October 11

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Editor's Introduction

This week, I report on Nokia's decision to acquire NAVTEQ and on Bentley's release of the results of a survey it commissioned regarding water resources modeling software. Plus, 20 press releases.

— Matteo Luccio

Nokia Buys NAVTEQ to Expand LBS

One indication of the continuing growth of the geospatial industry is the increasing frequency with which industry news becomes national news. Earlier this year, TomTom, a European manufacturer of navigation devices, made the business pages when it announced its intention to acquire TeleAtlas. This week it was the October 1 announcement by Finnish handset manufacturer Nokia and U.S. map data company NAVTEQ, giants in their respective industries, that Nokia will acquire NAVTEQ for about $8.1 billion.

The boards of directors of both companies have approved the sale, which is now subject to approval by regulators and by NAVTEQ's shareholders. In a conference call with reporters and industry analysts, leaders of the two companies stressed their expectation that it will enable an explosion in location-based services (LBS). This acquisition of a mapping company by a handset manufacturer is also a further indication of a new trend I mentioned last week in my story about First American's purchase of Proxix Solutions — that of large companies setting up geospatial divisions.

NAVTEQ, founded in 1985 and based in Chicago, licenses its digital map content, which covers 69 countries and territories, for use in automotive navigation systems, mobile navigation devices, Internet-based mapping applications, and government and business solutions. It is constantly updating its databases and expanding them to include new static and dynamic content, such as 3D imagery, real-time traffic information, and points of interest. The company generated 2006 revenues of $582 million and has approximately 3,000 employees located in 168 offices in 30 countries. It owns Traffic.com, a web and interactive service that provides traffic information and content to consumers.

Nokia, a Finnish company originally founded in 1865 as a paper mill, makes a wide range of mobile devices as well as equipment, solutions, and services for communications networks. The company, which claims that more than 900 million people use its mobile devices, is now expanding its offering to include such areas as entertainment, communities, and, most notably, LBS. Its GPS-enabled N95 multimedia computer sports the Nokia Maps LBS solution.

According to Olli-Pekka Kallasvuo, Nokia's President and CEO, LBS are "one of the cornerstones" of the company's Internet services strategy, which its acquisition of NAVTEQ is intended to advance. In turn, Judson Green, NAVTEQ's President and CEO, expressed his excitement at the prospect of combining his company's location experience with Nokia's huge customer base. Christopher Galvin, the chair of NAVTEQ's board, pointed out that Nokia's offer of $78 per share for NAVTEQ's stockholders represents a 34 percent premium compared to the stock's price only a month ago.

Following the acquisition, which is expected to close in the first quarter of 2008, NAVTEQ will remain operationally independent but will become a Nokia Group company and Green will report directly to Kallasvuo. Nokia plans to finance the acquisition with a combination of cash and debt and has secured a commitment on the debt.

In the conference call, Kallasvuo gave four reasons for the acquisition:

1) Navigation and LBS are already a great growth area. For example, he pointed out, "penetration rates are still very low in the in-dash and portable PND markets." LBS-capable mobile devices have now topped 1,000,000 units per year.

2) NAVTEQ has "great fundamentals and exciting prospects."

3) "Context and LBS is one of the cornerstones of Nokia's Internet services strategy. We recently launched Ovi, Nokia's new Internet services brand, and we believe location and context will add value to many of the upcoming Nokia services and devices."

4) "Nokia NAVTEQ customers will benefit from what we can do together to enhance navigation user experience and build the world's leading map data platform for the navigation industry players."

Neither Kallasvuo nor Green mentioned TomTom's acquisition of TeleAtlas as having affected Nokia's thinking. Nevertheless, TomTom's move probably helped Nokia realize that another very large company with an inherent interest in mapping — such as Google or Microsoft — might beat it to the punch.

"On the Internet, on the dashboard of a car, or on the screen of a portable device," Green said, "NAVTEQ maps are touched by consumers around the world more than 100,000,000 times each day." While acknowledging that the growth in the company's business is being driven by the rapid commercialization of GPS technology, NAVTEQ, he said, provides the context that allows consumers to make use of the geographic coordinates that GPS provides.

