Where’s Here Going?
Stories that a German auto consortium has already agreed to purchase Nokia’s Here mapping unit made the rounds last week, with several respected publications reporting the development as near fact based on anonymous sources. There’s been no public confirmation from any of the players involved, but the chain reaction of noise across news sites and blogs is now too loud to ignore.
The potential of the acquisition of Here raises the question of how the consortium — consisting of Audi, BMW and Daimler — would work in practice. Companies cooperating to create scale and pre-empt outside industries from encroaching on their businesses have had a history of success as well as some notable failures.
The price the consortium might pay extends speculation, though stories in the Financial Times and the Wall Street Journal point to something in the area of $2.7 billion. This is about one third the amount Nokia paid to pull its location assets together — the purchase of Navteq cost Nokia $8.1 billion, and this was combined with other related firms (including Germany-based gate5) bought by Nokia over the years. Here could be expected to have a mildly dilutive effect on the three German automakers, but there are indications of strong growth: Nokia’s 1Q15 financial results showed that revenue from Here grew 25% year-on-year to $261.
As a point of pricing comparison, TomTom’s current market capitalization is about $2.5 billion (though, unlike Here, the company also makes hardware). In 2014, Alibaba acquired AutoNavi for $1.5 billion, and Baidu acquired IndoorAtlas for $10 million.
Nokia said that four out of five in-car navigation systems sold during 2014 in Europe and North America were based on Here, and the same data is used across the Internet for services like Bing Maps. If the stories of the acquisition are accurate, Audi, BMW and Daimler are buying a market leader.
The motivation behind such a joint purchase is clear: the growing importance of maps for navigation and autonomous driving means that automotive makers must either buy, rent or borrow map data to keep up with industry trends. Dependence on a partner or supplier could lead to vulnerability and missed opportunities. Google, Nokia and TomTom are the core providers of maps, and benefit from big data collection.
The three auto companies said to be involved would be likely to keep Here at arm’s length, allowing it to maintain and explore other partnerships. Comparable co-ownership ventures include Symbian, which started as a joint venture between Ericsson, Motorola, Nokia and Psion, primarily as a method of circumventing Microsoft from dominating the market for mobile platforms.
Nokia could consider the rumoured bids for Here to be too low given the limited supply of maps and growing demand, and might want to maintain its interest in such an automotive industry control point. The rumour of a Here sale could be off. However, the automotive companies’ essential interest in maps is the best confirmation of Here’s direction, and would make a logical home for it.
 |
If you’d like to receive free Daily Insight |
Twitter
Facebook
LinkedIn
Email