What’s up with Nokia’s HERE mapping division? It has been reported during the last week that Nokia is reportedly about to sell the HERE mapping division. Even though CEO Rajeev Suri says it is in no hurry to sell one of the world’s most widely used mobile navigation mapping system – used in Windows, Android and iOS devices worldwide.
With several reports suggesting that the division might be sold in the $3-5 billion range some reports suggest the list of interested buyers has narrowed to 3 (although I would strongly disagree), let’s take a step back for a moment an take a closer look that the possibility of this sale and some of the drivers behind price and usefulness of the technology.
Technology professionals following this technology for a long time will tell you that it emerged from serving the basic need to provide maps in digital form. More pointedly, to support digital mapping such that it included algorithms largely evolving from geographic information system (GIS) technology – specifically Network Analysis. If you know where the streets are and connect those databases to addresses, then you can route between points or find a location.
Most of this kind of mapping was done when the company began as NAVTEQ before being sold to Nokia for $8.1 billion. Yes, almost three times the price currently estimated as the selling value.
The data rich features embedded into HERE mapping technology that you see today has, in fact, significantly increased the value of the mapping data. But it only emerged with the advent of social networking apps, lower cost mobility devices, faster networks, appropriate applications (apps) and cloud computing at reduced cost – all in recent years.
The basic foundation for HERE mapping products relies upon high quality map data. It is the air the platform breathes. Most suggesting that the division is simply an acquisition fail to understand that this raw data needs constant and continual updating. Roads change, routes change, new construction takes place and non-spatial information linked to the raw location data changes too. So promising has this technology been as it emerges, that NOKIA itself established a $100 million Connected Car Fund last spring.
The promise of a connected car fund evolved from the growth in Advanced Driver Assistance Systems. These systems have been discussed for 10 years or more as the concept of intelligent cars as evolved. This discussion is reaching new heights with advancements in driverless technology. Virtually every car-maker today is working on a driverless variant and HERE is the product of choice for about 80% of car navigation systems. Consequently, Nokia has a fairly narrow field of view when it comes to mapping data and emerging trends for that data otherwise. This, in my opinion, is why such a low price is being offered for the division.
Trends Dased on Spatial High Quality Data
When Nokia sold it’s phone business to Microsoft it sold one of the world’s most advanced mobile phones (Lumia) that included the HERE platform. But another significant part of this story lies in the 41-pixel camera with PureView technology. This remains a very advanced high resolution camera – one that could serve other trends emerging outside of automotive navigation alone.
For Microsoft it makes sense as an acquisition because the platform links to high quality 3D model data emerging from Microsoft’s Ultracam that is used to take aerial imagery. For Microsoft this means both aerial and on-the-ground mobile device imagery are high quality and can be connected readliy. More importantly it means a range of visualization and animation technologies that process imagery can also be more fully developed. It is not surprising that the recently announced Hololens technology is being discussed as the product, for example, will depend upon comparing real to augmented reality representations. Consider, for example, looking at a room design that needs high quality imagery compared to virtual walls, furniture or other object.
The 3D trend began to emerge at Nokia around 2011 wherein the Ovi Map products were touting 3D city models. Around that time the Swedish company C3 Technologies was developing 3D map technologies and was connected with Nokia, although it was finally acquired by Apple. As a result mobile device manufacturers began the grand shift toward more advanced mapping and location analysis, embedding maps into many applications and enriching them with user data.
In terms of visualization and animation, Nokia HERE have in some ways missed a profound opportunity to capitalize on other markets outside of the automotive sector. The Windows mobile device products have spawned new initiatives in the design, architecture, engineering and science area. Connected application are now beginning to emergy that include augmented reality built around maps, industrial asset management, building information modeling (BIM) and sensor applications tied to locations. The iOS platform is seeing similar applications being developed. Meanwhile, Nokia HERE appears stuck on positioning it’s technology to place a vehicle on a road (again, why it is so under-valued).
Engineering, Science and Industrial Mapping
While Nokia HERE has successfully navigated the consumer application space for mapping to it’s logical endpoint, Google and many others have risen in capability to do the same. That Nokia see’s this endpoint as the time to assess the mapping division makes sense, if the view perspective is consumers.
There are significant forces emerging around the globe in the infrastructure and design space that ties engineering, science and industrial applications forward with foundations built on spatial data. In the United Kingdom, for example, BIM underlies the entire building and construction industry through legislation. How things are planned, design, constructed and maintained depends on location data and mapping. Where assets are, how they are moved, where they are maintained and so on … all depend on mapping and visualization. Nokia HERE and it’s accompanying technologies have drifted around this space to large extent – which is unusual for a company now seeking to become more involved in cloud and network services that actually service BIM well. So – is Nokia about to diverge itself of a technology and capability that forms, potentially, part of it’s own Alcatel-Lucent strengths?
There is a digital city shift underway toward intelligent buildings that includes energy management, utility distribution and performance, location of spaces and places. Transportation systems including new rail and aviation and movement of people through spaces are about to become more sensor and digitally connected. These connections are likely more oriented toward digital mapping and, in particular, more 3D designed. Suddenly all kinds of data will connect and tie into mapping, from robotics to engineering to science such as geotechnical and emergency services and response.
Is Nokia HERE Worth $3-5 billion?
The quick answer is yes. In fact, at that price it is a bargain.
While automotive manufacturers are eyeing HERE undoubtedly, it is obvious why. But, Microsoft itself would benefit through owning HERE and could likely raise the cash to make it happen easily. Don’t forget that Facebook also depends on HERE mapping and it too would achieve a bright future along the lines of basic mapping, but also supporting it’s own Facebook augmented reality effort. Apple could finally resolve it’s own mapping needs through ownership of Nokia HERE division. At the same it would open up many new opportunities for mobility devices like watches and sensors the company is working on.
A key take-home-point if the division is sold depends on the buyer having the mapping knowledge to ensure that the quality of data is maintained, otherwise it will quickly lose value and even jeopardize products is it is not maintained correctly. There is a significant potential for this service provided it expands on a number of fronts into more knowledge-based expertise – in other words – maturing. To date, Nokia seems reluctant to assess in a wider view to drive innovation others are already embarking upon in the early stages.
Given the purchase price of this technology originally, and the advancements and investments that have already taken place, the current market share and the ‘potential’ as described above, it would seem the potential value of this division is far greater, perhaps as much as $15-20 billion by the right buyer.
This is the real stuff – as compared to some of the values paid for stocks with uncertain futures in recent times.