Nokia to buy GPS map company Navteq for $8.1 billion

October 02, 2007|By Eric Benderoff and Mike Hughlett | Eric Benderoff and Mike Hughlett,CHICAGO TRIBUNE

CHICAGO -- Mobile phone companies want to make it so easy to find that pumpkin patch in the middle of farm country that you will never have to call for directions. Just pull out your phone and look at a map.

Yesterday, Nokia - the world's largest phone maker - made a huge play for this emerging technology by agreeing to buy digital mapmaker Navteq Corp. for $8.1 billion. It's a bet that the majority of consumers soon will expect their cell phones to not only make calls and take photographs but to lead the way to the nearest coffee shop.

"It's just in the infancy of what we think will ultimately take place," said Judson C. Green, the chief executive of Navteq, which posted sales of $582 million last year.

The mobile phone, once a humble maker of calls, continues to add new functions to a hand-held device that now frequently plays music, sends e-mail and provides Internet access.

Consumers, particularly in the United States, have been cautious about adopting some of these functions. While 64 percent of mobile phone owners now have text messaging services, only 2 percent so far have used their phone to find where they are going, according to JupiterResearch.

Nokia clearly believes that figure will increase. The company is already including a mapping function on its higher-end phones that includes a global positioning satellite function, or GPS, so the phone knows where it is, along with access to a mapping database that shows up on the phone's screen in intricate detail.

In the next few years that technology is expected to trickle down to lower-end phones.

Navteq, formed in 1985, has seen its sales grow sharply since 2001, when stand-alone mapping devices, those mounted on a car's dashboard, for instance, became more affordable. The Chicago company creates digital maps of cities and other locations worldwide for use on any number of gadgets, as well as Internet mapping services offered by Mapquest and Google.

Navteq went public three years ago, in August of 2004, and has seen its stock price triple since. Nokia is buying the company for $78 a share in cash.

While the deal is a bet that cell phone navigation will be a must-have service for legions of consumers, it's also part of an attempt by the Finnish company to move beyond its core phone manufacturing business into a new frontier - software and services related to mobile phones.

For Navteq, the deal should allow even faster growth at a firm that's already the dominant force in digital mapmaking. The company will remain based in Chicago, where it's been one of the city's highest-profile tech industry success stories.

One reason mobile mapping is poised to take off is due to the U.S. government's enhanced 911 rules that govern mobile phones. Essentially, emergency services must be able to find people if they are calling from a wireless phone, so the chips used in new mobile phones have GPS capabilities.

This has enabled phone makers and wireless carriers to start offering more mapping features.

"They are all trying to figure out how to take advantage" of what the chips in phones can do, said Mark McKechnie, a telecommunications analyst with American Technology Research. "There's a whole plethora of advertising that can go with it, too. You can get someone to drive to the Starbucks one mile away."

In trading yesterday, Nokia's U.S. shares rose 3 cents to $37.96, while Navteq shares lost $1.52, or 1.9 percent, to $76.45.

Eric Benderoff and Mike Hughlett write for the Chicago Tribune.

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