Home Blogs Nokia HERE is now for sale – Facts you need to know!

Nokia HERE is now for sale – Facts you need to know!

Nokia’s decision to sell off its maps business unit — HERE — has been creating quite a buzz for some time now. And, with the entry of potential bidders in the race, that interest is even heightened. Uber seems to be the clear lead bidder, followed closely by the German car conglomerate — BMW, Audi and Mercedes-Benz – along with Chinese search giant Baidu. Various reports suggest that Nokia would use the funds to consolidate its Networks business, and may even buy its rival, Alcatel-Lucent SA.

The HERE division has been in turmoil for a while because of not-so-great performance in terms of revenue[i], and its former CEO, Michael Halbherr, also quit over the issue of the proposed sale, which was incidentally under discussion according to Bloomberg[ii]. Nokia Networks continues to be the major contributor to the company’s revenue (€11,198m), and HERE’s €970m input definitely doesn’t make a significant difference to the revenue pie.

Take a look at this interesting report: Nokia HERE Fact File[iii], published as part of the report ‘Nokia in 2014’[iv](refer to the presentation below for a summary extracted from the report):

 

What was Nokia planning?

Nokia definitely had grand plans, with a clear focus on automobiles, especially connected cars, location cloud, and traffic and mobile apps. Being a frontrunner in the business of connected maps, and having technology second only to Google, Nokia is a darling to many major automobile makers.

Though the recently-published annual reports from Nokia tried to bring in the key differentiators of HERE, they underplayed significant challenges posed by competitors like Google and TomTom, and threats from new entrants like Apple.

The Nokia Annual General Meeting 201, report published on May 5, 2015, has agreed to these facts[v] in the form of forward-looking statements, which point us toward the decision of potential divestment of the HERE business. Even the Nokia HERE Fact File[vi] as a part of the published report ‘Nokia in 2014’[vii] also talks about the competition it is facing from Google, TomTom and others:

  • The intense competition HERE faces and its ability to effectively and profitably invest in new, competitive high-quality services and data, and bring these to the market in a timely manner.
  • HERE’s dependence on the overall automotive market developments and customer business conditions.
  • HERE’s dependence on a limited number of customers and large multi-year agreements, especially with respect to sales in the automotive industry.

Right after the meeting, Nokia sprung into action with the release of an immediate plan of action. The news was out to the world on May 10.

Plans that didn’t work

When SeanFernback was appointed as CEO of Nokia HERE in October 2014[viii], he said that Nokia’s maps and location cloud products are critical enablers for automated driving, as well as new location experiences for enterprises and consumers. Rajeev Suri, the group CEO, also asserted that the company is looking to unleash the potential of Location Intelligence.

While all this was happening, internal discussions to do away with HERE were already on, possibly because of the pressure created by the investors, who couldn’t foresee immediate returns from the detailed 3D mapping solutions for automation. In my opinion, geospatial technology has always been a difficult proposition for the investors and governments to understand. It’s for this reason that we, at Geospatial Media, are continuously trying to raise awareness for this industry.

What is Nokia expecting out of this deal?

Nokia’s HERE division is currently valued at $2.1 billion. As an investor-led company, Nokia would always value this figure against the $8.1 billion it spent in 2008 to acquire HERE from Navteq Corp. Getting such a deal at this point of time is definitely not possible, and Nokia might have to settle for something it would not be happy about.

There is a reason why Nokia was compelled to pay that amount in the first place. Remember, that this acquisition was in 2008, when the industry scenario was totally different. Google Maps had just been launched (in 2005), and TomTom has acquired TeleAtlas for €2.9 billion[ix]. For Nokia, to get the first-mover advantage in the app business, with its smartphone supporting a GPS — especially on Symbian platform — the company found this to be a good deal. The company CEO at that time said[x], “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”.

Who are in the race and why?

Being a company focussing on automotive space, Nokia provides a clear advantage to someone who is in this business and who can get the first advantage out of this. In this category, Uber is possibly leading the race. This cash-rich taxi/cab aggregator has reportedly offered $3 billion to get a stake in the company. The German car conglomerate is offering €700 million each, according to a report by Mint. The reasons for Uber’s interest in HERE seems to be because it aims to be the world’s preferred logistics company, and is now heavily-dependent on Google Maps for its operations.

It is evident from this New York Times article that Uber does not want continue its dependency on Google Maps[xi]. While the reason is unstated, it hints at issues like licensing in the long term and flexibility which the technology is offering. In fact, Uber has already acquired deCarta to strengthen its maps, and the HERE bid reinforces the belief that Uber has some serious plans under its belt.

Second in the race is the German consortium, lead by BMW, Audi and Mercedes-Benz, along with Chinese search giant Baidu. As we all know, BMW and others are already active customers of HERE, and are believed to have put in their bid even before Uber.

Again, according to the NYT, there is a third company in the race, which is a private equity firm and whose identity is not known. While Microsoft and Facebook have previously shown interest in acquiring HERE, now, it is not clear if they want to be a part of the race.

By May-end, a clear winner will emerge. Please note that even after all of this, Nokia has the option to retain HERE, if it does not find a fitting buyer.

What does the future look like?

At its core, HERE has the DNA of a mapping enterprise. The company and its 6,000-odd associates harbour a passion for cartography and mapping. For HERE, the move from being an independent mapping entity to become a part of a firm with a different set of core business and framework, means a significant change. Below are the possible scenarios (and again, this is pure speculation).

  • Losing its identity: HERE is a well-recognised mapping and geospatial content company. The takeover would mean a very big loss for the geospatial community, in terms of losing a leader, whom to watch out for when it comes to innovation in geospatial content. HERE might even fade away, to be a supporting business unit — like a research and development (R&D) unit — of its main firm.
  • Innovation can’t be its core: This might be a difficult time for HERE’s R&D unit, which might lose its independent thinking when it come to creating unique mapping products for automobiles, enterprises and consumers alike. It will have to focus only on one area, like automobiles or transportation and logistics.
  • Losing customers: While the future of HERE’s existing business deals will come into light only after the acquisition, there’s a chance that it might lose some elite customers. Automotive companies, which are currently heavily-dependent on their R&D departments for automated cars, will need to get clear road maps. Microsoft, which has acquired Nokia’s mobile unit and currently provides HERE Maps as an app in its Smartphones, also has to take a call on what would happen if it is not in the lead to acquire HERE.

Whatever happens, as geospatial industry, we should be cautious and eagerly watching this space. Stay tuned for more updates!

References

[i] https://company.nokia.com/sites/default/files/download/investors/nokia_uk_ar14_full.pdf

[ii]

[iii] https://company.nokia.com/sites/default/files/download/nokia_uk_ar14_here.pdf

[iv] https://origin.company.nokia.com/sites/default/files/download/investors/nokia_uk_ar14_full.pdf

[v] https://company.nokia.com/en/news/press-releases/2015/05/05/resolutions-of-the-nokia-annual-general-meeting-2015

[vi] https://company.nokia.com/sites/default/files/download/nokia_uk_ar14_here.pdf

[vii] https://origin.company.nokia.com/sites/default/files/download/investors/nokia_uk_ar14_full.pdf

[viii] https://www.geospatialworld.net/News/View.aspx?id=30061_Article

[ix] https://en.wikipedia.org/wiki/TomTom

[x] https://company.nokia.com/en/news/press-releases/2007/10/01/nokia-to-acquire-navteq

[xi] https://www.nytimes.com/2015/05/08/business/uber-joins-the-bidding-for-here-nokias-digital-mapping-service.html?_r=0