The ink was barely dry on rumors published over the weekend, but Nokia (NYSE: NOK) confirmed on Monday that it will buy mapping data provider Navteq (Nasdaq: NVT) for $8.1 billion in cash. The deal will add a vast database of digital maps covering 69 countries to Nokia's assets, giving it the core data it needs for location-based services in its mobile phones.
The move is the largest in a string of acquisitions Nokia has made recently, broadening the company beyond simply manufacturing wireless devices. The top handset manufacturer has also picked up mobile marketing firm Enpocket, digital music company Loudeye, and social-networking company Twango. Nokia's trying to stretch from hardware into services, as the recent launch of its own iTunes-esque music store demonstrates.
In addition to getting access to mapping data for the mobile services it plans to offer, Nokia has now become a supplier to online companies such as Yahoo! (Nasdaq: YHOO) and Google (Nasdaq: GOOG), as well as auto manufacturers such as General Motors (NYSE: GM) and Toyota (NYSE: TM). Navteq will be operated as an independent organization; Nokia CEO Olli-Pekka Kallasvuo stated, "We also look forward to maintaining and enhancing the services and support provided to Navteq's existing and future customers."
Apparently, the market didn't feel that this statement of goodwill toward customers included Navteq client Garmin (Nasdaq: GRMN), which saw its stock drop by more than 10% on the news. Since Garmin's main competitor, TomTom, has already announced its intention to buy Navteq competitor TeleAtlas, many investors believe Garmin's supply chain for map data may be at risk.
And while Garmin and Nokia have few products that compete directly today, investors see a map-emboldened Nokia as bigger threat to Garmin. Certainly, Garmin's ambitions of supplying navigation applications loaded on cellular phones are right in Nokia's sights.
Many of Navteq's shareholders were less than thrilled about the purchase, though -- while the stock has doubled over the last four months, some investors believe there's much more long-term growth potential in an independent Navteq. With the deal already approved by both boards, however, Navteq will likely be gone from the map by next year. Investors interested in pure navigation plays will have to look in new directions.
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