Nokias $8.1 billion purchase of digital mapmaker Navteq marks a major move by the worlds largest handset maker to establish a new beachhead in location-based services. According to analyst Jack Gold, the acquisition is critical to the long-term growth of the Finnish company.
Navteq, of Chicago, Ill., provides map information for automotive navigation systems, mobile navigation systems and Internet-based mapping applications. The company also owns Traffic.com, providing traffic information and content to consumers.
“Nokia understands it must move beyond being only a hardware manufacturer if it is to continue to grow,” Gold said in an Oct. 1 analyst note. “Nokias … initiative is its attempt to move into a services business with music, marketing services, search, payments and now, search.”
Nokias leap to buy Navteq, Gold said an Oct. 1 interview with eWEEK, is not only a pre-emptive strike against fellow handset competitors such as Motorola, Samsung and Sony Ericcson, but also Google, which was rumored to be interested in acquiring Navteq.
The key, Gold said, is LBS, which he called a “fundamental service offering for a wide array of mobile needs. LBS will be such a fundamental enabler that all search companies, entertainment suppliers and especially mobile marketing firms will have to include [it] in their infrastructure.”
Moreover, Gold added, the deal should allow Nokia to drive the sales of its high-end smartphones. “Nokia really needs to be in this space,” he said. “They need more reasons for people to buy their phones. Ultimately, people will buy their phones based on the services around it.”
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The deal may also spell doom for Navteqs LBS competitors Garmin and TomTom, unless other companies seeking to leverage the LBS technology move to acquire them. “Those guys are probably not long for this world,” Gold said. “Where are they going be three years from now when all smartphones have GPS chips?”
In announcing the deal Oct. 1, both Nokia and Navteq struck the same message about LBS.
“Location-based services are one of the cornerstones of Nokias Internet services strategy. The acquisition…is another step toward Nokia becoming a leading player in this space,” Nokia President and CEO Olli-Pekka Kallasvuo said in a statement.
“By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market.”
Kallasvuo said Navteqs LBS technology would initially ship with Nokias GPS-enabled N95 smartphone.
“Its really exciting to imagine what we can achieve by combining our location experience with the resources of a company that has a customer base of more than 900 million people,” Navteq President and CEO Judson Green said in the same statement.
The acquisition has been approved by the board of directors of each company and is subject to customary closing conditions, including regulatory approvals and Navteqs shareholders approval. The deal is expected to close in the first quarter of 2008.
“Nokia needs to put together a complete service platform,” Gold said. “They really need to move into this space. They need more reasons for users to get on their phones.”
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