Mobile phone manufacturer Nokia will buy navigation software maker Navteq Corp. for $78/share, or a total price of $8.1 billion., it announced Monday. Chicago-based Navteq, which has a market cap of $7.61 billion, is a leader in electronic mapping used for car navigation and mobile phone applications like shopping, emergency services and advertising. Although Nokia sells more than a third of all handsets sold around the world, it is facing mounting competition from Asian competitors who offer handsets at lower prices. To fend off that threat, Nokia has been assembling a suite of mobile services. The purchase of Navteq, which trades at 54x earnings -- substantially higher than the music and games services Nokia has already bought -- represents what the Wall Street Journal calls a "vigorous move into the mobile-services arena." Navteq posted Q2 net income of $40.9 million on revenue of $202.3 million. Its stock price has more than doubled this year; Nokia's is up almost 90%. The acquisition is expected to close in Q1 2008, and will not affect share buybacks or the company's future cash distribution strategy, Nokia said. Nokia shares are down 3.1% in pre-market trading. Navteq shares are up 1.2% to $78.80, indicating investors may be expecting a counter-bid. Nokia's bid was just $0.03 higher than Friday's close of $77.97.
Sources: Wall Street Journal
Commentary: Navteq Driven By Place and Location Services Growth • Garmin, Navteq Soaring; GPS Is Hot • Nokia Buys Cellphone Ad Firm Enpocket
Stocks/ETFs to watch: NOK, NVT. Competitors: GRMN, ERIC, MOT. ETFs: FVI, PYH, DSC
Earnings call transcript: Nokia Q2 2007, Navteq Q2 2007
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