Nokia 2011 Annual Report Download - page 99

products for the broader Internet ecosystem, including products for our direct competitors. Our
Location & Commerce business aims to positively differentiate its digital map data and location-based
offerings from those of our competitors and create competitive business models for our customers.
In the fourth quarter 2011, we conducted our annual impairment testing to assess if events or changes
in circumstances indicated that the carrying amount of our goodwill may not be recoverable. As a
result, we recorded a charge to operating profit of EUR 1.1 billion for the impairment of goodwill in our
Location & Commerce business. The impairment charge was the result of an evaluation of the
projected financial performance of our Location & Commerce business. This took into consideration the
market dynamics in digital map data and related location-based content markets, including our
estimate of the market moving long-term from fee-based towards advertising-based models especially
in some more mature markets. It also reflected recently announced results and related competitive
factors in the local search and advertising market resulting in lower estimated growth prospects from
our location-based assets integrated with different advertising platforms. After consideration of all
relevant factors, we reduced the net sales projections for Location & Commerce which, in turn, reduced
projected profitability and cash flows.
Location & Commerce’s resources are primarily focused on the development of (i) content, which
involves the mapping of the physical world and places such as roads and points of interest, as well as
the collection of activity data generated and authorized for use by our users; (ii) the platform, which
adds functionality on top of the content and includes the development tools for us and others to create
on top of it; and (iii) applications built on the content and platform.
Our Devices & Services business is a key customer of Location & Commerce. Devices & Services
purchases map and application licenses from Location & Commerce for its Nokia Maps service sold in
combination with GPS enabled smartphones.
In the following sections we describe the factors and trends that we believe are currently driving our
Location & Commerce net sales and profitability.
Location-Based Products and Services Proliferation
A substantial majority of Location & Commerce net sales in 2011 came from the licensing of digital
map data and related location-based content and services for use in mobile devices, in-vehicle
navigation systems, Internet applications, geographical information system applications and other
location-based products and services. Location & Commerce’s success depends upon the rate at
which consumers and businesses use location-based products and services. In recent years, there has
been a strong increase in the availability of such products and services, particularly in mobile devices
and online application stores for such devices. Furthermore, as the use of the Internet through mobile
devices has been growing rapidly, the anchor of the Internet is moving from the desktops to mobiles.
This shift is making location-based content a key element of most Internet experiences. We expect this
trend to continue, but we also expect that the level of quality required for these products and services
and the ability to charge license fees for the use of map data incorporated into such products and
services may vary significantly. By combining our NAVTEQ business with our Devices & Services
social location services operations, we believe our Location & Commerce business will be better
positioned to capture emerging business opportunities with a broader offering which is no longer
limited to digital map data.
Increasing Importance of Creating an Ecosystem around Location-Based Services Offering
Creating a winning ecosystem around our Location & Commerce’s services offering will be critical for
the success of this business. The longer-term success of the Location & Commerce business will be
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