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. 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:
The blue area represents the difference between sales and costs and hence the operating expenses–the payments needed to “keep the lights on”.
[The following is a post written by James Allworth.
James is the co-author of How Will You Measure Your Life?. He has worked as a Fellow at the Forum for Growth and Innovation at Harvard Business School, at Apple, and Booz & Company. It follows and builds on a discussion we had on the 56th Critical Path podcast.
You can connect directly with James on Twitter at @jamesallworth -ed]
A lot of ink has been spilled in the wake of the recent Apple Samsung patent disputes, and the legal wars see no sign of abating any time soon. The rise of Samsung’s phone business has been meteoric, and Apple is right to be concerned. But the real threat that Samsung poses to Apple has very little to do with the copying (or not) of Apple’s designs. The lawsuits have simply been a convenient (if expensive and risky) way to attempt to quash a threat that is of Apple’s own making. While there’s no doubt that Google has played a key role in Samsung’s success by handing out a free mobile operating system to pretty much anyone who wants to build one — it is actually Apple, more than any other company, that is responsible for Samsung’s present success.
How? By outsourcing as much work to Samsung as they have. And it’s impossible not to wonder whether Tim Cook’s announcement yesterday on bringing back Apple’s manufacturing to the USA is the beginnings of an attempt to rectify the problem.
Two years ago, almost to the day, I wrote a post titled It’s time for Apple to look at owning factories again.
What I argued then was that of the problems that Apple had the means to fix, production was what most needed fixing.
Since then we’ve seen evidence of significant investment in manufacturing tooling, where Apple is effectively purchasing the means of production rather than just renting or contracting it out. This capital equipment investment is the equivalent of owning one of the three asset classes that make up a manufacturing operation:
- Tooling or capital equipment. The “Capital” at the root of the concept of “Capitalism”.
- Skills, talent and knowledge. This is the softer kind of asset that turns out to be harder to replace or buy.
- Labor pool. Although considered a commodity even unskilled labor is difficult to obtain if flexible employment is needed in a regulated environment.
It did not stop there. It has also used capital to ensure capacity through pre-orders thereby allowing the skills and labor to be more predictably applied by its suppliers (and preventing competitors from having sufficient supplies). Apple has also taken control of chip design for the vast majority of its CPUs thus building a more bespoke supplier chain.
However these are not enough steps to make production “good enough” to meet the demands of a billion customers buying a new product every other year.
In addition to the video (On Capital Spending’s Transformation of the Electronics Industry – YouTube), you can download the presentation used as an iPad Perspective story here.
It is a featured story on Perspective App on the iPad and now on iPhone and iPod touch.
Here is an exchange with Robert van Apeldoorn, Journalist with Trends Tendances Magazine in Belgium. (www.trends.be/fr). The exchange took place in early September via e-mail.
Robert: -Information and Communications Technology (ICT) is considered in Europe as a way to push growth, and is a target of national and EU policies (digital growth,etc), but the result seems to be a failure: the European computer industry (hardware) is almost dead (ICL, Siemens computers bought by Fujitsu, Olivetti almost out of computer business, Nixdorf dead) since the 90’, and the telco industry seems to be in crisis. All European companies are out of the handset business (big and fading exception is Nokia, but with American software), and Alcatel is suffering with telco equipement manufacturing. It seems that at best, Europe can be a good niche player, with companies like ARM (chips). Technology seems to be reduced to localized services (computer services), some software businesses. What do you thing about that point of view? Is it correct or exaggerated ?
What will remain to the European companies ?
The main problem is perphaps the creation of European platform/ecosystems. Almost all are American today: Apple IOS-iTunes, Android, Amazon,…
Why Symbian didn’t succeed as a competitive platform ?
Is it possible to create European platforms? After all, IOS succeed after a short period of time.
What are the European tech companies that could play an important role in the near future ?