Nokia Buys Navtech For $8.1 Billion, Shares Dip

Finnish mobile-phone giant Nokia Corp's (NOK) shares fell Monday after it agreed to purchase navigation-software maker Navteq Corp. (NVT) for about $8.1 billion, one of its largest-ever corporate acquisitions and deemed a high price by analysts.

Nokia has agreed to pay $78 a share for Navteq, which is 3 cents above Friday's closing price on the New York Stock Exchange. The stock has gained nearly $8 in almost a week. On Tuesday, the stock traded at $70, and shares have more than doubled this year.

After confirmation of the deal, Nokia's shares, however, were down 3.2% at EUR25.82.

Chicago-based Navteq is one of the world's leaders in electronic mapping, which enables in-vehicle navigation devices and a new generation of mobile-phone applications used for shopping, emergency services and advertising.

The two sides have been in deep discussions over the past few weeks, said people familiar with the matter.

Nokia expects the deal to close in the first quarter and will finance the acquisition with cash and debt. The move will cut into Nokia's earnings the next two years.

Nokia should be able to leverage its size to significantly expand Navteq sales, said Greger Johansson at Redeye in Stockholm. He sees the deal as a good strategic move for Nokia in an area from which it already sees customer demand, but notes it has paid a high price for Navteq.

Nokia's interest in Navteq represents a vigorous move into the mobile-services arena, where Nokia has already been building a suite of products around games and music. These types of services have been in development for years by mobile- phone makers like Nokia, as well as by telecom service providers. Around the telecommunications world, there is a growing sense that these services are finally ready for wide-scale consumer adoption.

Nokia Chief Executive Olli-Pekka Kallasvuo has been aggressively steering the Finnish giant, which has a market capitalization of $149 billion, into a software and services company. Last year he separated the company's infrastructure business, placing it into a joint venture with Germany's Siemens AG (SI).

Yet Nokia still receives the vast majority of its revenue and profit from selling handsets. The company sells more than one out of every three handsets around the globe. Asian companies have made this business extremely competitive, with their own lines of cheaper mobile handsets. For Nokia, the move into services is designed to persuade customers to pick the Nokia brand amid so many other choices.

Kallasvuo has been making a series of small acquisitions over that time, focused around music and gaming. But no deal has carried the price tag of a Navteq, which trades at about 54 times its current earnings. It reported second- quarter net income of $40.9 million on revenue of $202.3 million.

Navteq was founded in 1985, built around the premise of building turn-by-turn navigation directions through digitized maps. Since then, it has created digital maps in 69 countries across six continents.

The company's products are used inside a number of automobiles, including models from Chrysler LLC, Ford Motor Co. (F), Daimler's (DAI) Mercedes-Benz and Volkswagen AG's (VOW.XE) VW brand. It also makes after-market devices for cars and separate portable devices.

Nokia and Navteq already have a business relationship, where Navteq provides information for Nokia's mobile phones.

Netherland's-based provider of navigation solutions TomTom NV (38705.AE), the world's second-largest such company by sales, Monday declined to comment on Nokia's purchase of Navteq, but a Petercam analyst said: "In hindsight, TomTom's buy of Navteq's main competitor, Tele Atlas (23394.AE), has been very clever."

On July 23, TomTom said it wanted to make an offer for digital map maker Tele Atlas of EUR21.25 a share, valuing Tele Atlas at around EUR2 billion. The deal is expected to be completed soon, with the initial offer memorandum due to be published Tuesday.

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