Navteq Deal Guts Garmin

Updated from 10:09 a.m. EDT

Nokia (NOK Quote) jumped into the navigation game Monday with an $8.1 billion cash deal for digital map maker Navteq (NVT Quote).

The deal calls for Nokia to pay $78 in cash for each Navteq share, a slight premium to the Friday closing price of $77.97.

The acquisition gives Nokia a host of mapping and navigation services including Navteq's traffic.com site, a live traffic report system. The move adds to pressure building on Navteq customer Garmin (GRMN Quote). But shares in both Nokia and Navteq fell in early trading Monday as well.

Phone companies like Verizon (VZ Quote) and AT&T (T Quote) have targeted navigation services as a key new growth market and another source of mobile data sales. Phones equipped with global positioning system chips use mapping software from outfits like Navteq to give users turn-by-turn driving directions.

"Location based services are one of the cornerstones of Nokia's Internet services strategy. The acquisition of Navteq is another step toward Nokia becoming a leading player in this space," said Nokia chief Olli-Pekka Kallasvuo.

GPS device maker Garmin, one of Navteq's largest customers, saw its shares tank 12% with the announcement of the Nokia deal.

Investors say Garmin is suddenly looking at a squeeze among its map data suppliers. In July, Garmin rival TomTom offered to pay $2.5 billion for Tele Atlas, the map maker for outlets like BlackBerry maker Research In Motion (RIMM Quote), MapQuest and Google (GOOG Quote).

RIMM uses mapping data from closely held TeleNav, a Navteq rival.

Nokia has steadily been expanding beyond handsets into software. The Finnish tech shop owns 47% of Symbian, a developer of mobile phone operating systems. Two years ago Nokia moved into the mobile email market with the acquisition of Intellisync.

Nokia shares dropped $1 to $36.93, Navteq sank $1.30 to $76.65 and Garmin slid $15.40 to $104.