maps with our innovative RoadDNA positioning technology now covers over 200,000 kilometres across the major highways of the US, France and Germany. We are working with many automotive OEMs to integrate our HD maps into the self-driving systems they are developing. And in early 2017, we acquired Autonomos GmbH, a Berlin-based start-up that will give us greater insights and competencies into the Autonomous Driving software stack.
AUTONOMOUS DRIVING CONTINUES TO GAIN MOMENTUM AND WE HAVE NO DOUBT THAT major opportunities will arise for TomTom in this space
Ultimately, it is our people that underpin our growth ambition. With more than 3,100 people in our R&D units, we invest heavily in our products. We continue to evolve our organisational structure to enable our R&D to deliver more for our customers from the available funds and we work hard at continuously improving the way we develop our software, which is a challenge for any company to do at scale.
We are partnering with technology companies to position TomTom as a leading technology supplier for the future of driving. In 2016, we partnered with NVIDIA to develop artificial intelligence to create a cloud-to-car mapping system for self-driving cars.
This is an important step for TomTom and will enable us to propose new features to automakers faster, and therefore to make Autonomous Driving a commercial reality sooner. We also announced an agreement with Microsoft to be the supplier of location-based services for the Azure platform. Our location-based services continue to be sought after by leading technology companies and we extended our relationships with MapQuest, SAP and Pitney-Bowes.
Our Automotive strategy and products continue to be well received by automotive OEMs, resulting in order intake for 2016 of over €300 million. We made good progress in delivering a complete set of connected navigation components to our existing customers as well as securing new deals and partnerships. We announced deals with Volvo Cars, FCA, PSA Groupe, Volkswagen Group, Subaru and ŠKODA.
We have built the largest and fastest growing European fleet management business. Telematics business reached a subscriber base of more than 696,000 subscriptions in 2016, a 15% increase compared with 2015. The extensive vehicle-related data that Telematics technology can deliver is also opening up new opportunities for aftermarket Connected Car services.
Our Consumer business is transitioning from a declining PND market to a growing Sports business, with the strategy of establishing a growing multi-product consumer electronics business. Sports experienced another year of double-digit growth, which executes on our strategy to diversify our Consumer business. To confirm our commitment to the Sports business, we introduced the TomTom Sports brand and an advertising campaign to encourage people to 'Get Going' in 2016. We launched a new range of GPS sports watches, and also announced the new innovative TomTom Touch, a fitness tracker that measures body fat percentage.
The PND market declined faster than expected in 2016, and whilst we succeeded in taking market share, we made the decision to realign the Consumer business accordingly. We will however keep on extracting value from the PND category. In the last five years, we have worked very hard to gain independence from the PND business and we have developed a growing, more predictable and recurring revenue stream, which puts us at the heart of where the action is, location and mobility services. As the opportunities in location-based services grow, we have aligned our business to better capture these opportunities.
LOCATION-BASED APPLICATIONS REMAIN A SIGNIFICANT GROWTH OPPORTUNITY GLOBALLY across many industries and we will look for opportunities to innovate and play a leading role
We will invest in content and software across these areas as well as in our advanced mapmaking platform. These areas represent growth opportunities for TomTom and we believe will be the drivers of growth across the businesses in the medium to long-term. We saw a strong revenue growth in our Automotive, Licensing and Telematics businesses in 2016, and we expect their combined revenue to grow at a CAGR of around 15% between 2016 and 2020.
I would like to thank all of our stakeholders: our shareholders for their continued support and confidence in TomTom on our journey in this dynamic and fast moving industry; our customers for their loyalty and valuable feedback that drives us to constantly innovate; and finally our employees for their dedication, energy and hard work.
Chief Executive Officer