Green stressed the key importance of "field inspection" to NAVTEQ's success: "We believe strongly that the only way to insure that our maps reflect reality is to deploy a force of more than 700 geographic analysts around the world who literally drive the roads each and every day, collecting more than 200 unique attributes for each road segment." He estimated that, during the first six months of 2007, more than 75 percent of the in-dash navigation systems sold in Western Europe and North America used NAVTEQ maps and roughly half the GPS-enabled portable devices sold have been equipped with NAVTEQ maps.

Kallasvuo explained that, after focusing on telephony for the past 20 years, Nokia is now focusing on bringing "context and location-awareness" to its offerings. "Our vision," he said, "is that the location information helps build the next phase of the Web with context-sensitive services. Nokia has already taken the early lead in the navigation-enabled mobile handset space. Earlier this year we have introduced the N95 multimedia computer and in the second quarter alone we shipped more than 1.5 million units of the device." By the end of next year, he predicted, Nokia will have tens of navigation-enabled devices in the market. User surveys, he added, show that Nokia's mapping application is one of the top five used on the N95.

According to Kallasvuo, Nokia decided to acquire NAVTEQ, rather than just partner with it, because having both the map data and the handset manufacturing under one company "will enable virtually unlimited services innovation." As an example he cited the untapped potential for pedestrian LBS among the 3 billion mobile device users globally. He was probably thinking about Asia, because in Europe and North America the market for pedestrian navigation is still a distant second to that for car navigation.

In an apparent reference to user-generated content, Kallasvuo also made this interesting statement: "NAVTEQ can offer improved data quality as tens of millions of Nokia GPS device users can act as inputs, constantly adding new points of interest and other info on the database." What he did not mention is that Nokia would first have to negotiate a deal with the wireless carriers. He also pointed out that Nokia's open APIs will enable third party developers to innovate on top of the NAVTEQ map platform, making it even more valuable to current and future NAVTEQ customers.

Bentley Releases Results of Water Software Survey

Last week, Bentley Systems, Incorporated released the results of a national survey of water resources modeling software users, conducted on its behalf by CENews.com's civilconnection newsletter, published by ZweigWhite. According to the survey, Bentley's Haestad Methods Water Solutions water modeling software has the largest market share in five of seven categories: water distribution, transient analysis, wastewater conveyance, stormwater networks, and general hydraulics. Intelisolve's product came in first in the detention pond category, and the U.S. Army Corps of Engineers' Hydrologic Engineering Center's product took the top position in the floodplain modeling category.

In the survey, Bentley's WaterCAD, WaterGEMS, HAMMER, SewerCAD, and SewerGEMS products in its Haestad line received more than three times the top responses of their closest competitors among responses from water utilities and municipalities in the water distribution, transient analysis, and wastewater conveyance categories. Bentley's StormCAD and CivilStorm topped the stormwater networks category, as did its CulvertMaster and FlowMaster in the general hydraulics category. Bentley's PondPack came in second in the detention pond analysis category and its HEC-Pack came in third in the floodplain modeling category.

The survey respondents also said that ease of use is their foremost requirement for water resources modeling software and that they found Bentley's Haestad products to be the easiest to use. The second most cited must-have characteristic was multiplatform interoperability across stand-alone, CAD, and GIS platforms. When asked about their use of these platforms for water resources modeling, 77 percent of respondents said that they normally use at least two of these platforms simultaneously.

The online survey was conducted through August 2007. Respondents were mostly licensed civil engineering professionals employed by consulting engineering firms, public works departments, utilities, construction companies, surveying firms, and architectural engineering firms. Bentley acquired Haestad Methods Water Solutions in July 2004, then moved its headquarters from Waterbury, Connecticut, to Watertown, Connecticut.

I discussed the survey with Charlie Ferrucci, Vice President of Water Asset Solutions, who has been at Bentley for 11 years in different capacities, and Dr. Thomas Walski, senior product manager for Bentley water products, who was previously Haestad's Vice President of Engineering. "My background is in actually applying the models as an engineer," says Walski. "Generally, in our meetings, I take the point of view of our users when dealing with our programmers."

