Nokia to buy Navteq in Finland's largest-ever corporate acquisition

Mobile phone giant expanding into navigation devices; dozens of new integrated GPS phones promised next year

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Nokia is planning to buy itself to the top of the expanding navigation and mapping market at a single stroke.
      The mobile phone manufacturer announced on Monday it was agreeing to buy the American company Navteq Corporation for EUR 5,700 million.
      In what would be Finland’s largest-ever corporate acquisition, Nokia would acquire digital maps of 69 countries and make itself a major player in the market for navigation devices.
     
Nokia, which will pay USD 78.00 in cash for each Navteq share, believes the current growth and potential in the navigation and GPS market justifies the large outlay.
      The market was slightly less optimistic and Nokia stock slipped just under 2% in Helsinki amid some worries that Navteq might be too expensive, at least in the short-term.
     
Together with the Dutch firm Tele Atlas, Navteq dominates the digital mapping market. The company licenses its maps to the suppliers of GPS equipment and services, including handheld navigation devices and in-car satnav systems.
      Navteq has around 3,000 employees worldwide and posted net sales of EUR 409 million in 2006.
      The company has been profitable ever since it was listed three years ago, and last year it made an operating profit of around EUR 108 million.
     
Seen in this light, Nokia could be said to be paying something like 50 times the estimated earnings for the Navteq shares, and this is what has caused investors to question the short-term prudence of the move.
      However, the Nokia CEO Olli-Pekka Kallasvuo believes that location-based services will be one of the cornerstones of Nokia’s internet services strategy, and he said on Monday that "The acquisition of Navteq is another step towards Nokia’s becoming a leading player in this space."
      Certainly Navteq’s operations are showing every sign of rude good health, and the company has grown this year at a rate of around 40%, with operating profit running at around 25% of turnover.
     
Nokia’s decision was probably accelerated by the move in July in which TomTom, another manufacturer of navigation devices, offered to buy Tele Atlas for around EUR 2,000 million.
      Tele Atlas is currently a Nokia supplier just as Navteq is, and Nokia may have seen a need to guarantee access to a supply of maps, and to prevent Navteq from being gobbled up by a competitor.
     
The Navteq share has soared by around 30 per cent in recent weeks on rumours that another maker of navigation devices - Garmin - was wooing it.
      The Garmin stock price took a big hit after the announcement of Nokia’s buyout of Navteq, shedding around 10% on the Nasdaq.
      Nokia stock has also risen steadily in the course of the past year, putting on something like 70% all told. On Monday, however, investors apparently saw some short-term negative aspects to the Navteq deal and by the close in Helsinki the share was down by just under 2% at EUR 26.17. It had touched EUR 25.50 in earlier trading.


Links:
  Navteq
  Nokia to acquire Navteq - Nokia press release
  Nokia Maps
  Nokia´s N95 model, equipped with integrated GPS, sold 1.5 million units between April and June

Helsingin Sanomat