Struggling Nokia revamps ops, reels in Navteq
Wed Jun 22, 2011 4:28am EDT
By Tarmo Virki, European Technology Correspondent
HELSINKI (Reuters) - Ailing Finnish cellphone maker Nokia Oyj is revamping its business to bolster location-based services as it tries to gain profitability and compete more effectively against rivals such as Apple Inc.
Nokia said on Wednesday it would incorporate Navteq, an independent unit specializing in the fast-growing digital mapping, into its broader services business.
Map-linked advertising, key to generating cash from location-based services, is starting to take off and is expected by Pyramid Research to grow to over $6.2 billion by 2015.
"This is where the world is going, just look at Foursquare," said Hannu Rauhala, analyst at Pohjola Bank, referring to the popular service that helps users show friends where they are.
"Logically this makes sense, they merge the standalone Navteq unit with the separate location-based services business," Rauhala said.
Nokia Chief Executive Stephen Elop also named Michael Halbherr, an outspoken executive who joined Nokia in 2006, to lead the new Location & Commerce business line.
Halbherr was the mastermind behind Nokia's $8.1 billion 2008 acquisition of Navteq, the world's largest digital map maker, in the largest-ever takeover by the 146-year old company.
Elop has seen the company's stock price halving over the last four months as investors doubt the likely success of his plan to switch to Microsoft Corp's smartphone software.
On May 31 Nokia warned on current-quarter sales and profits and abandoned hopes of meeting key targets just weeks after setting them, raising questions over whether its new boss can deliver on the turnaround he promised.
Under previous management, Nokia pushed strongly into a wide range of cellphone services, but most of the efforts, including gaming and music, flopped.
The failed strategy was one of the key reasons for the company to replace previous Chief Executive Olli-Pekka Kallasvuo with Elop in September 2010.
Nokia has lost the initiative in the smartphone market to Apple Inc's iPhone and Google Inc's Android devices, and at the lower end to more nimble Asian rivals.
Overall, Nokia still makes more cellphones than anyone else due to its strong position in basic cellphones and its wider distribution network in emerging countries.
Yet the tough market conditions it is facing were highlighted on Tuesday by Credit Suisse, which said competitive pressure in the smartphone sector was likely to increase in coming months as a wave of new products hits the market.
Separately, Nokia said it had closed its deal to outsource its Symbian software business to Accenture, which will take care of its development until 2016. Some 2,800 Nokia staff will transfer to Accenture as part of the deal.
Nokia shares were up 1.5 percent at 4.27 euros by 0823 GMT (4:23 a.m. ET).
(Editing by David Holmes)