Nokia (NOK): Pushing Further Into Portable Software?

There is word from The Wall Street Journal that Nokia (NOK) is in negotiations to buy Navteq (NVT), a navigation software company. The paper describes the company "as is one of the world’s leaders in electronic mapping, which enables in-vehicle navigation devices and a new generation of mobile-phone applications used for shopping, emergency services and advertising."

Navteq has a market cap of over $7.6 billion.

Nokia is sick of just being a handset company. It has a 36% share of the global market, but, as more phones are sold in places like India, margins will be compressed. The price points for handsets sold in developing countries is much lower than in Europe and the US.

Nokia figures that if it can provide services to people who but its handsets, and those of competitors, it can build another layer of revenue into the company. It has already started its own music download business for wireless devices.

The only real problem with the program is that Nokia is setting itself up to compete with the cellular service operators who buy its handsets. Operations like AT&T (T) make a lot of their money selling software and services to customers. They hardly need their largest supplier to take a piece of their sales and profits.

Nokia may think it is a nice problem to have, but time may tell that its largest customers decide to go elsewhere. That, by itself, could give Motorola (MOT) a lift.

Douglas A. McIntyre