HERE yesterday, gone today – but still here: the paradox of Nokia
What is Nokia? Investors need to know. The name keeps cropping up in different information and communications technology (ICT) sectors – but what does it represent? In a series of interlocking markets, is Nokia manufacturing or mapping, licensing or litigating?
These questions are not idle speculation; Nokia has changed greatly in the past year or so following the $7.2 billion sale of its handset business to Microsoft, its recently cleared €15.6 billion all-share deal to acquire French equipment maker Alcatel-Lucent and the even more recent sale of its mapping business HERE for €2.8 billion to an automotive consortium comprising Daimler, BMW and Audi. Nokia products are still on the streets, but is there now a disconnect between the brand message of Nokia’s heritage products and the company’s current activities?
A fully functional four-dimensional image of Nokia can be constructed using IP analytics:
- the breadth of its market activity;
- the depth of its coverage of key technologies;
- the potential longevity of intangible assets that can be licensed or enforced; and
- the direction in which these assets are impelling its business operations.
Using Cipher – the latest in IP business intelligence and analytics – Nokia can be analysed through this lens.
First, the table below shows the impact of the Alcatel-Lucent acquisition.
The vast majority of Nokia’s patents are, unsurprisingly, within the mobile space, and the HERE portfolio is a small and unrelated part of the Nokia patent estate, making it a good candidate for divestiture.
Nokia’s acquisition of Alcatel-Lucent strengthened its Networks business, essentially creating a three-horse race with Huawei and Ericsson.
The disposal of Mapping means that Technologies provides the main area of uncertainty for investors, with the outcome of smartphone standard-essential patent royalty arbitrations with Samsung, LG Electronics and others likely to generate a substantial but currently unknown income streams.
Second, Cipher reveals that the HERE portfolio is one of a number of strong mapping and navigation portfolios, but one of very few (or perhaps the only one) which was non-core (and hence possible to acquire) including heritage, pipeline, as well as maps, automotive and navigation assets.
Putting this into context goes a long way to explain the recent disposal (and corresponding acquisition) of HERE:
In this visualisation, companies are targets if they hold weak patent portfolios but earn high revenue, or hunters if they have strong patent portfolios but little revenue, and thus are prepared to take risks. Alternatively, they might live in glasshouses – enjoying strong portfolios and high revenue, they tend not to throw stones at each other, preferring the option of cross-licensing. The market features new entrants too, but – typically with small patent holdings and low revenue – they plant a correspondingly small footprint in the sands of change.
Mapping, a technology developed over a 15-year period, is an interesting case study. As the grid suggests:
- Nokia, along with Microsoft, Google and Apple, lives in glasshouses and would have been expected to resolve patent disputes with one another through cross-licensing;
- Bosch and Pioneer have the ability to drive licensing deals across the value chain; and
- companies with large revenues but relatively weak patent portfolios, such as Uber, could be characterised as targets.
While Nokia has vacated its place to the consortium of German automobile manufacturers, the collective size and power of the purchasers should ensure that they (through the acquisition of the HERE portfolio) remain a glasshouse proposition.
Did Nokia’s sale of HERE make sense? The company paid €5.7 billion for NAVTEQ’s mapping business in 2008 and made a number of other acquisitions. So without a handset business, and since motorists (as users of mapping services) do not expect to pay for maps, the disposal is entirely rational. Nokia can now focus on their strengths within ICT, where it (now with Alcatel-Lucent) is in an even stronger position.
Patent analytics are not everything. Nokia’s intangible assets include significant brands, but these reflect the nature and direction of its businesses more superficially. It is patents that provide the company’s skeleton, the framework that supports corporate muscle and flexibility. And it is patent analytics that resolve the paradox of how Nokia remains viable even when it is HERE no more.
This is an insight article whose content has not been commissioned or written by the IAM editorial team, but which has been proofed and edited to run in accordance with the IAM style guide.
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