Espoo, Finland — Nokia announced a definitive agreement to acquire GPS map maker Navteq for about $8.1 billion, claiming the deal will strengthen its location-based services for the Internet and portable devices.
Analyst Michael Ippoliti of ABI Research, Oyster Bay, N.Y., called the deal a wise move by Nokia. He noted that Garmin’s stock fell on the news because many industry members expected Garmin to purchase Navteq, following TomTom’s offer in July to purchase TeleAtas, the other key GPS map supplier.
Garmin had no comment on the announcement.
Nokia said it wants to develop a new class of pedestrian location-based devices, according to Anssi Vanjoki, head of Nokia multimedia business. These would offer the ability to “find your friends to stay in touch.” Another application might include sightseeing. He said with the acquisition Nokia will offer “tens of navigation-enabled devices in the market,” by next year.
Nokia also recently launched an Internet service called Ovi for accessing games, music and other content. “Location-based services are one of the cornerstones of Nokia’s Internet services strategy. The acquisition of Navteq is another step toward Nokia becoming a leading player in this space,” said Olli-Pekka Kallasvuo, Nokia president and CEO.
Navteq’s chairman Christopher Galvin said, “Nokia’s offer of $78 per share reflects a very attractive valuation of Navteq’s stockholders, representing a 34 percent premium to our stock price of one month ago.” He said that Navteq had approached other potential purchasers. “Our board took those contacts and discussions into account in determining that Nokia’s proposal was the best opportunity available to maximize value for our stockholders.”
Navteq’s current map data business will continue to be operationally independent but would become a Nokia Group company.
In a conference call today, both Nokia said Navteq emphasized they would continue to serve Navteq’s current and future map customers as before the purchase.
Phil Magney principal analyst for TRG, Minnetonka, Minn., said, “The acquisition of Navteq gives Nokia some advantage when it comes to a historically expensive piece of the puzzle, which is the map.” Map fees can account for 20 percent of the wholesale cost of a PND, said suppliers.
But Ippoliti does not believe that Nokia will dramatically expand its PND business. Instead it will focus on cellular phones and other devices, he said. He added it is worthy of note that the potential buyers of the two sole global GPS map suppliers, TeleAtlas and Navteq, are European companies, “which is interesting because Europe is ahead of the U.S. in location awareness services.”
The acquisition is expected to close in the first quarter of 2008.