|Nokia in Talks to Acquire Navteq|
Interest in a Deal Reflects Move Into Mobile Services As Threat to Handsets Rises
By DENNIS K. BERMAN and JASON SINGER
October 1, 2007; WSJ
Finnish mobile-phone giant Nokia Corp. last night was deep in discussions to purchase navigation-software maker Navteq Corp., people familiar with the matter said, marking what would be one of its largest-ever corporate acquisitions.
With a $7.61 billion market capitalization, Chicago-based Navteq is one of the world's leaders in electronic mapping, which enables in-vehicle navigation devices and a new generation of mobile-phone applications used for shopping, emergency services and advertising.
The two sides have been in deep discussions over the past few weeks, said the people familiar with the matter. It was still possible those discussions could crumble over a series of last-minute issues. A Navteq spokesman didn't return a request for comment. Nokia representatives were unavailable for comment.
Navteq's stock price, up 75 cents to $77.97 Friday in 4 p.m. New York Stock Exchange composite trading, has more than doubled this year.
Nokia's interest in Navteq represents a vigorous move into the mobile-services arena, where Nokia has already been building a suite of products around games and music. These types of services have been in development for years by mobile-phone makers like Nokia, as well as by telecom service providers. Around the telecommunications world, there is a growing sense that these services are finally ready for wide-scale consumer adoption.
Nokia CEO Olli-Pekka Kallasvuo has been aggressively steering the Finnish giant, which has a market capitalization of $149 billion, into a software and services company. Last year he separated the company's infrastructure business, placing it into a joint venture with Germany's Siemens AG.
Yet Nokia still receives the vast majority of its revenue and profit from selling handsets. The company sells more than one out of every three handsets around the globe. Asian companies have made this business extremely competitive, with their own lines of cheaper mobile handsets. For Nokia, the move into services is designed to persuade customers to pick the Nokia brand amid so many other choices.
Nokia shares have climbed nearly 90% this year; on Friday, the company's American depositary receipts were at $37.93 in 4 p.m. Big Board trading. Mr. Kallasvuo has been making a series of small acquisitions over that time, focused around music and gaming. But no deal has carried the price tag of a Navteq, which trades at about 54 times its current earnings. It reported net income for the fiscal second quarter ended July 1 of $40.9 million on revenue of $202.3 million.
Navteq was founded in 1985, built around the premise of building turn-by-turn navigation directions through digitized maps. Since then, it has created digital maps in 69 countries across six continents.
The company's products are used inside a number of automobiles, including models from Chrysler LLC, Ford Motor Co., Mercedes-Benz and Volkswagen AG's VW brand. It also makes after-market devices for cars and separate portable devices.
Nokia and Navteq already have a business relationship, where Navteq provides information for Nokia's mobile phones.