ABI Research: Quit the whining – Nokia wins this round

Mike Ippoliti
Mike Ippoliti
Mike Ippoliti is Research Director, Telematics & Automotive at ABI Research. He manages the team for the automotive practice area while concentrating his own research primarily on Automotive Infotainment topics. Prior to joining ABI Research in 2007, he spent ten years at Volvo Cars of North America, where he had several responsibilities including product planning of cross-carline infotainment systems and the management of the VCNA market intelligence team. Prior to his time at Volvo, Mike was a consultant, focused on consumer trends research, software usability testing, and database analytics for high-tech companies. He holds a BS in Mechanical Engineering from Tufts University, as well as an MBA in Marketing and Product Development from Carnegie Mellon University.

In the days since the NAVTEQ purchase announcement by Nokia, there have been several sour-grapes expressions of “We didn’t want them anyway,” and continued sputtering about the price paid by Nokia.

Quit the whining. All the arguments are very thin. Nokia has a vision, a strategy to achieve that vision, and they’re acting on it. If their actions are causing some re-examination of strategic direction within the industry, that is probably a good thing. Lots of technology companies and Wall Street analysts out there just don’t get it. It seems Nokia does. Maybe it’s the fresh air in Finland, or maybe they just think more long term. Probably both.

Motorola is a good example. CEO Ed Zander has been quoted as saying “We looked at it and went our own way,” and “We are not in the applications business.” The implication was that Moto is going to focus on hardware and platforms. Alright – a valid strategy, but one which strikes me as extremely risky. You don’t have to be “in the applications business” to realize that hardware is heading toward commoditization, and the services delivered through applications running on that hardware will be the revenue stream. Michael Dell is learning that lesson right now, as are Gateway and Packard Bell.

Innovative hardware is great, but so far Motorola has not shown the ability to deliver the rapid stream of innovations it will take to stay on top of the market, and make money, using that strategy. Their latest RAZR is a big ho-hum. What’s next? The Koreans will kick Motorola’s butt unless Mr. Zander can work some rapid development process miracles. Apple already has, as evidenced my Mr. Zander’s apparent dismissal of the iPhone as not such a ground-breaking device. Got anything to compete with it, Motorola? Let’s see the product in consumers hands, then. Hardware and platform superiority can work as a strategy, but it’s a tough road and Motorola will have to be a different kind of company than they seem to be right now.

Over in Mountain View, CTO of Google Earth Michael T. Jones has been quoted as saying they never considered buying Navteq because they’d use the Google Map/Earth community to create their own maps. Well, maybe someday in the future, but Google Earth and Google Maps would not be a product without the professionally created map databases from Navteq, TeleAtlas, and others. User-generated content can help refine a map, but you need the map first. Sure, you can collect GPS-traces, or handset locations and movement, but when you need to put that map into a system people depend on for guidance, with a very high expectation of accuracy, the multiple costly challenges make a license with TeleAtlas or NAVTEQ seem like a bargain. Data validation, sifting out malicious input, cleaning the traces, gathering address and street sign information, and on and on. Not to mention the legal exposure a user-generated map would open up.

It just seems to me some things need professional development, and navigable maps is one of them. You just can’t turn everything into a community-created product. Community-created POIs – now there’s a value proposition. Everyone welcomes input on the best restaurant, or sights to see in a new city, or finding out what people like themselves are doing or liked doing. But the underlying map data has to be factual and accurate. Wikipedia is great, and quite handy, but I don’t know anyone who would reference it in their PhD dissertation. WikiMaps are the same.

Meanwhile, down on Wall Street some people are still whining about how much Nokia paid for Navteq, referencing silly EBITDA ratios. They’re drinking the short-term, make-me-rich-today-not-tomorrow Wall Street Kool-Aid. The EBITDA ratio is just a current guesstimate calculation, and means almost nothing about the real value of a company in the future. It would be like saying the value of a used car can be based upon a ratio of the model year to the number of miles on the car. Let’s see – that means a 1985 Ferrari 308 with 50,000 miles (ratio .0397) is clearly not worth as much as my wife’s 2003 Toyota Corolla with 45,000 miles (ratio .0445). Anyone who pays more for the Ferrari is a fool. It must be true, that’s what the numbers say. The opposite kind of Kool-Aid is the flavor that over-values companies like Facebook. Those same people can use a different analysis and say Nokia paid too much for NAVTEQ. Wall Street logic just doesn’t work sometimes.

In conclusion: The NAVTEQ purchase was brilliant, at the right price, and unless other companies take Nokia’s lead and look forward instead of back at what they did yesterday or down at this quarter’s financial ratios, the location-aware future will pass them by. It will go by them so fast they may not even notice until their market share vaporizes and they are sold to I-bankers for scrap. It’s happened to bigger and better companies than Motorola and Garmin.

Copyright ABI Research

Disclaimer: The opinions expressed herein are the personal opinions of the author and are not necessarily those of GPS Business News.

Wednesday, October 10th 2007
Mike Ippoliti

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