Nokia's announcement this week that it will acquire navigation system maker NAVTEQ could be a big step toward bringing navigation and location-based services (LBS) capabilities into the enterprise, some experts said.
The $8.1 billion deal, which was mostly cash, was announced Monday.
According to Nokia, the combined entity will be the leading global player in the LBS market.
"The navigation area is a fast-growing business, and with location-based services expanding rapidly into mobile communications devices, the industry is poised for even further growth," Nokia said in a statement.
NAVTEQ provides digital map information for automotive navigation systems, mobile navigation devices, Internet-based mapping applications and government and business solutions. Basically, the company creates the digital maps and map content for navigation and LBS.
The deal will allow Nokia to wrap better LBS into its arsenal of devices.
"LBS is 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."
Avi Greengart, principal analyst for mobile devices at Current Analysis, said the purchase is a two-pronged approach from Nokia: offensive and defensive. On the offensive side it wants to lower the cost of rolling out mapping in high volumes on many of its phone models. In addition, it wants to control and own the mapping equipment, and it wants to add the data to its line of connected services.
On the defensive side, Greengart said, Nokia bought NAVTEQ because "buying NAVTEQ means that Google can't."
Jack Gold, principal and founder of J.Gold Associates, a Northborough, Mass.-based mobility research firm, agreed the acquisition was a good move for Nokia, despite the huge price tag, especially since NAVTEQ could have been scooped up by another company looking to round out its LBS and navigation offerings.
"LBS will be such a fundamental enabler that all search companies, entertainment suppliers and especially mobile marketing firms will have to include an LBS component in their infrastructure to make their products desirable to consumers," he said. "Nokia, by acquiring NAVTEQ, has made a preemptive move that both anticipates the likelihood that NAVTEQ would have been acquired anyway, and also puts it in a position to internally leverage the NAVTEQ technologies onto their platforms, particularly platforms like the N95 high-end entertainment devices and their emerging Internet tablet devices, in more integrated ways than might be available to NAVTEQ's other customers."
According to Gold, the acquisition could boost the use of LBS in both the consumer and enterprise spaces -- though he suggested the enterprise impact would be minimal at first -- while also opening the door to Nokia selling devices and solutions with more features.
"Nokia understands it must move beyond being only a hardware manufacturer if it is to continue to grow, and especially if it is to grow the higher end of its devices market, with its higher margins, where desirable services to the user are what drive sales for expensive devices," Gold said. "Nokia's OVI initiative is its attempt to move into a service business with music, marketing services, search, payments and now navigation. We would expect to see continued moves by Nokia to acquire other such service providers to fill in its OVI services over the next one to two years."
Greengart said enterprises are already using some navigation tools, but Nokia's purchase of NAVTEQ could make it more mainstream. He said sales forces that need to determine where they are going while on the road would benefit more from a mobile device-based navigation tool than from an in-car or other type of portable navigation system. Enterprises can also utilize tracking and routing features.
Still, Nokia has not yet made its NAVTEQ intentions clear, but it could lead to more partnering.
"In the short term, there will be little impact on the end-user, whether it is consumer or in the enterprise," Greengart said. "But they're betting big and the amount they paid shows that."
Overall, Gold said, the move by Nokia can take it beyond being a device manufacturer. And future acquisitions could cement that.
"We believe that this acquisition puts Nokia well down the road towards becoming a mobile services provider, not just a device manufacturer," he said. "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, an likely will over then next one to two years."
Gold added: "Ultimately, what Nokia needs to do is turn into a services company. The reason people go out and buy high-end devices isn't because they want the coolest phones, it's because they want the services."
Gold said Nokia could have simply partnered with NAVTEQ instead of acquiring it, but noted that Nokia wanted control over the technology to potentially create a stranglehold on the market.
"LBS is going to play across the board. Everyone is going to need it," Gold said. "I don't really see this giving them tight coupling in the enterprise. But the data NAVTEQ provides is mapping data, and you can use that in any way you want."
Greengart noted that Nokia already has its stranglehold pretty locked up, and offering more connected services, like those offered by NAVTEQ, can solidify that. "Nokia looked at this from the perspective of: Who are our competitors today and who are they likely to be tomorrow," he said. "Nokia will not be battled for supremacy any time soon at the top of the mobile device hill."