The deal announced today that brings Nokia's devices and services business (read: cell phones) to Microsoft for $7.17 Billion leaves Nokia's HERE location technology business unit untouched. Some are speculating that this may leave HERE open to an eventual sale by Nokia. (I'd suggest reading Marc Prioleau's take). But for now, the HERE business unit will be treated as high value intellectual property (IP) and is going nowhere. The investor's call today by Nokia discussed that "Microsoft will become a strategic licensee of the HERE platform." As most are aware, Microsoft Windows-based phones use the HERE platform for navigation apps. In addition, as a result of the acquisition, Nokia's former CEO, Stephen Elop, becomes the EVP of the devices and services unit of Nokia, which is suggested by the Wall Street Journal and the Twittersphere, to be a temporary move before taking over Steve Ballmer's CEO job at Microsoft. That move now seems likely to happen sooner rather than later.
The bigger question is why Microsoft didn't buy HERE at this time or why Nokia didn't put HERE on the table, all of which is pure conjecture as we obviously don't know the details of discussions. Here's my take.
- I contend that Nokia sees value in HERE's IP.
- Microsoft has mapping assets in Bing Maps. They haven't managed those assets well anyway (see my recent edtiorial for reasons).
- HERE is managed more as a platform and cloud service, and licensing fees can continue to accrue for Nokia which made a rather big deal of articulating its patents and other IP during the conference call. CFO Timo Ihamuotila specifically noted HERE"s "implementation patents" as a part of the strategy to continue its strength in the mobile market.
- Nokia had to demonstrate to its shareholders that it was keeping something that would generate cash flow. HERE definitely contributes to the company's revenues through its licensing and agreements.
- HERE has a huge automotive business (see press release on "connected car"); not a industry with which Microsoft is particularly familiar.
The announcement is a stunning admission by Nokia that its lost the smartphone war to Apple and Samsung. Likewise, for Microsoft, if it wants to remain relevant, it must go "all in" in the mobility market and this allows them to take control of that rather long hill to climb against the market share leaders.
In the battle between HERE and TomTom, it doesn't change much. The two location technology and map data players will continue to challenge for mindshare as the perception to which has the better data set remains the primary battlefield. If anything, this might allow HERE to receive some additional support from the parent company now that it has been crowned as one of three strategic business units by Nokia.
As to whether HERE is spun out of Nokia. I don't see that happening unless the battlefield shifts. That shift might come about if Apple were to buy TomTom. HERE then becomes an even bigger asset to Nokia in the war for dominance in mobile location based advertising and marketing.