Nokia Should Sell NAVTEQ

Why does troubled handset company Nokia (NYSE: NOK) own NAVTEQ, which is a map and traffic software company? The unit competes with several powerful rivals, including Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG), and a number of GDP companies. Nokia should sell the operation and add to its dwindling cash position.

NAVTEQ had 245 million euros in net sales last quarter, up from 232 million euro in the first quarter. Nokia could use any one of a number of other solutions to power its location-based services. NAVTEQ, at its current revenue level, could be worth several billion euros.

NAVTEQ’s revenues are tied to global car sales because it receives such a large portion of software and hardware sales from the industry. The business may do well, but there are reasons to believe that worldwide auto sales could slow with the economy and high gas prices.

Nokia’s global handset market share is currently 30%, down from almost 40% five years ago. It is increasingly unlikely it will ever come close to catching Apple (NASDAQ: AAPL), or the companies that use the Google Android mobile operating systems. Nokia’s partnership with Microsoft is its best hope for a recovery. This is to a great extent because of Microsoft’s huge marketing operation and willingness to spend billions of dollars on development and advertising. But most analysts believe the JV is too late to the industry.

Nokia has only 3.9 billion euros left on its balance sheet. It will probably need at least that to fund a recovery. A sale of NAVTEQ would add to its war chest and rid the company of a non-strategic asset.

Douglas A. McIntyre