Mapping business is one of the three core business segments of Nokia Corporation (NOK). In the last and current quarter, the management of this business segment has been very busy with signing deals and building partnerships to ensure the profitability of the business segment. This is a very promising business, with a lot of potential for the company.
The company's mapping, location and commerce segment is also known as Navteq. According to the last quarter's earnings report, this business currently makes up 3% of Nokia's overall revenues and made an operating profit of $40 million last quarter. In 2010, the business segment generated revenue of $1.09 billion and in the next year, the revenue for the business segment was $1.37 billion, up 26%. In the first half of 2012, the business segment's revenue was $705 million.
Since the beginning of the summer, Nokia's mapping business has signed some significant partnerships - which should increase the business segment's revenue significantly.
- On June 12, it was announced that Bing Maps (Microsoft Corporation: MSFT) would be replaced by Nokia Maps in all Windows Phone devices.
- On June 26, Ford selected the Nokia mapping technology to use in the navigation system of the next generation cars it will build.
- On June 29, the photo sharing website Flickr (Yahoo! Inc: YHOO) decided to adopt Nokia Maps. The website uses the map technology for locating the photos that are published.
- On August 1, Nokia signed partnership with Groupon, Inc. (GRPN) to allow local Groupon deals to appear on Nokia Maps.
- On August 23, Nokia teamed up with 22 technology giants including Samsung (SSNLF.PK) and Qualcomm Inc. (QCOM) to produce an indoors GPS that will help people find specific locations within large venues such as stadiums, shopping malls and hospitals.
- On August 31, Amazon.com, Inc. (AMZN) joined the partners of Nokia mapping business by incorporating Nokia maps in its new tablet, Kindle Fire.
Nokia didn't actually release the exact details of these deals so we don't exactly know how much each deal will bring the company. For example, we don't know if Nokia will get commission from Groupon per deal sold using Nokia Maps. On the other hand, we can see the impact of these deals in the earnings reports of the next few quarters if the revenue of Nokia's mapping business increases significantly.
While Nokia's mobile phone segment is going through a major restructuring and rebuilding itself, it is important for other segments of the company to remain profitable so that the company can stay afloat. At this point, every dollar will help Nokia and the company's mapping business is attracting a lot of attention from everywhere. During the next earnings report of the company, the mapping segment will be one of the first things I will look at. It looks like Nokia's mapping is ready to do something no one has ever done before; that is breaking dominance of Google Maps (Google Inc.: GOOG). Recently, Apple announced that its iPhone would drop Google Maps to use Apple's own maps.
The number of location-based service users is expected to jump from 65 million today to over 1 billion by 2015, as smart phones and tablets become more widespread. There are a lot of opportunities for growth in this business segment and Nokia is well positioned to take advantage of these opportunities.
I am long Nokia and I don't plan on changing this anytime soon. At the moment, many people see Nokia as a company going bankrupt; however, the company continues to innovate, rebuild itself and adapt with the fast changing technological environment. From hardware to software, the company's products are still of very high quality. With some good marketing, I don't see how Nokia can't turn around within a few years. At the moment, marketing is pretty much the biggest weakness of the company.
As a note of caution, I should mention that it may still be a while before Nokia returns to profitability. The company is working hard to re-establish itself in the mobile device business and this will take a lot of time, work and other resources. Apple Inc. (AAPL) and Samsung will continue to dominate the smart phone market for the foreseeable future. Only patient investors who are willing to wait for a few years should be invested in Nokia.
Also, make sure that Nokia doesn't make up a large percentage of your portfolio. While I believe in Nokia's turnaround story, there is no sure thing in the investment world and there is no such thing as a safe investment. Personally, I will continue to hold onto my Nokia shares till the end; however, I don't plan on adding to my Nokia shares anytime soon. Once Nokia returns to profitability, I might consider adding more shares.