Subscription revenue for the Haestad product line has grown 67 percent since the acquisition, Ferrucci told me. New users include United Utilities, in the U.K., and Brisbane Water, in Australia. "The Haestad applications," Ferrucci says, "clearly complement and strengthen the Bentley geospatial and civil solutions, and the former Haestad users have access to a wide range of comprehensive and interoperable software, as well as enjoying the benefits of Bentley's Select program and flexible licensing."

These survey results, Ferrucci says, are relevant to North America because that is where the majority of CENews' readers are. However, since the company began to focus outside of North America in the last year or so, he says, it has seen "very strong growth in China, India, and Eastern Europe."

Ferrucci points out that in the water distribution category EPANET is distributed for free by the federal Environmental Protection Agency, and in the floodplain modeling category the top two choices are also government-provided solutions. However, "free isn't really free," argues Walski. "The amount of extra cost for purchasing the model is pretty small compared to the cost of model development and calibration." The difference, he contends, is that Bentley provides 24/7 technical support, whereas if you have a problem with free software "you're stuck."

Additionally, Walski says, Bentley's products make working with the model easier. He stresses the importance of ease of use: "Anybody can write software. What makes a difference is writing software that is really intuitive, that thinks like a user thinks." He also emphasizes the importance of interoperability: "You can run our software from just about all of the key modeling platforms. If you are in Microstation doing design work and you want to run a hydraulic analysis, you can start it right there."

Walski points out that fire flow analysis is a type of product that Haestad created in the early 1990s. "If you want to look at your distribution system," he explains, "you generally want to look at your normal days, but then you also want to put fire flow loads on the system and see how it handles it. If you have 10,000 hydrants, in the old days you would have had to make 10,000 runs of the model. With FireFlow Analysis, we do one run where we analyze all of the 10,000 at one time, which simplifies the workflow for the engineers and helps them spot what is really important."

As another example of ease-of-use tools he cites elevation assignment, to identify the elevation of points in a distribution or collection system or a sewer site. "You can go to a topographic contour map and for every point in the system manually interpolate between the contour lines and enter that elevation data," Walski says. "In the old days, when you dealt with models that had 50 or 100 pipes you could do this manually. Nowadays, we are going to much more detailed models, with tens of thousands of points and trying to do this manually would be extremely difficult, so we've automated that step in our terrain extraction model."

Another new feature that Walski highlights is variable speed pumping: "With other software," he says, "you have to tell the program at what speed the pump is running. With our program, we simulate the kind of logic that is in pump controllers and we determine at what speed the pump should be running and set it, so that the user does not have to go through these extra calculations."

Engineers use modeling software for design and simulation, Walski explains. Therefore, they are most interested in worst-case conditions, because they control design. "What happens," he says, "when you have a big storm, in a storm water model? What happens during the peak flows, in a waste water model? What happens during a fire in a fire distribution model? You are running many scenarios. In the old days, you had to create a new model file for every run you made; every new scenario was a new file. We created a scenario manager that keeps track of the various scenarios within a single data file. If you run all these 'what if' scenarios and come back later and say, 'What is the difference between scenario A and scenario B?' the scenario manager tells you what you've changed between those two. Our tool, basically, self-documents the way you go through scenarios."

Finally, Walski stresses that users can run Bentley's Haestad software from many different modeling platforms. "Most of our users prefer to run a model in stand-alone mode," he says. "But there are cases where you'd rather be running your model from within a CAD package, such as Microstation. Similarly, if you are building the model from GIS data, you can run the model within GIS, without having to stop and get out and get back into some other software. With our software, you use the same model file in these different packages. Most people work in multiple environments. Also, an engineer who is working in a CAD environment might turn the model over to someone in the planning department who is working in ArcGIS and there is no need to do any translation. That model may also then be transferred over to someone who is in water systems operations and they can run this model in a stand-alone mode, without having to change the file or the format or buy different software."

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