Nokia’s HERE Value is Down to €2 Billion

When announcing its financial earnings today Nokia revealed it now estimates the value of its mapping and LBS subsidiary HERE to €2 Billion.

See below the entire explanation from Nokia’s financial press release:

“Nokia’s continuing operations reported an operating loss in the third quarter 2014 as a result of the EUR 1.2 billion goodwill impairment charge related to HERE.

In the third quarter 2014, we conducted an impairment assessment of the goodwill related to our HERE business as a result of an adjustment to the HERE strategy and the related new long-range plan. We concluded that these factors resulted in a triggering event requiring an interim impairment test to assess if events or changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable. As a result of the impairment test, we recorded a charge to operating profit of EUR 1 209 million for the impairment of goodwill. The impairment charge is based on our estimate that the recoverable amount of HERE is now EUR 2.0 billion. After the impairment charge, the carrying amount of goodwill for HERE is EUR 2.3 billion. The impairment negatively impacted our reported diluted EPS by EUR 0.30.

The impairment charge is the result of an evaluation of the projected financial performance of our HERE business. This takes into consideration the clearly slower ramp-up of net sales related to direct to consumer monetization than earlier expected and our plans to curtail our investment in certain higher-risk and longer-term growth opportunities. It also reflects the current assessment of risks related to the growth opportunities that we plan to continue pursuing, as well as related terminal value growth assumptions. After consideration of all relevant factors, we reduced the net sales projections for HERE, particularly in the latter years of the valuation which, in turn, reduced projected profitability and cash flows. Additionally, changes in foreign exchange rates increased the carrying amount of goodwill in euros which in turn increased the amount of the impairment.

We believe HERE will continue to be a leading location services business. We plan to continue to build on our strength in the automotive segment, to expand our enterprise business, and extend our reach to consumers through deals with mobile device vendors such as Samsung and internet players such as Yahoo. Thus, we continue to believe we have an opportunity to create significant value with the HERE business, as connected cars become more pervasive and as enterprises deploy new location-services to improve their productivity and efficiency.“

Our analysis

Out of this announcement it worths to point out several elements:

First, it is interesting to get reminded that Nokia paid $8.1 billion (€5.7 billion) in cash for the acquisition of the digital map maker Navteq (€5.4 billion net of Navteq existing cash balance) in 2007.

In addition to that HERE was built not only out of Navteq but also as a merger with Nokia Maps (the navigation software and LBS platform built by Nokia and headquartered in Berlin). So the lost value between €5.7 billion and €2 billion is even bigger than what it looks if we add the Nokia software asset.

We can understand that not only the map asset was over paid by Nokia (which we already knew based on previous write-off) but also that it has been – until recently – overvalued based on B2C revenue expectations that did not come to fruition.


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