Nokia 2012 Annual Report Download - page 91

the broader Internet ecosystem, including products and applications for our direct competitors and their
ecosystems. Our HERE 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 November 2012 Nokia introduced HERE as the new brand for its location-based products and
services. HERE is the first location cloud aiming to deliver maps and location experiences across
multiple screens and operating systems. With the new brand, HERE, we aim to inspire a new
generation of location-based products and services that make the mobile experience more personally
significant for people everywhere. To further extend its location services, we launched a maps
application for iOS under the HERE brand. Furthermore, we also demonstrated an Android OS-based
reference application and announced plans for the availability of a HERE Software Development Kit
(SDK) for Android OEMs in early 2013.
HERE’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 experiences on
top of it; and (iii) applications built on the content and platform.
Our Devices & Services business is a key customer of HERE. Devices & Services purchases map and
application licenses from HERE for the HERE Maps service sold in combination with GPS enabled
smartphones. The internal sales amounted to EUR 374 million in 2012. Due to changes in Devices &
Services competitive position and other factors, HERE has been and may be affected by lower
recognized revenue from internal sales which generally carry a higher gross margin compared to
external sales.
In the following sections we describe the factors and trends that we believe are currently driving our
HERE business net sales and profitability.
Location-Based Products and Services Proliferation
A substantial part of net sales in 2012 came from the licensing of digital map data and related location-
based content and services for use in in-vehicle navigation systems, geographical information system
applications, mobile devices and other location-based products and services. HERE’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 in-vehicle navigation systems and mobile 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. We believe our HERE business will be well
positioned to capture emerging business opportunities with its broad offering.
Importance of Creating an Ecosystem around Location-Based Services Offering
We believe that creating a winning ecosystem around our HERE’s services offering will be critical for
the success of this business. The announcement of the HERE platform and business focus in late
2012 is an important step, as the platform becomes more widely available for different smartphone
users. We believe that the longer-term success of the HERE business will be determined by our ability
to attract strategic partners and developers to support our ecosystem. HERE is aiming to support its
ecosystem by enabling strategic partners and independent developers to foster innovation on top of
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