German carmakers buy Nokia Maps to fend off Digital Rivals
German carmakers BMW (BMWG.DE), Audi (VOWG_p.DE) and Mercedes (DAIGn.DE), will pay around 2.5 billion euros ($2.75 billion) to buy Nokia’s maps business, a transformational deal that will help them to develop self-driving cars.
Daimler BMW and Audi (NSUG.DE) will each hold an equal stake in the business, known as HERE, keeping it from falling into the hands of a new rivals which are emerging from Silicon Valley.
The premium carmakers agreed to pay 2.5 billion euros. The deal has an enterprise value of 2.8 billion euros, including liabilities worth nearly 300 million euros, Nokia said. The transaction is likely to close in the first quarter of 2016.
BMW, Audi and Daimler, which invented the modern motorcar in 1886, want to own the customer relationships that otherwise could shift to challengers such as Uber [UBER.UL], Google (GOOGL.O) or Apple (AAPL.O).
“With the joint acquisition of HERE, we want to secure the independence of this central service for all vehicle manufacturers, suppliers and customers in other industries,” Daimler Chief Executive Dieter Zetsche said.
Intelligent mapping systems like HERE’s form the basis on which self-driving cars linked to wireless networks can perform functions such as recalculating a route if data about a traffic jam or an accident is transmitted to the car.
In the future, such mapping systems will have a role to play in collision detection and other features of self-driving cars.
DISRUPTION
HERE is the leading supplier of high-resolution digital maps for most of the world’s top automakers and also supplies Internet customers including Amazon (AMZN.O), Yahoo (YHOO.O) and Baidu (BIDU.O).
It competes with Google and also with Dutch navigation firm TomTom (TOM2.AS).
Created via Nokia’s $8.1 billion acquisition of Navteq in 2008, HERE at first aimed to create new consumer services for mobile phone users, but has switched course to focus on automakers, which now account for a majority of sales.
Nokia, which subsequently wrote down the value of HERE to around 2 billion euros, said it expected to book a gain on the sale to the automakers, including cumulative foreign exchange translation differences, of around 1 billion euros.
Mikko Ervasti, analyst at brokerage Evli said the price was perhaps a bit lower than what some had speculated and could be seen as a “slight disappointment”.
Shares in Nokia slid 0.9 percent in early trading. TomTom shares rose more than 5 percent.
Operating systems for self-driving vehicles, as well as services associated with autonomous driving such as car-sharing, recharging and parking services, may become money-spinners for carmakers evolving beyond manufacturing.
Self-driving and connected car services could become a $50 billion market, analysts at Exane BNP Paribas have estimated.
Andreas Tschiesner, head of McKinsey’s automotive practice in Germany, said: “The automotive industry is facing a big disruption through connectivity and connected driving technologies. These features will become an important source of differentiation.”
Nokia is shedding the maps business to help it focus on integrating its 15.6 billion-euro purchase of Alcatel Lucent (ALUA.PA), a deal that will create the world’s second largest network equipment maker.
Source: Reuters
