Nokia: Two out of Three

Here Divestment Leaves a Tighter Nokia

Here_logo_lAs we covered last week (see Daily Insight: Traffic Noise), the rumours about the sale of Nokia’s Here mapping unit to a German car consortium had enough backing from respected sources to be taken seriously. In this environment of constant leaks, surprise has become the exception. Today’s press release from Nokia wasn’t so much news as it was a detailed confirmation.

The sale of Here, which will go through customary regulatory approval, is expected to net Nokia €2.8 billion. The mapping unit is an amalgamation of location-based assets pulled together by the company over the past decade. The largest of these was Navteq, acquired in 2008 for €5.7 billion.

Nokia’s decision to invest so much in location assets seems misguided in hindsight, but it’s worth noting that the company controlled about half the global market for smartphones when it acquired Navteq. The acquisition might have now appeared astute had Nokia maintained its dominance, given the cost of licensing maps per device, the forecast volume surge of smartphone sales and the lack of other options.

The sale of Here — expected to be completed in the first quarter of 2016 — will mean the transfer of 6,500 employees from Nokia. The company currently has a total of 57,000 employees, though the €15.6 billion acquisition of Alcatel-Lucent will add about 50,000 people to its headcount and is expected to close by the end of 2015.

Few companies have reinvented themselves as Nokia has. The planned Here divestment would leave the company with only two business units: Networks, and the much smaller Nokia Technologies group (which licenses and develops new technologies). It’s a new heightened level of focus for the Finnish company that, at least for the time being, is leaving the mobile devices industry behind it.

Nokia will take on a very different business structure to the one it had just a few years ago. The company morphed from a wide conglomerate to a mobile enterprise, and is funnelling itself down further to one main area. Its concentration on the infrastructure business leaves Nokia a larger but more focused company — more narrowly focused than it’s been in many years. The mobile industry’s transition to 5G is the next big area of opportunity, and the company has options to make use of its extensive IP portfolio and product expertise as a smaller but interesting aspect. This is where Nokia goes from here.

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