Nokia 2011 Annual Report Download - page 100

determined by our ability to attract strategic partners and developers to support our ecosystem.
Location & Commerce is aiming to support its ecosystem by enabling strategic partners and
independent developers to foster innovation on top of their location platform. We believe that making it
possible for other vendors to innovate on top of Location & Commerce’s high quality location-based
assets will further strengthen the overall experience and make our offering stronger and more
attractive.
Emergence of the Intelligent Sensor Network
Mobile Internet devices are increasingly being enabled with a rich set of sensors such as a GPS, a
camera and an accelerometer which enable interaction with the real world. This interaction also
enables the collection of large volumes of rich data which, when combined with analytics, enable the
development of increasingly sophisticated, contextually-aware devices and services. We believe the
combination of NAVTEQ with our Devices & Services social location services operations will enable
Location & Commerce to participate in this industry development and seize new opportunities to deliver
new experiences that bridge the virtual with the real world.
Price Pressure for Navigable Map Data Increasing
Location & Commerce’s net sales are also affected by the highly competitive pricing environment.
Google is offering turn-by-turn navigation in many countries to its business customers and consumers
on certain mobile handsets at no charge to the consumer. While we expect these offerings will
increase the adoption of location-based services in the mobile handset industry, we also expect they
may lead to additional price pressure from Location & Commerce’s business customers, including
handset manufacturers, navigation application developers, wireless carriers and personal navigation
device (“PND”) manufacturers, which are seeking ways to offer lower-cost or free turn-by-turn
navigation to consumers. Turn-by-turn navigation solutions that are free to consumers on mobile
devices may also put pressure on automotive OEMs and automotive navigation system manufacturers
to have lower cost navigation alternatives. This price pressure is expected to result in an increased
focus on advertising revenue as a way to supplement or replace license fees for map data.
In response to the pricing pressure, Location & Commerce focuses on offering a digital map database
with superior quality, detail and coverage; providing value-added services to its customers such as
distribution and technical services; enhancing and extending its product offering by adding additional
content to its map database, such as 3D landmarks; and providing business customers with alternative
business models that are less onerous to the business customer than those provided by competitors.
Location & Commerce’s future results will also depend on Location & Commerce’s ability to adapt its
business models to generate increasing amounts of advertising revenues from its map and other
location-based content.
We believe that Location & Commerce’s PND customers will continue to face competitive pressure
from smartphones and other mobile devices that now offer navigation, but that PNDs continue to offer
a viable option for consumers based on the functionality, user interface, quality and overall ease of
use.
Quality and Richness of Location-Based Content and Services Will Continue to Increase
Location & Commerce’s profitability is also driven by Location & Commerce’s expenses related to the
development of its database and expansion. Location & Commerce’s development costs are
comprised primarily of the purchase and licensing of source maps, employee compensation and third-
party fees related to the construction, maintenance and delivery of its database.
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