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Day December 18, 2012

How much do maps cost and what are they worth?

How much does it cost to have the world’s best maps?

The answer may seem simple: $8.1 billion.

That was the cost to Nokia in cash for buying Navteq in October 2007. It would seem that buying that asset (or another one like it) is a cut-and-dried solution to anyone needing a mapping “solution”. But it’s not an answer that is either complete or explanatory of how mapping solutions are valued.

Navteq was not priced as a database for an app. It was a business which was expected to create licensing revenues and profits[1]. The actual price for this business net of cash was $7.7 billion but the following graph shows the net sales and operating profits since Nokia began reporting its performance:

Screen Shot 2012-12-18 at 12-18-3.13.12 PM

The blue area represents the difference between sales and costs and hence the operating expenses–the payments needed to “keep the lights on”.