Nokia Serves A Winner With HERE Maps Licensing Deal With Samsung

Sep. 3.14 | About: Nokia Corporation (NOK)

Summary

Nokia struck a winning deal with Samsung: exclusive HERE Map app for users.

Turnaround for Nokia progresses in the right direction.

Value of HERE Map discussed.

Nokia (NYSE:NOK) is taking another right step moving its business forward. Flush with cash from the sale of its devices and services division to Microsoft (NASDAQ:MSFT), Nokia is still committed to monetizing its assets. With the HERE mapping service licensing deal with Samsung, Nokia's shares are more compelling than ever. It is likely now that its shares bottomed just below the $8 level.

Nokia sets sight on Google

Nokia should expect strong user growth after HERE is licensed on Samsung's Android operating system. The beta offering allows users to access maps without an Internet connection. Map browsing, searching for locations and navigating without data is now possible. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) offered offline map browsing, but with limited flexibility. It is a disadvantage for Google when users browse on their phone without an internet connection: the search giant cannot serve up ads. Users will quickly recognize Nokia's superior offline mapping services. Activities like downloading offline maps before traveling to foreign countries is easy for users. HERE Maps also offer turn-by-turn navigation.

Nokia's partnership with Samsung is a win-win for both companies. Samsung lessens its dependence on Google because users now have an alternative to Google Maps. As Samsung develops its Tizen operating system, it will become even less reliant on Google's app offering.

Making HERE Maps available is an important step toward growing the unit. When Google bought Waze, a traffic mapping app, for $1.3 billion, it had around 50 million users. At present, usage for HERE Maps depends on Windows Phone growth. Android has 66.5 percent of the global market share for smartphones, compared to 5.7 percent for the Windows platform. The mapping app will eventually be made available for all Android devices. Wider adoption for the app means Nokia will boost the value of the unit. An eventual sale is possible, but Nokia may now accelerate research and development for HERE Maps. Last quarter, HERE grew unit sales in new vehicle licenses by 22 percent. Greater awareness for HERE Maps should help the company grow sales in the automotive market. Nokia gains operating leverage with the HERE Maps app release. Revenue will grow as Nokia moves the unit's focus toward the enterprise and the consumer space.

Bottom line

Nokia is progressing in its turnaround. The firm is much healthier after shedding its money-losing phone division. Thanks to the sale, Nokia is improving its balance sheet, returning cash to investors in the form of a special dividend and a stock buyback. Nokia pared its debt by $1.1 billion last quarter as part of its $2.63 billion debt reduction plan. It also plans to buy back $1.64 billion in shares over the next two years. The healthier balance sheet, improving cash flow and monetization of assets all suggest investors should consider buying Nokia shares now.

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