Nokia announced that it will split the HERE maps division from the company in a sale worth 2.8 billion euro ($3.1 billion) to the German car consortium formed by Audi, BMW and Daimler. Nokia is trying to refocus on networking technology and services going forward after the merger with Alcatel-Lucent.
Back in 2007, Nokia bought Navteq, a maps services company, for $8.1 billion. Nokia was still at the top of its game then. The iPhone had just launched, and the company couldn't imagine it would struggle for its survival because of it just a few short years later.
Nokia realized that maps were going to be important for future mobile phones, and it wanted to get ahead of that trend. However, it paid an overly expensive price to do that, and the company never quite recovered from it.
At the time, Navteq was making $108 million in profit per year on $582 million revenue, so without major changes to its business model it would have taken Nokia decades to recoup that money.
Nokia seems to have failed on the execution of its maps business model, too, as in the first half of this year the company only made $50 million on net sales of $605 million, making it even less likely that the company would ever fully get its acquisition money back.
Nokia is also getting out of the mobile market (for the most part), and it now wants to focus on networking technologies and services, especially after the merger with Alcatel-Lucent, a company which has similar goals.
Rajeev Suri, President and Chief Executive Officer of Nokia, said: "With this step we complete the latest stage of Nokia's transformation. We integrated the former Nokia Siemens Networks, divested our Devices & Services business, and have now reached agreement on a transaction for HERE that we believe is the best path forward for our shareholders, as well as the customers and employees of HERE."He added, “Going forward, we will focus on our planned combination with Alcatel-Lucent. Once that is complete, Nokia will be a renewed company, with a world-leading network technology and services business, as well as the licensing and innovation engine of Nokia Technologies."
Nokia sold the HERE maps business for 2.8 billion euro to the consortium of German car companies which know that the maps service is going to be a critical feature of future cars. Many cars at all price points already come with embedded navigation systems these days anyway, so at the very least the companies could use the HERE acquisition to cut costs.
However, self-driving cars, as well as other advanced safety features that will be developed for future cars, will need to know the location of the car at all times, which will also make the maps service more important than ever.
After this sale, Nokia will consist of two businesses: Nokia Networks, which will provide broadband infrastructure solutions, and Nokia Technologies, which will continue to create new technologies and offer licensing agreements to other companies.