Nokia's offer to buy digital map supplier Navteq threatens to reshape the consumer navigation device market, putting pressure on market leader Garmin and perhaps opening the door for Google's entry.
The $8.1 billion (€5.7 billion) bid for Navteq, if successful, could make the world's largest mobile phone manufacturer a leading player in the navigation business, which is one of the technology industry's fastest-growing segments.
Nokia's financial resources, wireless technology and carrier relationships may give it an edge in creating phone-based navigation devices, analysts said. It could also damage Garmin's ability to influence design decisions at Navteq, Garmin's biggest map supplier.
"Should the deal go through . . . it could have profound implications for the navigation and wireless markets," said CIBC World market analyst Yair Reiner.
Devices made by Garmin, TomTom and others use signals from government satellites to pinpoint a user's exact location. Map makers such as Navteq augment that with myriad data, such as traffic conditions, nearby hotels, and a highway exit's location.
Navteq had been seen as a takeover target since TomTom offered €1.8 billion in July for Tele Atlas, Navteq's only global rival.
Market watchers said Nokia's willingness to put down about $8 billion for Navteq showed it saw enormous market potential for navigation devices, which could see wider adoption this holiday season due to price cuts and cheaper models.
"It validates this market segment and it means that the combination of TomTom and Tele Atlas is maybe a takeover target in itself," Fortis analyst Felix Oberdorfer said. TomTom's market capitalisation is about €6.5 billion.
An industry executive, speaking on the condition of anonymity, said Google may decide it needs access to a digital map database, especially if the widely rumoured Google phone turned out to be a real product. Google is already taking comprehensive pictures of cities for its online maps system.
"If Google turns out to be a Nokia competitor in six months, it could be a worry for Google [ not to have the same access to digital maps]," the executive said.
In such an event, Google could try to buy TomTom after the acquisition of Tele Atlas closed instead of making a counterbid for Navteq or Tele Atlas directly, the executive said.
"Navteq has been shopping around and found Nokia's offer to be the best - so a counterbid here seems unlikely.
"That also makes it likely that the merger between TomTom and Tele Atlas is going ahead," Fortis' Oberdorfer said.
One analyst suggested Google could try to build its own navigation products, but said it would take years and billions of dollars to complete. Google had no immediate comment.
Nokia's near-term challenge was seen as greatest for Garmin, whose shares fell more than 10 per cent on Monday.
"They are in a vulnerable position - Nokia can be seen as a competitive threat," said American Technology Research analyst Rob Sanderson. "Strategically, their key component is falling into less friendly hands."
A Garmin spokesman said the company did not comment on moves by competitors, adding its relationship with Navteq was "strong" and that it expects it to remain that way.
