Is NAVTEQ Worth $8.1 Billion?
On Monday, Nokia said it is buying NAVTEQ, the provider of data for digital maps. Like the July announcement in which TomTom offered TeleAtlas for $2.5, a device maker is grabbing a provider of map data. Reportedly, some analysts are saying Nokia is overpaying for NAVTEQ. Perhaps, but these same analysts likely lack the understanding of the full potential of what NAVTEQ provides. Nokia’s main market is mobile, which is exactly where the explosion of location-based applications is occurring. Furthermore, rumors abound that TeleAtlas might be now seeking a higher valuation, more in line with the NAVTEQ/Nokia deal - mentioned are Garmin, Google, and Microsoft.
Of course the primary concern in the market is the same as the concerns over a TomTom/TeleAtlas combo – whether other device makers (GPS, phone, etc.) will be at a disadvantage because of the combination. Nokia is claiming NAVTEQ will remain independent, however that is doubtful in the long term. Why would Nokia spend $8.1 billion and act as a holding company? While it can benefit solely from NAVTEQ’s continuing growth, it will need to embrace it more completely than it could have if it hadn’t bought it. Otherwise, the price makes no sense.
Another way to look at it is that the other device makers have contracts for the data and the data providers have incentive to keep them happy because they are revenue sources. In many parts of the world, there are at least two providers of digital street data, ensuring some competition.
Time will tell whether Nokia overpaid. It paid more than 13 times annual revenues, compared to 5 times revenue that TomTom offered for TeleAtlas and 3 times revenue that Pitney Bowes paid for MapInfo. The Geo Factor is optimistic about the market for geospatial data and applications – current use is but the tip of the iceberg. Consumer uses, especially on mobile devices, is overshadowing business applications. However, the market for business uses of location-based data is huge. Assuming Nokia handles the merger right, it will get its money’s worth.
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