Shares In Dutch navigation equipment maker TomTom NV (TOM2.AE) surged Wednesday after second quarter earnings beat analysts' expectations and it raised its cost savings target, but the company said it remains hard to forecast how markets will develop in the second half of the year.

Margins were ahead of expectations, due to cost savings and a favorable product mix as a result of new products introduced during the quarter, while lower sales of personal navigation devices, or PNDs, was partly offset by higher sales from other products. In addition to PNDs, TomTom supplies services such as traffic information, fleet management tools and in-car navigation.

At 1034 GMT, TomTom shares were up 11.5%, strongly ahead of a 0.4% fall in the AEX index.

Net profit fell to EUR19.8 million in the quarter ending June 30 from a net result of EUR52 million a year earlier, however beating analysts' expectations for net profit of EUR18.9 million.

Sales fell 19% to EUR368 million in the second quarter, compared with EUR453 million a year ago, again beating the EUR353 million forecast by analysts.

TomTom, along with rival Cayman Islands-based Garmin Ltd (GRMN), has had to contend with the sharp drop in consumer spending on consumer electronic goods caused by the economic slump, which has hit sales and margins, and the increasing prevelance of location-based services available on mobile phones.

As a result of these pressures, TomTom previously announced a EUR60 million cost cutting program, which it increased Wednesday to EUR90 million in operating cost savings from last year. "In the first six months of 2009 we've realized EUR64 million in cost savings," Chief Financial Officer Marina Wyatt told reporters, nearly half of those from marketing, research and development costs.

Wyatt said that so far trading has been in line with expectations given at the beginning of the year, but she refrained from reiterating the guidance as she said the company needs to see how markets develop in the second half.

Overall the results were better than expected, said SNS Securities analyst Martijn den Drijver, but "the lack of guidance and the fact that the market share in the U.S. did not increase will dampen the enthusiasm somewhat." SNS rates TomTom at buy.

TomTom in February said it expects PND volumes for the full-year in in Europe to be around 15 million units, and in North America 17 million units. TomTom said it expects to sell between 11 million and 12 million units, for full-year revenue of between EUR1.4 billion and EUR1.6 billion.

In the second quarter, TomTom sold 2.5 million PNDs at an average price of EUR112 per unit, a 20% volume decline and a 14% price drop compared with the same time last year.

In Europe, the company had 45% market share, up one percentage point from last year, while it lost one percentage point in market share in the U.S. market, where Garmin is dominant.

Goddijn told reporters he is confident the company will be able to gain market share in the U.S. in the second half of 2009 as the price difference between TomTom's products and those of Garmin narrows.

While overall revenue from PND sales declined by over 30% on the year, revenue from other products rose over 30%, mainly driven by a strong increase in automotive sales. Revenue at TeleAtlas was flat.

Earnings before interest and taxes, or EBIT, was EUR57 million compared with EUR92 million in the same period last year, topping forecasts for EUR41 million. EBIT margin came in at 16%, down from 18% in the second quarter of 2008.

TomTom recently raised EUR430 million by offering new shares to investors to ease the debt it took on when it acquired TeleAtlas for EUR2.9 billion in 2007. Pro forma net debt stood at EUR672 million after the rights issue.

-By Robin van Daalen; Dow Jones Newswires; +31 20 571 5201; robin.vandaalen@dowjones.com