Wednesday, September 06, 2006

Nokia Buys Again

Nokia buys again this time a Location based application provider Gate5.As suggested in my earlier posting that Nokia will buy more application providers in different strategically important domains this buy from Nokia justifies my statement. In this posting I will try to put my thoughts why Nokia bought this company.
To begin with Gate5 is a smaller company then their recent acquisition Loudeye.It has 70 employees and is based out of Berlin Germany. The financial terms were not disclosed but it definitely has no impact on Nokia quarterly results which indicates cost of the aquisation should be very low .Gate5 basically has Navigation applications portfolio targeting both in car navigation systems and Smartphone and PDA market .The part which interests Nokia is navigation application portfolio for S60 Smartphone. So the basic logic and reasoning behind this buy seems pretty clear that Nokia would like to ship this software as default in their high end N Series Devices which are expected to have inbuilt GPS receivers’ question might be is why couldn’t Nokia partner with some other more established and popular navigation SW vendors like Tom-Tom ,Route66 or Navicore who also have similar offerings My guess is that Nokia would try to push in long term to have GPS revivers in mid range phones also and would like to ship navigation SW as part of basic device offering so as to have a competitive offering. So in such a scenario to have cost effectiveness it is better to have application in house rather then through partnering process. Another interesting move might be that they start bundling this navigation SW with their Bluetooth enabled GPS receivers so as to offer complete solution rather then selling just GPS receivers to customers like now .So in all it makes sense to acquire company like Gate5 .
Another interesting thing to note is both gate5 and Loudeye buy are though strategically crucial for Nokia they went and bought small companies with tech assets rather then buying big companies with already established customer base for example instead of buying gate5 Nokia could even have bought much bigger and established company like Tom-Tom .This basically shows that Nokia thinks it has great brand value and the converged space is still infancy stage and hence by acquiring small tech focused companies today it would be in great position in future when this market hots up .And another thing is that Nokia would still like to be primarily device vendor but at the same time wouldn’t like the value to be taken away by SW and application service vendors hence would like to bundle crucial applications and services itself in devices and use it as differentiating factor w.r.t to competitators.I would say all of its competitors including Motorola are lacking or unclear about their strategy in this space i.e. converged device space)It would be definitely would be good to see how these companies react if and when this market of truly converged devices happen and also worth to watch is weather Nokia startergy really pays off .

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