The acquisition, Nokia’s largest, is an indication of where Nokia and other handset makers are headed. Navteq specializes in location-based services, which uses the Global Positioning System to track movement and delivers information to a consumer about routes and destinations. Because the services could include advertisements and promotions related to the locations, wireless carriers and mobile phone makers see potential for new sources of revenue.
“It’s a step that moves us toward the Swiss Army phone,” said Roger Entner, a senior vice president for communications at IAG Research. “It tells you where to go, where to pick up your children, how to find your spouse. It does everything for you.”
Nokia, the world’s largest cellphone maker, said yesterday that it would pay $78 in cash for each share of the digital mapmaker, including outstanding options.
The acquisition is part of a broader strategic shift by Nokia, based in Finland, to transform itself from a maker of handsets, a notoriously low-margin business, to a provider of mobile services like photos, video, music and games.
Nokia recently revamped Nokia Maps to make it easier for consumers to use. It also bought Gate5, a small company based in Berlin that makes navigational software applications for cellphones. And two weeks ago, Nokia acquired Enpocket, a mobile advertising company based in Boston.
However, mobile service is already proving to be every bit as competitive as the handset business. Google, Yahoo and Microsoft all have ambitions to offer directions or maps to users via cellphone and to ply them with advertising along the way. Other electronics makers are also studying the market. TomTom, the world’s largest maker of car navigation devices, announced in August that it planned to buy Tele Atlas, Navteq’s main mapmaking competitor, for $2.7 billion.
“This is not just about ‘the Internet goes mobile,’” Richard A. Simonson, Nokia’s chief financial officer, said in an interview yesterday. “We’re not just trying to replicate the Google or Microsoft experience online. The consumer won’t come unless we give them something that is rich.” That includes using the Global Positioning System to help users find restaurants, theaters and shops. “That’s where we are headed,” Mr. Simonson said.
Information on traffic, updated in real time, would also help consumers reach their destinations more easily.
Unlike phones that access maps online — like the Apple iPhone, which accesses Google Maps via the Internet — Nokia cellphones could be integrated with Navteq’s navigational software and technology. That could give Nokia an edge over competitors like Motorola and Samsung, analysts said.
Today, most people who use G.P.S. do so through separate devices, though some can be linked to a cellphone. But with the growing popularity of smartphones, which are essentially hand-held computers, and the falling price and shrinking size of G.P.S. processors, it is becoming easier to access maps and other data that were once limited to personal computers.
“If you have never used one, it sounds high tech and kind of fancy,” said Charles S. Golvin, a wireless analyst with Forrester Research. “But it’s kind of like TiVo. Once you have it, it changes you. You have to pry it from people’s fingers.”
If Nokia wants to sell high-end phones, “they have to give consumers something different,” said Jack E. Gold, founder of J. Gold Associates, a technology research firm.
“Still they have to get beyond the coolness factor. After three months, is it still cool or are you moving on to something else?” he said. “They have to move beyond the next step; like, if I am driving, does it let me know about traffic accidents or where that bar or coffee shop is? Those are the concierge services that make it worth $10 a month or whatever they will charge. But if it saves you 45 minutes in traffic, then it’s worth a lot.”
For now the market for such services is tiny. But wireless carriers, mobile phone makers and others are salivating over the potential revenue if such phones catch on with consumers. In July, Sprint Nextel began a “friend finding” service from Loopt, based in Mountain View, Calif., that allows users to find their friends who are also using the service. “Carriers want to offer the same products, so there is likely to be some tension,” Mr. Golvin said.
Mr. Simonson, of Nokia, said the relationship with carriers is not tense now and that the two sides are realizing that they have to work together.
Nokia shares fell as much as 4 percent in New York trading after the announcement as some investors questioned whether the Finnish company had paid too much for a business that had $582 million in sales in 2006. Nokia shares rebounded, however, amid a broad rally in the market. The stock closed up 3 cents, at $37.96 a share on the New York Stock Exchange.
“This is a very high valuation for the U.S. company, so yes, this is a high price to pay,” said Mats Nystrom, an analyst at SEB Enskilda Bank in Stockholm. “But navigation is a hot area and fits well with Nokia’s strategy.”
Navteq shares fell $1.52, or 1.95 percent, to $76.45. The stock had been bid up since July on rumors that it was an acquisition target.
Judson C. Green, the chief executive of Navteq, said executives at the company, based in Chicago, talked to other potential bidders before agreeing to be acquired by Nokia, but he declined to say which ones. Analysts said Navteq would have been a good fit with Google because, although it dominates the search and online advertising businesses, it does not have the technology to make its own maps.
Google, like Yahoo, buys maps from Navteq.
Mr. Green said another reason he preferred an acquisition by Nokia was that Nokia had agreed to let the company remain an independent unit. The new parent company would bankroll improvements to service, including better block-to-block tracking of cellphone users as they walk down the street.
Both Mr. Green of Navteq and Mr. Simonson of Nokia said they were interested in expanding into emerging markets like China and India, where a growing middle class is widely using entry-level phones but could be eager for expanded services.
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