Business view

SEVEN years ago Nokia was on an acquisition spree in the mobile services sector. One of those purchases was Navteq, a company which specialised in digital mapping. Times have certainly changed for Nokia, but they have held onto their location-based services business through the turmoil. This may have been a wise move, as the HERE division may have the greatest growth potential going forward.

NOKIA had been working on location-based services for some time, but their effort took a huge step forward when they bought the Chicago-based Navteq for about €5.3 billion in 2007. Navteq was a fine company, but Nokia paid 74 times earnings for it – an absurdly high price.

SINCE then their location-based business hasn't had the easiest of times. They have lost a cumulative €3.1 billion. During the company's near-death experience it was rebranded a couple of times – now it is known as HERE. On several occasions Nokia admitted they paid too much for Navteq and wrote down billions of euros worth of goodwill. For a while management considered selling it off, but Stephen Elop wanted to keep it.

FINALLY it seems as if HERE has found its path. They had good sales growth in the third quarter thanks to their focus on the automotive industry. HERE sold 3.2 million in-vehicle navigation systems in the third quarter for an impressive 80% market share. They also signed an agreement with former archenemy Samsung to provide maps on some smartphones.

NOKIA is investing heavily in HERE, spending the equivalent of 58% of its sales on research and development this autumn. They are not content to simply sell maps to smartphones and vehicles, but are investing in predictive analytics, connected vehicle technology and traffic flow management for municipal authorities, among other things.


David J. Cord
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