Nokia / German Auto – HERE today, gone tomorrow.

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Sale of HERE is a reasonable deal for shareholders.

• Nokia has agreed to sell its mapping business, HERE, to a consortium of German auto manufacturers for USD3.1bn.
• This is 50% more than was rumoured (US$2.2bn – see here) but 22% less (US4bn) than I think could have been achieved if Nokia had developed HERE’s business further before selling.
• However, taking into account the time value of money and the certainty of closing a sale now, I think that this is a satisfactory outcome for Nokia shareholders.
• The German consortium is made up of Audi, BMW and Daimler who will use HERE as a central part of their navigation and location based services offering.
• Going forward navigation and infotainment is going to play an increasingly important part in differentiating one automotive brand from another.
• The auto is under threat from the big ecosystems like Google and Apple who are encouraging users to view the auto as just another device where their services can operate.
• With this transaction HERE’s independence as it relates to technology and internet clients can be assured, but there is a risk that the other automakers will be pushed further into the arms of Google.
• Tom-Tom is another option for automakers not in the consortium but I do not believe that Tom-Tom has the resources to keep up with HERE or Google and think that it will slowly fall behind.
• The acquisition of HERE is a step forward for the German automakers, but navigation is only part of the digital experience that users are coming to expect.
• This is why automakers are increasingly under threat because the user experience in the car is something that needs to be specific to them.
• Increasingly users will consider the quality of the digital services on offer in the car as part of their purchase decision.
• This will enable those that get it right to enhance their brands and margins while those that fail to deliver will suffer.
• Audi, BMW and Daimler all have significant shortcomings when it comes to the Digital Life experience in the car and this acquisition should help them begin to close the chasm.
• If these car makers are smart, they will also incorporate elements of how HERE operates into their processes for the creation of other digital experiences as this is where almost all car makers fall over.
• The ideal situation for a car maker is to create a digital experience inside the car that allows the user access to all of the Digital Life services he enjoys on other devices while still maintaining a unique look and feel.
• This is the Nirvana that would keep the automaker current with the digital world while still maintaining control over the entire user experience within the car.
• This requires automakers to understand software which almost none of them do.
• This acquisition may herald their first step into the new world.