Nokia Nabs Navteq
After TT acquires TA, N acquires NT. Poetic justice, huh?
The announcement this morning that Nokia intends to acquire Navteq in a € 5.7 billion deal (€5.4 billion net of existing Navteq cash)). The meteoric rise of Navteq’s stock during the last month, in light of the market’s general difficulties, was a clear signal of deal-making. Based on a statement by Chris Galvin, of the Navteq Board, they received an offer from Nokia and had time to discuss other possibilities with a number of companies. Leaks from these companies presumably propelled Navteq’s stock to a price close to that eventually offered by Nokia.
The dynamics of the deal-making effort provide a number of interesting insights. Additional information was available in Nokia’s webcast (and supporting materials) for a teleconference presenting Nokia and Navteq’s public stance on the acquisition.
The official storyline from the teleconference was as follows:
1. Location Based Services is a phenomenal growth story. Nokia indicated that today LBS is like an iceberg in that the size of its potential market is not yet visible.
2. Location, locational context and Location Based Services are a cornerstone of Nokia’s business strategy for the future. In addition to supporting exisiting navigation services, Nokia wants to focus on “pedestrian-oriented” navigation
3. Nokia will benefit from Navteq’s future revenue growth gained by Navteq’s leadership role in navigable databases and by keeping its licensing fees for Navteq data internal to Nokia.
4. Nokia and Navteq’s customers will benefit from the synergies between these companies made possible by the proposed acquisition.
5. Nokia is not looking for cost savings from Navteq. Rather they feel that the synergies between the two companies will allow Nokia to avoid spending money on specific developments that would also have been funded by Navteq. In essence, Nokia feels the Navteq is the “prefect acquisition”.
From our perspective, there are a couple of additional connections. First, Navteq remains attractive to suppliers in the PND and Automobile Navigation market because Nokia is not viewed as a competitor in either market (although the same cannot be said for TomTom/TeleAtlas, at least in the PND market).
Next, since Nokia is a supplier (rather than a competitor) to the cellular telephone companies, their acquisition of Navteq is not viewed as a threat by this industry since it is unlikely that any of the telcos’ would have a strategic reason to own a map company. In fact, Nokia’s service strategy (i.e. the types of services they want to provide the carriers) benefits from owning a map company) may simplify the supply chain in wireless telecomm services.
We suspect the initial acceptance of Nokia’s owning Navteq will eventually be viewed as a competitive threat by the telcos, and other providers of Internet services. It is our belief that Nokia and Navteq (which was referred to as a platform in the teleconference) will want to service the industry by being not only the source of data but the source of applications that run the data. In essence, Navteq will become Nokia’s routing platform and routing services will be dispensed to network operators the same way Google provides search, but on a fee basis.
It was noted in the question and answer session of the teleconference that the millions of users of Nokia phones can provide a feedback mechanism to improve the quality of Navteq’s database. Take that TomTom! (Guess that means we better continue with our series on User Generated Content and map database updating!)
Oh, a couple of enders. The term “local search” slipped out during the teleconference. Look for it to become a big part of Nokia’s interest in navigation services for pedestrians. I will write more about that in a future column. Hmmmmmm. Nokia–Navteq-Local Search-FAST? Maybe.
Finally, why weren’t the “Internet Guys” (Google, Microsoft and Yahoo) interested in competing here? Is UGC on their minds (or at least on Google’s mind)? Or maybe counterbids are in the wings? More on that later too.