Nokia and Microsoft – Still HERE

Quality of HERE more important than availability on iOS or Android.

• There is confusion regarding whether Nokia is about to pull its support for Windows Phone for its’ HERE mapping service.
• Now that Nokia no longer makes mobile devices, it makes sense for it to spread its application to the widest possible audience.
• This means making it available for both iOS and Android.
• In terms of its relationship with Microsoft, it has a four year contract to supply Microsoft with its mapping service and so support will not be dropped any time soon.
• It is easy to think that HERE becoming available on other platforms is a negative for Microsoft but what will really make the difference is the quality of the implementation and the features that come with it.
• HERE on Microsoft stands out over Google for two main reasons
  • First. The user is able to download the maps to the device for free and use them in offline mode. This is excellent when network conditions are poor and when the user is overseas.
  • Second. HERE Drive is the companion app. that uses HERE maps and provides turn by turn directions. This app. is reliable and effective and much better than Google Maps. It makes a very good replacement for a separate GPS unit.
• These two features are differentiators and as of today they are only available on Windows Phone giving users extra reasons to adopt the ecosystem.
• Hence the question is not whether HERE will still support Microsoft but whether these valuable features will be made available on iOS and Android.
• If HERE services become available on iOS and Android to an equal level of quality then one of the reasons to buy Windows Phone will have been erased.
• This is why, I believe that ecosystems must develop their own exclusive Digital Life services in order to maintain their edge.
• Developers are incentivised to get their apps and services on as many devices as possible meaning that the will not be a long term differentiator for any ecosystem.
• This is exactly why I am concerned about Apple’s long-term margin outlook.
• Its own in-house Digital Life services that are exclusive to iOS have not fared particularly well, meaning that Apple’s value is in the easy and fun distribution of third party apps. and services.
• This is not a long-term competitive edge and raises the spectre of commoditisation once the other ecosystems have caught up.
• This is why I think that Microsoft will end up buying HERE from Nokia.
• I suspect that Microsoft wanted to do this when it acquired the handset business but was rebuffed by Nokia.
• With HERE under its control, Microsoft will be able to ensure that HERE on Windows devices is much better than on other devices thereby maintaining differentiation and a reason to adopt the ecosystem.
• In the meantime, I think that Nokia will continue to develop HERE such that it will be able to get the best possible price when it comes time to exit.
• Nokia looks set to do the same with its patent portfolio and these are the two main reasons why there is upside in Nokia but it will take some time before this is realised.