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Nokia Finds Navteq For $8.1B

Cell phone giant Nokia can now add "navigation leader" to its list of technology assets. The Finnish company today announced plans to acquire Chicago-based Navteq, a leading provider of digital map information for automotive navigation systems, mobile navigation devices and Internet-based mapping applications.

Under terms of the agreement, Nokia will pay $78 in cash for each share of Navteq including outstanding options for an aggregate purchase price of approximately $8.1 billion, or approximately $7.7 billion net of Navteq's existing cash balance. The acquisition is expected to close in the first quarter of 2008. Nokia said its offer of $78 per share represents a 34 percent premium over its stock price a month ago.

The twelve-year-old Navteq generated revenues of $582 million last year and has approximately 3,000 employees located in 168 offices in 30 countries. In addition to its core navigation devices business, Navteq also owns Traffic.com, a Web and interactive service that provides traffic information and content to consumers.

"Location-based services are one of the cornerstones of Nokia's Internet services strategy," said Nokia President and CEO Olli-Pekka Kallasvuo, in a statement. "The acquisition of Navteq is another step toward Nokia becoming a leading player in this space. By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market."

Analyst Jack Gold said the growing importance of navigation and location based services (LBS) made Navteq a likely acquisition by Google (which uses NAVTEQ data in its Google Maps property) or another company interested in expanding its LBS portfolio -- and therefore a smart, preemptive move by Nokia.

"We believe that this acquisition puts Nokia well down the road towards becoming a mobile services provider, not just a device manufacturer," said Gold, principal analyst for J.Gold Associates, in a statement sent to InternetNews.com. "Nokia will require more pieces to fully flush out the services it will ultimately need to offer, but Nokia is cash-rich and can afford to make more pointed acquisitions, and likely will over the next 1-2 years."

The Navteq purchase dovetails with the August debut of Ovi, Nokia's Internet services brand. Ovi, which means "door" in Finnish, is Nokia's plan to offer mobile consumers an easy way to access social networks and more of Nokia's services. Ovi initially includes the company's Nokia Music Store, N-Gage gaming service and Nokia Maps with plans to add more features and services in the first half of 2008.

Prior to Ovi, Nokia had already made moves to expand its consumer-oriented services offerings, including its purchase in July of photo-sharing site Twango.

Gold said Ovi promises to give Nokia an edge over its primary competitors, which include Motorola, Samsung and Sony Ericsson. But, he added, the company still faces daunting challenges.

"We do not believe Nokia can create a stranglehold on the market, and it faces formidable competition from Google, Apple, and many others," said Gold. "Further, Nokia still must prove that it can make Ovi a consumer-friendly and … desirable destination, and given the fickle nature of the consumer market, it has a significant chance of not achieving this goal."

As for the Navteq purchase, the smaller company's president and CEO, Judson Green, is bullish on what it will be able to accomplish as part of Nokia.

"Nokia's unique vision for location-based services aligns perfectly with Navteq's vision to enable everyone to find their way to people, places and opportunities on mobile communications devices, cars, desktop computers and in all the other places that are important to them," Green said in a statement. "It's really exciting to imagine what we can achieve by combining our location experience with the resources of a company that has a customer base of more than 900 million people."

After completion of the transaction, Navteq's current map data business will continue operationally independent as a Nokia Group company, with Green reporting directly to Olli-Pekka Kallasvuo.