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Nokia Shifts From Connecting People to Connecting Cars

Stocks in this article: NOK MSFT AAPL GOOG HMC F

NEW YORK (TheStreet) -- It's been an interesting few days for Nokia (NOK), the once top-of-the-league phone maker now struggling to stay relevant.

First, it appointed a new CEO, Rajeev Suri, with a mandate to, in the words of a Nokia board member, "deliver innovations that have a positive impact on people's lives."

Then, in an apparent demonstration that it is going into overdrive to fulfill this promise, the company announced a $100 million war chest to invest in "smart car" technologies.

To be fair to Nokia, now that it has sold the phone business to Microsoft (MSFT), it can break free of the shackles of its legacy and concentrate on a whole new set of technologies that are going to typify the connected world, long after Nokia made the phrase its own.

Google's (GOOG) already stolen a march, not only with its much-heralded driverless cars, but getting leading carmakers like Audi, Honda (HMC) and Hyundai to integrate its Android operating system into their connected cars.

Nokia is taking the investment route to grab a piece of the future. Nokia Growth Partners, the $700 million venture capital arm of the company, will be managing the car fund. Top of its agenda will be to look for investments that support Nokia's investment in HERE, Nokia's smart maps platform.

While Nokia's aspirations to reinvent itself are laudable, industry watchers point out Nokia will be up against the same competitors that it faced in its phone business. Google, Microsoft and Apple (AAPL) have major plans for marrying maps with cars.

Despite Apple's much-publicized problems with its maps software, it is hiring some of the top people in the navigation business. Apple is going beyond maps to make using the iPhone in one's car part of the driving experience, with its CarPlay product. Ferrari, Mercedes-Benz, BMW and Ford (F) are all partnering with Apple to roll out the product in their latest models.

Other players are also pitching their products similarly, trying to hook folks commuting in cars with their promises to make driving or riding in a car safer, easier and more enjoyable.

For many people unfamiliar with Nokia's origins as a wood pulp mill, the 149-year old company's attempt to seek out a new path to profitability might seem unnerving.

Fortunately for such skeptics, Nokia has retained its core telecom infrastructure business, which should keep generating cash flows that allow for dividend payments and share buybacks that will make the stock markets bullish again on the company's stock.

On the new CEO's watch, Nokia may have to take some hard decisions to keep the markets happy. Suri has already had experience in carrying out large scale layoffs, and there might be more employee attrition to come.

The 20-year company veteran will however need all the help he can get. Therefore, he will be hoping the investment in connected cars pays off soon or it could be a bumpy ride ahead. 

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read more: Apple Hit $600, Now Raise the Target

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