Nokia (NYSE: NOK ) may be selling its device and services business to Microsoft (NASDAQ: MSFT ) , but that doesn't mean it's game over for the Finnish handset maker. As you likely know, Microsoft agreed to buy Nokia's cell-phone segment last month in an all-cash deal worth $7.2 billion. While the transaction is still pending shareholder approval, it marks the beginning of a new era for both companies.
Microsoft gains access to Nokia's trove of patents for the next decade. The software giant also hopes the acquisition will help it steal market share from Google's (NASDAQ: GOOG ) Android operating system. On the other hand, the deal bails Nokia out of a struggling handset business that was doomed to fail. Additionally, exiting the handset business means Nokia can finally focus its energy on its more profitable operations.
Introducing the future Nokia
Nokia's remaining businesses will include its telecom networks business, IP licensing division, and mapping and location services. The largest of these is Nokia's telecommunications equipment unit, now called Nokia Solutions and Networks, because of Nokia's recent acquisition of Siemens' 50% stake in the Nokia Siemens Networks joint venture. Nokia Solutions and Networks now makes up the majority of the Finnish company's remaining business. But the real growth opportunity is hidden in Nokia's location-based mapping business, known as HERE.
Nokia is playing to the future by offering mapping and location services for use, not only in smartphones and GPS devices, but also cars. The company recently made a big bet on its HERE business. Nokia unveiled a suite of connected driving solutions dubbed HERE Auto, which could come preloaded in your next car. Here's how it works.
Mapping the future
HERE Auto will hit the market in a couple of months. With features including real-time recommendations on nearby parking spots, where to eat, or where to find the cheapest gas, it isn't your average in-car-navigation system.
The platform's HERE Auto Companion features a mobile app that lets a driver remotely find their car using LiveSight augmented reality. It also includes live traffic updates, which Nokia recently upgraded to a new data processing engine called Halo.
This comes six years after Nokia bought Navteq, the world's largest digital mapping company, for $8.1 billion -- a move that is finally paying off for the company. In its latest quarter, Nokia's HERE business kicked off the launch of its LiveSight technology, and finalized a contract with Rand McNally to be its preferred map provider.. Nokia's partnerships with automakers are also charging ahead. Ford, Toyota, and Honda are a few of the big manufacturers that are now integrating Nokia's HERE services within their vehicles.
Nokia's new offerings should continue to resonate with other automakers, because the platform is fully customizable. This enables companies such as BMW and Toyota to both integrate HERE Connected Driver, while at the same time offering their customers completely different driving experiences. On top of this, Nokia plans to release a software development kit for its new HERE Auto platform. This will let developers and automakers create their own apps and features for use on the system.
There is no denying Nokia's HERE unit has struggled in the past. To be sure, second-quarter sales at the HERE business were down 18% from a year ago. But Nokia's new Connected Driver suite, along with the promise of self-driving cars, could help reverse this trend.
The future of driving
Many car manufacturers today are working on developing a driverless experience, and Nokia is very much a part of this movement. Specifically, Nokia is helping Daimler-owned Mercedes-Benz create three-dimensional smart maps to power a self-driving vehicle. The duo achieved a 62-mile test drive of an autonomous Mercedes car last month using technology that accurately maps road data, such as the direction of lanes and the exact coordinates of traffic lights.
Michael Halbherr, Nokia executive vice president and head of its HERE division, said: "We believe that the evolution toward a connected car future will happen in different phases. Autonomous driving is just one fascinating aspect." Of course, Nokia isn't the only company gunning for its technology to power the shift to self-driving cars; Google is also on a mission to deliver a self-driving car.
Even electric car maker Tesla Motors is throwing its hat into the ring. In fact, Tesla CEO Elon Musk says he can deliver an autopilot system for the company's Model S car within three years. That beats Mercedes' aim of delivering autonomous cars by 2020. It's also ahead of Google's push for production-ready self-driving cars in five years.
Nevertheless, Nokia commands one of the most expansive databases of mapping information in the world. And unlike Google, Nokia isn't attempting to build its own autonomous cars. This is an important distinction because down the road automakers may be more inclined to license Nokia's mapping technology over Google's for this very reason.
An even better way to unlock growth
Ultimately, the autonomous car could help Nokia's ride back to relevancy. Nokia's position as a leader in the mapping and locations industry should fuel the company's growth going forward.
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