Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has a mixed future ahead with one less piece once the sale of its devices division to Microsoft is completed. But what will that future look like? Bernstein analysts suggest that Nokia’s Here mapping system won’t be such a big piece of the pie. In fact, they call the future of Here “bleak and uncertain.”
Nokia’s problem with the mapping market
Analysts Pierra Farragu, Jasmeet Chadha and Viral Gandhi believe the big problem Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Here maps has is the mapping service industry as a whole. They don’t believe an independent player, like Nokia will be after it sells its devices division, will be able to be successful in the mobile market. They also suggest that other markets like the automotive market and PND are comparatively slim and may end up using mobile platforms.
In the best-case scenario, they say Here could provide €1.5 billion in revenues and €160 million in EBIT in 2018. Less optimistically, the division could struggle to stay in break-even territory. The analysts estimate the strategic value of Nokia’s Here assets isn’t worth more than €1 billion, which they say is the most a strategic investor might pay for Tele Atlantis or bidding “aggressively” on Tom-Tom.
They say because of the evolution of the mapping services industry, mobile platforms are providing their own mapping system, so the former map data provider leaders—of which Nokia’s Navteq maps was one—aren’t in a very good position to generate solid returns any longer.
Nokia’s Here maps could be in trouble
In a more pessimistic view, Farragu and his team say Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) could end up seeing its Here maps become unable to generate any returns. It already has about an 80% market share in the automotive segment, and that is in risk because of the industry’s recent developments. They said Here has a lot to lose and that “even a slight pressure” from Apple Inc. (NASDAQ:AAPL) and / or Google Inc (NASDAQ:GOOG) in area would probably keep the division anywhere from break-even to below.
In addition the only potential buyers they see for Nokia’s map assets are Microsoft Corporation (NASDAQ:MSFT) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930). They report that Microsoft might not have offered enough to interest Nokia and that speculating that Samsung would be interested seems like a long shot at this point. And besides, they don’t think Nokia wants to sell the maps division any time soon.
What Here maps could contribute to Nokia
The analysts estimate that if Here remains part of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), then it could contribute no more than 4 cents in earnings per share on the bullish side, but they see this as optimistic. They see break-even as being a more likely scenario.
If Nokia would sell Here as a strategic asset, they don’t think bids would be much over €1 billion.