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Nokia Buys Navteq, “Place” Becomes Key

Posted on Monday, Oct 1st 2007

I had written earlier about Navteq (Navteq: Bright Future If Managed well and Place and Location Services Growth Fuels Navteq).

Well, this morning, Nokia is announcing that they are acquiring Navteq for $8.1 Billion in cash. Navteq’s stock had risen steadily recently upon acquisition speculation. Since I last wrote about Navteq on August 2, the stock has gone from $65.99 to $79.27, and is trading at $76.79 right now.

Nokia has made a very smart move here, as the cell phone and the GPS device are bound to converge, adding further intensity to the convergence device movement. The growing importance of Place and Location data has also prompted me to enhance my Web 3.0 definition: Web 3.0 = (4C + P + VS) + Place

Earlier, TeleAtlas was bought by GPS device company TomTom. The other GPS maker Garmin is still independent. Also, at this point, there is no other independent GIS company in the market.

navteq chart

Nokia is also doing exceedingly well, with tremendous market shares in the emerging markets. The company’s stock price has been scaling heights over the last year. The WSJ story is here.

nok chart

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Sramana,

Indeed, this is a huge move by Nokia, and a big win for Navteq shareholders (11.5 x trailing revenue!!)

A couple of comments:

You should add Trimble Navigation to your list, which is still independent (Nasdaq: TRMB) and an important player in the GPS technology space.

GIS, or Geographic Information Systems has historically been considered to be a software category dominated by ESRI (private), Integraph (recently taken private by Cobalt Holding), MapInfo (acquired by Pitney Bowes) and to some degree Autodesk (Nasdaq: ADSK). These companies have all been eclipsed by Google, Microsoft, Yahoo and MapQuest web mapping servcies. While they still have a solid base in the enterprise market, they are quickly being disrupted and marginalized by web servcies.

Finally, TeleAtlas and NavTeq acquisitions were about controlling the two premier global map data sets – not GPS technology. They are the the fuel that powers GPS applications like TomTom, GM Onstar, Trimble and Garmin, as well as all of the online web mapping and local search services. I am actually surprised that Google or Microsoft didn’t move before Nokia on this one.

What is clear with this acquisition, as well as TomTom’s move, is that wireless consumer-oriented local search is where the action is.

GPS, wireless web, and phones are clearly converging… RIM is there now, it is obviously core to Nokia’s strategy, and Apple’s iPhone is rumoured to have GPS capability in a future version. What can we expect from Motorola and Palm?

With this massive shift in focus towards wireless devices, GPS and maps… with billions of potential users – the competitive landscape for local search has just changed. After all… Google, Yahoo and MSN only get a modest 100 million unique visitors per month.

Once the dust settles on the digital map land grab, the next challenge is clearly organizing the worlds information around the paradigm of place, as an information service for billions of devices.

PlaceID will get it’s day in the sun!

Cal McElroy Monday, October 1, 2007 at 12:00 PM PT

Cal,

Here’s my Trimble coverage:
http://sramanamitra.com/2007/08/14/trimbles-compelling-growth-strategy/

Sramana Mitra Monday, October 1, 2007 at 12:21 PM PT

There are other interesting questions that pop up too -

  1. Where does this leave the other handset vendors? Will Motorola/Sony-Ericsson follow suit?
  2. Would GPS chipvendors align up with mobile vendors as well? We have a midsize company like Sirf and a smaller one like uNav waiting to hit it big as GPS grows.
  3. Does this improve Nokia’s IP position when it comes to bargaining for 3G royalties?

These were just a few off the top of my head. But this is obviously exciting for the mobile world.

Vijay

Vijay Monday, October 1, 2007 at 12:37 PM PT

Vijay,

There is no other vendor in the GIS map data space that is independent. So, for Motorola or others to get their hands on one, they would have to go acquire TomTom, which is a GPS vendor.

This may not be a bad thing, because the GPS device and the cell phone will converge in the next decade anyway.

Cal,

As for Google, Yahoo, IAC, Microsoft, AOL – those who have Local Search related plays, they will, most likely, keep sourcing mapping data just as they do today – from TeleAtlas and Navteq. I don’t believe any of them would venture into becoming a device vendor, but the devices would continue to be a great channel for their services. It’s a win-win relationship that should continue to thrive.

Apple is a slightly different story.

Apple actually is a device vendor. It competes with Nokia. So it would probably get its data from TeleAtlas as long as it is independent. But if TomTom ends up inside Motorola, that would make it problematic. Same with RIM and Palm. They will love their source of mapping data from an independent provider.

In a strategic move, Nokia could restrict its competitors from acquiring Navteq data, making itself the sole beneficiary of its strategic asset.

More likely, however, is that Nokia will now be able to make money off its competitors’ data services offerings, which is a masterful piece of maneuvering.

Well done.

Sramana

Sramana Mitra Monday, October 1, 2007 at 2:50 PM PT

From Garmin’s vantage point, do you anticipate this acquisition to pose a serious threat, either in the short or long term? I can understand that Garmin may face pricing pressures in the near future with Nokia at the helm, but can’t imagine consumers substituting their in-vehicle gps system for one that comes on their phone, regardless of the convenience.

DH

David Hong Tuesday, October 2, 2007 at 12:38 PM PT

Hi David,

I think the in-vehicle built-in GPS business will be less under threat. But the portable GPS business is the one that will likely get absorbed into the smartphone.

Sramana

Sramana Mitra Tuesday, October 2, 2007 at 1:09 PM PT

[...] 6% q-o-q to €74. Nokia Siemens Networks net sales grew 18% y-o-y and 20% q-o-q to €4.1 billion. Navteq will be a reportable segment in Q3. As for market share, Nokia estimates that Q2 Mobile Device [...]

Still Bullish on Nokia - Sramana Mitra on Strategy Tuesday, July 22, 2008 at 1:23 AM PT
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